Member Article

Make overdue account letters work for you

The most time-consuming but the most important part of debt recovery for your business is the pro-active stage, essentially calling and chasing your client to make them aware that their account is overdue.

You may currently contact clients by phone, email and letter but you may not be aware that how your overdue account letter is worded can seriously impact your collection rates and consequently your cashflow, but what can you do to make your overdue account letters more effective.

Firm but fair

When recovering debt, it is important to follow an escalation process so that the collection process can be easily traced. The language that you use is important, don’t be too casual, the first overdue account letter should make it clear that you have been awaiting a payment for some time, refer to the original invoice. Stress how many days’ overdue the invoice is and state that all further action that will be taken if payment is not received. ** Charging interest**

All companies have the right to charge interest on overdue accounts, the current rate is 8.5%, you can recover late payment charges on top too. If you choose to charge interest then this should appear clearly on your overdue account letter, in a box in bold lettering.

This may persuade your clients to pay their debt so they can avoid having to pay interest, by putting this on your first letter, you may save yourself a lot of time.

Make the threat real

As part of your collections process you should have a contingency plan if the client still doesn’t pay. This usually includes putting your clients on stop and releasing the debt to a third party for collection. By stating this information in your overdue account letter, it can be enough to spur your client into action.

Being firm in your letters is a must, by using more assertive language in your letter your client will understand the severity of the situation.

This was posted in Bdaily's Members' News section by Steve Hall .

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