Collection Letter or Phone Call?
As a general rule in early collections, a phone call is ten times more effective than a written collection letter. This is mainly because at this stage a two-way dialogue is far more effective than a one-way communication.
But like many rules in collections, there are exceptions:
• You might need to send a first collection letter because you don’t have time to make all your calls that week.
• A letter will be less expensive than long distance calls to small balance out-of-town customers.
• If you do not have trained telephone collectors, it is better to use well-written letters and less telephone contact.
Your success rate using a letter with the format provided at the Stevens & Ricci Resource Center should increase drastically. The smaller the business you are sending it too, the more success you are likely to have. The larger the business, the less success you are likely to have.
What a First Letter Should Do
Your first letter should indirectly ask for payment by means of asking for the reason for non-payment. The sample format letter on the Stevens & Ricci Resource Center gives your customer the benefit of the doubt by asking for the reason for non-payment using check-box style common reasons at the bottom and making demand for a response to the inquiry.
Further, you are adding interest to the total, which gives you instant priority over most other creditors you are competing with for payment. On a judgmental basis, you can put “waived” instead of the interest amount for certain key customers, etc. letters for the most part are trashed and ignored.
The first letter should not directly ask for or demand payment. First, you are assuming that a payment is due. Many times, the customer has put the invoice on hold awaiting your call to discuss something they feel is wrong with your product, service, and/or delivery. In cases like this, most will not contact you –they’ll wait for you to contact them. Unless you know the situation, always give your customer the benefit of the doubt.
The important thing with a first contact letter is to not ask for payment, but to ask for the REASON FOR NON-PAYMENT.
Refer to the sample First Collection Letter. It identifies a problem, asks for a resolution or other information and provides a check-box style for replying.
This letter can be customized to fit the particulars of your business. You may want to add checkbox reasons for non-payment based on the more common excuses you receive in your business or industry. The sample letter can be downloaded onto your computer in MS Word at which point you can add your company’s logo and information.
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