The first thing is to realize that A/R balances over 60 days old do not pay voluntarily. Something has to happen on your part. Unfortunately, accounts receivable is not like fine wines or cheeses – they don’t get better with age. So you’re going to need systematic follow-up using solid and proven letters and call tactics. Studies show accounts payable departments pay in priority fashion. What this means is that your collection process (invoice, follow-up fax, calls, etc.) must compete with your customer’s other vendors for the next available A/P dollar.

Don’t Be a Bank to your Customer - You’re a BUSINESS, Not a Bank

If you’re a vendor-lender, I’m going to show you how to work your receivables, manage your cash flow, and cut you’re A/R department costs. Your customer calls this Trade Creditor Financing, but to you it’s called excess invoice float. And it’s costing you money. You’re a vendor lender carrying past-due invoices interest free.

Unfortunately, this is what trade credit has evolved into. I’m going to show you how to control it, manage it, AND THEN actually profit from it.

Visit the Stevens & Ricci Resource Center for access to pre-packaged collection systems & strategies, including the renowned IRS Collection System©. If you have questions or comments, Ben can be reached by email at bricci@stevensricci.com or by phone at 888-722-1611.

Keep in mind though that you don’t want to go to court, you want to collect the monies owed. The Final Demand Letter sells the need to pay while it fulfills legal requirements. A good letter results in payment in as many as one-third of all cases, probably because the written word is far more powerful than speech at this stage of the game.

Think about the times you found yourself embroiled in a heated collection situation. After exchanging angry words – maybe even a lawsuit threat – what happened? Chances are nothing. For whatever reason, you didn’t pursue the claim.

Things change when you write a demand letter. Lay out the reasons why the other party owes you money. State that, if you fail to get payment, you will go to small claims court or turn the account over to a collection agency. Now, instead of being “just another bill collector voice on the other side of the phone,” you and your claim take on a sobering realness.

The other party must now confront the fact that you won’t simply go away, but plan to have your day in court or unleash agency collectors. They will have to expend time, energy, and money. As long as your position has merit, the chances that the other party will pay all, or at least a portion of what you demand, just went way up.

When you write your Final Demand Letter, keep the following points in mind whether or not you actually intend to follow through with small claims court action. (Refer to the sample letter.)

• Firm Opening: Grab their attention and get right to the point.

• Heavy Language: Nothing sets a serious tone better than a reference to some fine print or legalese in your contract or work order, especially if signed by the customer.

• Payment Demand: Say exactly what you want. Ask for a specific amount of money to be paid by a set date, or for some other specific action to be performed.

• Consequence: Towards the end of the letter, state your intentions and give your customer a potential “out.” (i.e., pay now and preserve your credit rating.)

• Close: Be polite and professional, avoid personal attacks. You want the other person to make a business decision: What are my risks of losing? How much time and expense does a defense take? Usually, the other party will decide it makes more sense to compromise.

• Enclosure: Enclose a copy of your invoice and/ or work order. In an involved situation, review the history of the dispute. If you do end up in court, the judge or hearing officer who doesn’t know the facts of your situation will read the letter.

• Mail: Send the letter by certified mail. This assures your customer that you mean business and provides a record of receipt.

• Fax: Send the letter via “Receipt Recorded Fax”. After faxing, print a confirmation report from your fax machine and attach it to your copy for proof.

TECHNICAL TIP: If your debtor is a corporation, mail or fax the letter to the Statutory Agent (call Secretary of State’s office to obtain), copying the debtor. If not a corporation, mail or fax the letter to an owner or partner, not the manager or clerk. Pull your credit application if you have one on file to find the names of owners, partners, corporate officers, etc. You want MAXIMUM IMPACT, and WHO you send it to can be more important than WHAT you are sending.

Your Final Demand Letter should contain the following elements:

- Firm Opening

- Heavy Language

- Payment Demand

- Consequence

- Close

Obtain a complimentary sample in MS Word at our Resource Center.

Keep in mind though that you don’t want to go to court, you want to collect the monies owed. The Final Demand Letter sells the need to pay while it fulfills legal requirements. A good letter results in payment in as many as one-third of all cases, probably because the written word is far more powerful than speech at this stage of the game.

Think about the times you found yourself embroiled in a heated collection situation. After exchanging angry words – maybe even a lawsuit threat – what happened? Chances are nothing. For whatever reason, you didn’t pursue the claim.

Things change when you write a demand letter. Lay out the reasons why the other party owes you money. State that, if you fail to get payment, you will go to small claims court or turn the account over to a collection agency. Now, instead of being “just another bill collector voice on the other side of the phone,” you and your claim take on a sobering realness.

The other party must now confront the fact that you won’t simply go away, but plan to have your day in court or unleash agency collectors. They will have to expend time, energy, and money. As long as your position has merit, the chances that the other party will pay all, or at least a portion of what you demand, just went way up.

When you write your Final Demand Letter, keep the following points in mind whether or not you actually intend to follow through with small claims court action. (Refer to the sample collection letter.)

• Firm Opening: Grab their attention and get right to the point.

• Heavy Language: Nothing sets a serious tone better than a reference to some fine print or legalese in your contract or work order, especially if signed by the customer.

• Payment Demand: Say exactly what you want. Ask for a specific amount of money to be paid by a set date, or for some other specific action to be performed.

• Consequence: Towards the end of the letter, state your intentions and give your customer a potential “out.” (i.e., pay now and preserve your credit rating.)

• Close: Be polite and professional, avoid personal attacks. You want the other person to make a business decision: What are my risks of losing? How much time and expense does a defense take? Usually, the other party will decide it makes more sense to compromise.

• Enclosure: Enclose a copy of your invoice and/ or work order. In an involved situation, review the history of the dispute. If you do end up in court, the judge or hearing officer who doesn’t know the facts of your situation will read the letter.

• Mail: Send the letter by certified mail. This assures your customer that you mean business and provides a record of receipt.

• Fax: Send the letter via “Receipt Recorded Fax”. After faxing, print a confirmation report from your fax machine and attach it to your copy for proof.

TECHNICAL TIP: If your debtor is a corporation, mail or fax the letter to the Statutory Agent (call Secretary of State’s office to obtain), copying the debtor. If not a corporation, mail or fax the letter to an owner or partner, not the manager or clerk. Pull your credit application if you have one on file to find the names of owners, partners, corporate officers, etc. You want MAXIMUM IMPACT, and WHO you send it to can be more important than WHAT you are sending.

Your Final Demand Letter should contain the following elements:

Firm Opening

Heavy Language

Payment Demand

Consequence

Close

Download a copy of the sample template letter at the Stevens & Ricci Resource Center at http://www.stevensricci.com/tools_products.html