4 Tips To Composing A Demand Letter To Collect Your Bad Debts
If you are handling your own debt collections in house, then you already recognize the need to periodically send demand letters to delinquent customers.
If you are handling your own debt collections in house, then you already recognize the need to periodically send demand letters to delinquent customers.
Most businesses prefer to use the "gentle" approach by sending a friendly reminder. The hope is that the customer may have simply forgotten about owing the bill, and that this reminder will help them to remember.
While these can and do work, there are some tips that might help you to write a demand letter than can encourage customers to pay sooner rather than later.
1. Careful Professional Wording
Your demand letters should never contain any harassing, threatening or abusive language. Nor should it even imply threats. Some customers might become defensive if they perceive they're being threatened. Whether or not you meant to threaten, if interpreted as such, it can result in possible legal retaliation. At the very least, it will not put them in the mood to want to pay you.
Always keep your collection letters professionally worded so that your customer is reminded of their unpaid debt and encouraged to pay. The gentle encouragement is usually enough to reassure your customers that they're not being attacked and many will find a way to pay their debt.
2. Be Exact
The demand letter should state the exact amount that is past due, and when payment was due. You can also remind them of the services or products purchased. Keep your letters to the point and succinct.
3. Payment Arrangements
Some customers may avoid all contact with you, possibly out of embarrassment to admit they're going through financial straits. A payment plan offered to them might be more financially feasible, with smaller payments.
Smaller amounts of money tend to become less overwhelming to a customer suffering from financial distress and they may become more cooperative because of this.
4. Penalties And Late Fees
Mentioning the possibility of late fees or penalties might be a further incentive for some customers to pay. Your demand letters could mention tacking on additional late fees if the account continues to remain delinquent. Faced with the possibilities of still more fees, some customers will find the money needed to pay the debt.
By receiving smaller payments over time to your business, you can increase the cash flow by following these suggestions. At the same time, you're encouraging your delinquent customers to pay their past due bills.
If you're dealing with your debt collection procedures in-house and writing your demand letters yourself, you must not imply that a debt collection agency is involved in the collecting.
You should also be careful not to use wording that can imply a threat of any form, nor can you use any form of deception in your letters. This means you may not imply that the customer could be facing legal action or that you're working with a government department to recover debt. You're also not allowed to imply the threat of garnishing a customer's wages to recover debt.
It's also a violation of federal statutes to try to make your demand letter look like it's been written and sent by a state or federal agency or from a court.
Use a professional tone in your writing, using your own regular business stationary. Generally, you should send two demand letters, spaced about 30 days apart. If these aren't proving to be successful, perhaps it may be time to think of alternative debt collection methods, including hiring outside collection agencies to help you with your collections.
If you are handling your own debt collections in house, then you already recognize the need to periodically send demand letters to delinquent customers.
Most businesses prefer to use the "gentle" approach by sending a friendly reminder. The hope is that the customer may have simply forgotten about owing the bill, and that this reminder will help them to remember.
While these can and do work, there are some tips that might help you to write a demand letter than can encourage customers to pay sooner rather than later.
1. Careful Professional Wording
Your demand letters should never contain any harassing, threatening or abusive language. Nor should it even imply threats. Some customers might become defensive if they perceive they're being threatened. Whether or not you meant to threaten, if interpreted as such, it can result in possible legal retaliation. At the very least, it will not put them in the mood to want to pay you.
Always keep your collection letters professionally worded so that your customer is reminded of their unpaid debt and encouraged to pay. The gentle encouragement is usually enough to reassure your customers that they're not being attacked and many will find a way to pay their debt.
2. Be Exact
The demand letter should state the exact amount that is past due, and when payment was due. You can also remind them of the services or products purchased. Keep your letters to the point and succinct.
3. Payment Arrangements
Some customers may avoid all contact with you, possibly out of embarrassment to admit they're going through financial straits. A payment plan offered to them might be more financially feasible, with smaller payments.
Smaller amounts of money tend to become less overwhelming to a customer suffering from financial distress and they may become more cooperative because of this.
4. Penalties And Late Fees
Mentioning the possibility of late fees or penalties might be a further incentive for some customers to pay. Your demand letters could mention tacking on additional late fees if the account continues to remain delinquent. Faced with the possibilities of still more fees, some customers will find the money needed to pay the debt.
By receiving smaller payments over time to your business, you can increase the cash flow by following these suggestions. At the same time, you're encouraging your delinquent customers to pay their past due bills.
If you're dealing with your debt collection procedures in-house and writing your demand letters yourself, you must not imply that a debt collection agency is involved in the collecting.
You should also be careful not to use wording that can imply a threat of any form, nor can you use any form of deception in your letters. This means you may not imply that the customer could be facing legal action or that you're working with a government department to recover debt. You're also not allowed to imply the threat of garnishing a customer's wages to recover debt.
It's also a violation of federal statutes to try to make your demand letter look like it's been written and sent by a state or federal agency or from a court.
Use a professional tone in your writing, using your own regular business stationary. Generally, you should send two demand letters, spaced about 30 days apart. If these aren't proving to be successful, perhaps it may be time to think of alternative debt collection methods, including hiring outside collection agencies to help you with your collections.
Author:
David P. Montana has been a leading enterprise consultant, business adviser along with writer with regard to debt collection agencies services for 30 years. He provides more useful advice and information about Crafting an effective demand letter.