A well-written collection letter should focus on two objectives. The first, obviously, is to collect money that's owed. It can be equally important, however, to retain customer goodwill. In cases where keeping the debtor's business is of advantage to your company, taking care to word your letters in a way that maintains that relationship needs to be part of your strategy.
While even the most expertly written collection letter is no silver bullet, keeping these two objectives in mind and using the following six "secrets" will help you stay on target with this traditional collection tool.
Secret #1: Prepare before you write.
Gather and verify all the facts before you begin. Review the account. Be prepared with specifics: what was purchased, amount owed, terms of payment, when payment was due, what previous collection attempts have been made, how (or did) the debtor respond.
Secret #2: Be concise, specific, and to the point.
Keep the collection letter to one page. Use short sentences and short paragraphs. Language should be clear, direct, and easy to understand. Avoid overly formal business language that can sound condescending and distant, creating an unnecessarily adversarial tone to the letter.
Secret #3: Treat the debtor with respect.
Remember, while your primary goal is to get payment, you may also want to keep the customer's business. The key here is respect. Follow the golden rule - speak to the debtor as you would want to be spoken to if you were the recipient of the letter.
Avoid the use of adjectives in general, especially any that could be construed as derogatory or insulting.
Whenever possible, personally sign the collection letter. This shows your regard for the customer, as well as the importance you place on the payment.
Be cognizant of your customer's privacy. Mark the envelope "confidential" or "personal" (especially if your customer is an individual consumer).
Secret #4: Make payment as easy as possible.
Provide details that make it possible for the customer to respond to your letter quickly and easily. These should include payment and contact information such as your reference/account numbers, address, phone, fax and the name of your contact person. And, be sure to let the debtor know the deadline for payment and the exact amount to be paid.
Secret #5: Expect to be paid.
Be firm but fair while creating a sense of the urgency of payment. However, never threaten an action you are not prepared to take. Think through any ultimatum, such as a lawsuit, before including it in a collection letter.
Remind the debtor of the benefits of prompt payment, such as maintaining a good credit rating, avoiding having their account put on "credit hold", etc.
Avoid any language that suggests the customer might be dissatisfied with the product or service they have received. Be unapologetic. Remember, you have a right to receive payment.
Secret #6: Proofread Your Collection Letter
Once you've finished writing your letter, read it out loud. This will alert you to anything that isn't clear, as well as help you discover any errors in spelling or grammar. Of course, run a spell check as well. Finally, if possible, have someone other than yourself read the letter before you finalize it and send it out. This will serve as an additional check for clarity, focus, tone and content.
2 Types of Collection Letters
The most common types of collection letters are: Reminders and Final Demands.
Reminder Letters
Reminder letters are generally sent to debtors who have just gone past due. Their tone and language should be friendly and convey the assumption that the customer has merely forgotten to pay the invoice.
Include a statement showing the amount past due and/or a copy of the original invoice. It's our experience that many invoices are paid late because the customer never received, or misfiled the original invoice.
Again, make payment as easy as possible. Be sure to include all necessary payment information and, if possible, insert a return envelope for the customer's convenience.
Use Reminder Letters to Gradually Increase the Pressure to Pay
"The squeaky wheel gets the grease" is true in collections. The more often you touch the customer, the more likely he'll put your invoice on the top of his payment pile.
Use a series of collection letters to stay top of mind with your customers. For instance, send a customer service-type reminder letter before payment is due. This letter can be a confirmation that you've shipped the product. Mention the amount that will be owed and specify the upcoming due date. Your customer will appreciate this type of friendly reminder.
A few days after payment was due (and not received), send another Reminder Letter, this time mentioning that payment was expected and is now past due. Send out regular reminders, once a week or every 10 days. Change the tone and contents of each letter to gradually "turn up the pressure" for payment.
Such a letter series should include no more than two or three different letters. If the customer hasn't paid you after receiving these "reminders", it's time to send them a Final Demand.
Final Demand Letter
Once you've decided that the customer just isn't going to pay, it's time to send the letter of ultimatum -- a Final Demand. This letter should clearly state the action you will take if payment is not received.
Be specific and clear about the amount to be paid, the deadline for payment, and the action that will be taken if payment is not received per your stated requirements. Do not make the deadline for payment too far in the future. You should allow just enough time for the debtor to receive the letter, arrange for payment, and send the payment to you. Typically final demand periods are not more than 10-15 days.
It is critical that you follow through with the ultimatum, should the Final Demand letter fail to result in payment of the past due amount.
Note: many U.S. collection agencies offer a free final demand service, by which they will send out a final demand collection letter for you at no cost. If the customer does not pay within the final demand period (usually 10 days), then the account is rolled over by the agency into traditional third-party collections. If the customer does pay within the final demand period, then the collection agency will not charge you a fee.
Anything Worthwhile is Worth Doing Well
Sure, it takes time to craft effective collection letters. But you're going to send a letter anyway, why not take advantage of these secrets and improve the chances that you'll get the response you're looking for.
Loral Narayanan is Editor of the Credit-to-Cash Advisor, a monthly, educational e-Newsletter sponsored by ABC-Amega Inc. -- http://www.abc-amega.com -- a global receivable management firm doing business in the U.S. and around the world since 1929. ABC-Amega, which has twice been honored by the U.S. president, provides 1st-party Collection Outsourcing and 3rd-party Commercial Debt Collection in the US and 200+ countries.
Article Source: http://EzineArticles.com/?expert=Loral_Narayananan
No comments:
Post a Comment