“Please.” “Thank you.” “Excuse me.” Those are common courtesies that smooth the interaction between people in public. They also encourage the public to treat one another with respect. Similarly in commercial debt collection, if you treat the first collection letter to an overdue customer as a common courtesy, it will improve your collection efforts and encourage a respect for timely payment.
It is generally assumed that a phone call is considered the best first contact when a customer becomes overdue. Unfortunately, phone contact carries with it a lot of time and effort. The seemingly endless calling, being left on hold, leaving messages, returning messages, etc. that is inherent in this method distracts from the core effort of running the business.
However, it is possible to use a collection letter as the first contact, and get results similar to phone contact, but without the cost and time involved with using the phone.
The letter just needs a few important components.
First, treat the first collection letter as a request to the customer to explain why the payment is late and make your request for payment a secondary concern.
This does two things:
(1) It gives the customer the benefit of the doubt and suggests your interest in the customer is more than the value of the invoice. It leads the customer to believe you hold a genuine interest in their financial health.
(2) Some customers may have been holding off on payment in order to discuss a dissatisfaction with the product, service, or delivery. In cases like this, the customer will not contact you and instead will wait until you contact them. Again, it gives the customer the benefit of the doubt and treats them with the courtesy to which they are entitled.
Secondly, the first collection letter should provide an easy way for the customer to answer your inquiry.
An effective way to do this is to place a checkbox at the bottom of the letter with a list of the most common reasons for late payments. The customer is invited to mark the appropriate box and then return that portion of the letter to you. The point is to invite the customer to act and open a dialogue with you about the account.
Note if your business has an interactive website where customers can pay their bill online, it is very easy to set up an electronic version of the checkbox that can instantly beam the customer’s response directly to you via email.
If that is the case, the bottom of the letter should include a simple URL (”web address”) that the customer can go to give the requested feedback. Preferably, the electronic checkbox should be accessible from within the customer’s already existing online account.
Finally, place the invoice information at the top of the letter in the subject field and leave it out of the body of the letter.
This reinforces that this letter is a courteous reminder of an amount owed rather than a “demand” for payment. Remember, at this stage of collections, your contact with the customer is focused on being cordial and helpful.
To get an idea of what your letter should look like, a sample first collection letter with all of these elements can be downloaded at the Stevens & Ricci Resource Center. Link >> http://www.stevensricci.com/tools_products.html
Conclusion
If you apply the elements described above to your first collection letter, you should see a dramatic increase in the effectiveness of your collection efforts, while saving time and money over traditional telephone contacts.
Tags: First Collection Letter
