Writing a debt collection letter is never a pleasant experience (why would it be - you're chasing money!) but it is a task that most SMEs will have to perform from time to time. However, the process can be made less stressful by following some simple ground rules that will help your debtor understand the issue and help you get paid!
- Address the letter specifically
- Outline the situation
- Detail how you want the situation resolved
- Style: be polite but firm
- Be Brief
- Proofread your letter
- Following up your letter
Address the letter specifically
To help you get your message across clearly it is essential that you address the letter to a specific person. This way it is clear who the responsibility for paying the debt rests with. Addressing the letter to a position title such as 'accounts payable manager' may lead to the letter being taken less seriously.
Outline the situation
It is paramount that you make clear the amount due and specify exactly what services or products the money is owed on. Briefly outline the situation, making sure you note the date the product or service was provided, and any invoice or product numbers. This will help lessen the likelihood that your claims can be disputed.
Knowing that your invoices are clear and accurate will provide you with more confidence during this phase. Use these tips to create a perfect invoice >>
In terms of time frames, the debt will fall into one of two categories: just overdue or significantly overdue. The time frame which applies will of course influence the tone of your letter and the options you use to resolve the issue. A simple reminder is all that is necessary in the case of a debt that is just overdue, whereas for a debt well-over its due date a more direct tone is required.
Detail how you want the situation resolved
After you have outlined the amount of the debt, you need to state when full payment is due and how it is to be paid e.g. eftpos, cheque etc. If you are able to accommodate a range of payment options, state clearly on the letter what those options are.
If the debt is well-overdue it is advisable to outline the implications of the debt remaining unpaid. You might convey that the services of a debt collection agency will be used or that you will simply suspend the provision of services to the customer in question.
If you think that you have exhausted your abilities to reclaim the debt or you would simply like to have the process carried out by a third party, don't be afraid to call in the professionals.
Find out how a collections agency can help your cash flow>>
You want your letter to be a polite, yet firm, reminder that a debt is owed. If payment is only just overdue, your tone should be more that of a friendly reminder; however, if the due date has been significantly encroached a stronger tone should be used. In the latter case, it is important that throughout the body of your letter you convey urgency - do not be apologetic, after all, you are owed money!
As important as making your message clear is making it short and sharp. Use simple words and use a separate paragraph for each point. Do not waffle on about irrelevant details as these will only convolute your message.
Make sure you check for spelling mistakes and incorrect use of grammar - if any of these creep through they will undermine the authority you want your letter to possess. Make sure you run the spell check over it and if you think you need a second opinion, give it to someone else to read over. And last but not least, sign the letter personally and provide details so you can be contacted directly.
If the debt is one that you are particularly concerned about you may want to follow up the letter with a phone call to make sure it has been received and understood. This would not be necessary for a debt that is just past its due date, however it may be appropriate when the payment is significantly overdue.
Being owed money and having the added stress of chasing it up is not a pleasant experience. However, by following a few simple rules for writing a collection letter - such as keeping your tone firm but polite and being specific about all the salient details - you can greatly improve your chances of receiving your money in a timely and orderly manner.
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