II. Reading.

The Collection of Overdue Accounts

There has probably never been a trading firm whose accounts department has not had to spend a considerable amount of time in trying to get customers to pay overdue accounts. In the home trade this is fairly common, but in foreign trade it is fortunately less frequent, as sellers usually insist on terms which secure payment, when dealing with customers they do not know. Accordingly the only risk comes from customers with open accounts, and as these are normally buyers with a proven reputation, this risk is small. However, it can and sometimes does happen that an account is not paid when due. A buyer may run into a period of bad trade and find himself temporarily short of money: he may have a complaint about the goods sent; he may refuse to accept a bill of exchange; or delays and misunderstandings may be caused by customers regulations in his country. A wise customers will inform his supplier of any such situation and try to get some concession from him. If he does not, and an account becomes overdue, the seller has the task of asking for payment.

Collection Letters

The primary function of a collection letter is to collect money. To accomplish this, the writer must retain the goodwill of the debtor. This is especially true of personal collection efforts, directed toward individuals or businesses managed by one or two persons. A collection letter to a large business firm, however, need not put as much emphasis on empathy with the reader.

Let us explore the essentials of s business collection letter. The most important thing is to identify exactly what is delinquent. The letter should include:

• the delinquent customer's order number and date,

• the items purchased,

• the seller's invoice number and date,

• the dollar amount that is past due,

• the original due date.

These items are essential to the reader in identifying the delinquent invoice.

Collection letters should be PERSUASIVE rather than forceful, FIRM rather than demanding. A fair and tactful letter gets better results than a sarcastic or abusive one. In fact, even collection letters should be ‘YOU-oriented’: courteous, considerate, and concerned about the customer's best interest.

Collection letters are usually sent in a series. The first tend to be mildest and most understanding, with the letters getting gradually more insistent. The final letter in a series, when all else has failed, threatens to turn the matter over to a lawyer or collection agency. Of course, the tone of any letter in the series will vary, from positive and mild to negative and strong, depending upon the past payment record of the particular customer. The intervals between the letters may also vary, from ten days to a month at the start, from one to two weeks later on.

The majority of bills are paid within ten days of receipt, with nearly all the rest being paid within the month. Therefore, when a bill is a month overdue, action is called for. Still, the collection process must begin gently.

How to Receive a Prompt Reply

The surest way to receive a prompt reply is to enclose a post-paid, self-addressed envelope. Mention in the letter that one is enclosed.

An additional device for making the reply easy for the reader is to enclose a card or note showing the amount and date of the next payment. Leave a space for comments. This will be returned to the writer and will save the reader the trouble of writing a letter.

A third technique is to enclose a phone number with the name of a person who can be called.

How to Do It

1. State the purpose of the letter clearly and in an interesting way.

2. Include data relevant to the situation: what the writer is asking for, how the reader can be helped, and reasons for paying now.

3. Restate the request for payment.

Collection letters are necessary part of managing a business. When asking for a payment, neither apologize nor beg.

STEP 1

The MONTHLY statement reminds the customer of outstanding bills. If it is ignored, it should be followed (about a week or ten days later) by a second statement. The second statement should contain a notice (in the form of a rubber stamp or sticker) stating ‘Past Due’ or ‘Please Remit’. An alternative is to include a card or slip with the statement, alerting the customer to the overdue bill. This notice should be phrased in formal, possibly even stilted language; it is an OBJECTIVE reminder that does not embarrass the customer with too early a personal appeal.

Dear Mr Ballard

May we call your attention to your loan payment, that you have no doubt overlooked? It is 30 days past due. The amount is $ 50.44.

Sincerely

STEP 2

If the objective statement and reminder fail to get results, the collection process must gradually become more emotional and personal.(Form letters may be used, but they should LOOK personal, adapted to the specific situation, perhaps even originally typed.) The second collection message, however, should still be friendly. It should seek to excuse the unpaid bill as an oversight; the tone should convey the assumption that the customer intends to pay.

Collection Letter I

Dear Mr Ballard

Patience is a virtue we may sometimes seem lacking because we get a little impatient, but we try to be considerate of our friends and customers. Therefore, please accept this letter in that spirit.

Your account has become long past due (since February 15). Please send your check for $ 50.44 today. We are expecting it.

Respectfully

STEP 3

The next letter in the series should still be friendly, but it should also now be firm. While expressing confidence in the customer's intention to pay, it should inquire about the REASON for the delay. The third collection message should also make an appeal to the customer's sense of:

1. fairness

2. cooperation

3. obligation

or desire to:

1. save her credit reputation

2. maintain her credit line

This letter should stress the customer's self-interest by pointing out the importance of prompt payment and the dangers of losing credit standing. The letter should convey the urgency and seriousness of the situation.

C

Dear Mr Ballard

Again we call your attention to your loan payment due February 15. If there is some reason for the delay, please let us know.

We would appreciate receiving your check for $ 50.44 immediately.

Very truly yours

ollection Letter II

STEP 4

Ultimately, payment must be demanded. The threat of legal action or intervention of a collection agency is sometimes all that will induce a customer to pay. In some companies, moreover, an executive other than the credit manager signs this last letter as a means of impressing the customer with the finality of the situation. Still, the fourth collection letter should allow the customer one last chance to pay before steps are taken.

Final Collection Letter

Dear Mr Ballard

It bothers us more than a little to say this, but we insist on your paying the $ 50.44 you owe us. If we don't receive your check by December 31, we will be forced to turn your account over to a collection agency. Please save yourself the embarrassment and loss of credit standing this will cause you. The enclosed envelope is for your convenience.

Yours truly