The collection letter is also known as the dunning letter, past-due letter, and demand letter. This letter is an integral part of your invoice collection approach. Usually, we need the collection letters when the customers have already passed the due date and you have made efforts to contact them through phone calls. If you want to collect the due amount from your customers, then you should write an effective collection letter. In addition to this, the delivery timing of the collection letter plays an imperative role.
Importance of a collection letter
The collection letter is very important for various reasons. By sending the collection letters, you can tell your customers that amount is overdue. Sometimes, customers are not intentionally delaying the payments. But, they are so busy in their lives that they forget to make payments and are not able to receive your phone calls and check your emails.
In some cases, customers are trying to hold off on payments. By sending the collection letter to these customers, you are able to get the payments. Sending a collection letter is very important if you want to escalate this issue to the next level or want to involve lawyers. The AR collection software can help you to create an effective collection letter and let you save copies of the same.
Tips To Write Effective Collection Letter
The process of writing a collection letter to the client or customer who has passed the due date of payment is tricky. It is so because you want to get paid the full amount and you also want to maintain a good relationship with your clients.
Managing these two things at the same time is very difficult for your business. Here, we have shared a few tips that will help to write an effective collection letter that will speed up accounts receivable collection without affecting your relations with the customer.
Products Or Service Reference
You should refer to the products or services that were purchased by the customer in the collection letter. You should mention the product or service that you offered to the client and also mention how much it costs. One of the best ways to mention the products or service reference is by attaching a copy of the invoice along with the debt collection letter.
Use Friendly And Firm Tone
All business owners get furious when they do not receive the due amount before the deadline. No matter how angry you are, you should use user-friendly and firm language while writing the collection letter. You should never use rude or abusive language in the collection letter. Always keep in mind that there might be a valid reason for delayed payment. By using rude or malicious language while writing the collection letter, you might ruin your relationship with your customers.
Discuss Contractor Agreement
You should remind your customers about the contract or agreement that they have signed in the beginning. You should also recall them about the late payment fees as mentioned in the contract. Most customers pay immediately when they receive a collection letter. There are different types of collection letters and they use different ways to address the customers.
Offer Ways To Fix The Problem
You should offer multiple ways to the payee to fix the problem. If you send the collection letter to your customer, it increases the probability of getting the best reply. For instance, waive off the late payment fees if the payee agreed to make the entire payment immediately. Also, you should offer different ways for compromises.
If you are suffering from a cash flow problem, you can discuss it with the business accounting staff. They may allow you to make payments in small installments. You should offer different ways to make payments on the payment collection letter. It will help you to make sure that you will get the payment at the right time.
Give Personal Touch
When the payee receives the collection letter, they do not want to have the cold form of the letter. You can create a standard format for the collection letter of your company. You should consider adding few lines about the relationship of this company with the client. For instance, you can use lines like “We’ve worked together for a long time.”
Create A New Deadline
If you get to know that delay of payment due to genuine reason then you should give a new deadline to your customers. It will help in retaining your good relationship with the clients and also help to collect the receivables.
Collection letters may help to collect the overdue amounts, but you should also pay attention to the invoicing system of your company. It is very important to send invoices to your customers immediately.
Also, you should create an effective invoice template. A good invoicing system will get your clients and customers to make payments quickly before the deadline without sending reminders. Ultimately, a good invoicing system will save your precious time and efforts down the road.