Writing a debt collection letter is one of most important skills of any small business owner. Do you have what it takes to get money you’ve earned?
I have a confession: I'm a business writer who's let clients get away with not paying me--a huge sign of failure of my writing abilities. You see, I never learned one of most important writing skills for any self-employed person or small business owner: how to write a debt collection letter.
Debt collection letters--an overview
"Debt collection letter" in singular may be an oxymoron, since unfortunately, one is rarely enough. You should have a series of letters to send to deadbeat clients, each one becoming a little more insistent. Here are some ideas for a five-letter series.
1. Don’t make your first letter look like a collection letter at all. Make it a friendly note. You’re more likely to get money from someone who thinks of you as a partner than a dun.
2. If that first letter doesn’t get a response--and usually it won’t--send another next week that’s more urgent and directly asks for money. Express your concern that you have not been able to contact client. Ask if he or she is all right, and if he or she is having any trouble paying.
3. The next week, if you still have not gotten a response, send a letter referring to payment terms in agreement you and client originally made (you did have some kind of written agreement, even if it was just on back of your invoice, right?). Mention effect this nonpayment is having on your cash flow, and that your business’s cash flow is just as important as theirs.
4. Still no response by next week? State plainly that you are asking for money for final time before referring it to collections. Include a copy of entire agreement between you and client.
5. If you still have not heard back from client, and are confident that you do not simply have a problem with their contact information, call a collection agency—in fact, you may have wanted to have gotten a collection agency from step one (more on that below).
More Tips for Successful Debt Collections
Tip: Don’t wait to start asking for your money.
If it’s been a week since payment deadline passed, it’s been a week too long. Send out that first “reminder” letter today. Don’t hesitate to send these letters as little as a week apart from each other. The longer your bill goes unpaid, less likely it is you will ever see that money again.