Learn These 4 Tips To Write A More Effective Demand Letter

If your business is responsible for its own in house debt collections, you already understand the need to send out demand letters to late-paying customers from time to time.

Most businesses prefer to use the “gentle” approach by sending a friendly reminder. The hope is that the customer may have simply forgotten about owing the bill, and that this reminder will help them to remember.

These are often effective, but they can be improved by learning some tips to help you write a better demand letter. This can help make customers want to pay you sooner, as opposed to later.

1. Wording That Is Professional

Your demand letter should never contain any kind of threatening language or terms that can imply threats. People can become very defensive if they feel they are being attacked, whether its rightful or not. This defensiveness can often become retaliation and prompt them to become even more stubborn about not paying your unpaid bills.

Your collection letters should be worded professionally, with communication that is non-personal, emotional, stay on the point, and communicate clearly that the letter is a reminder of an unpaid debt. This usually proves to be enough of an encouragement to get the customer to pay the bill.

2. Exactness is Key

The demand letter should state the exact amount that is past due, and when payment was due. You can also remind them of the services or products purchased. Keep your letters to the point and succinct.

3. Payment Arrangements

If you notice that some customers are avoiding contact, it is possible to introduce the concept of entering into a payment plan arrangement. Youre effectively asking the customer to pay even a small portion of their unpaid debt to help reduce the amount they owe over time.

They might be more cooperative after being offered a payment settlement plan, as these smaller payments are less overwhelming.

4. Late Fees

Some business owners may find that mentioning the prospect of adding a penalty fee on top of any seriously delinquent accounts can become effective. Throughout your demand letter, point out that if an account remains unpaid for a further 14 or 28 days, then the account may incur a penalty fee. Many people will suddenly find enough money to pay their debt rather than face an extra cost on top of the amount they already owe.

These suggestions can increase the cash flow to your business, by receiving smaller payments over a period of time. They will also encourage your late-paying customers to pay their past due accounts.

If youre dealing with your debt collection procedures in-house and writing your demand letters yourself, you must not imply that a debt collection agency is involved in the collecting.

You should also be careful not to use wording that can imply a threat of any form, nor can you use any form of deception in your letters. This means you may not imply that the customer could be facing legal action or that youre working with a government department to recover debt. Youre also not allowed to imply the threat of garnishing a customers wages to recover debt.

It also violates federal statutes to make your demand letters look “official”, and like they’ve been written by any federal or state agency, or from a court.

Remain professional in the tone of your writing. Use your own business stationary. A general rule is you should send no more than two demand letters, spaced around 30 days in between. If these don’t yield any positive results, then its time to consider other alternatives, including hiring third party collection agencies to help with your collections.