Overdue Payments & Example Letters
Many businesses dread dealing with customers who have outstanding accounts or unpaid bills. Sometimes these matters can be unavoidable, however, so it pays to have a clear system in place to deal with these situations. There are also steps that can be taken from the very beginning of a business transaction to avoid late payment. These include:
- agreeing to the price at the quoting stage, including any interest or charges for late payment,
- making sure payment terms are clear, and potentially offering first time or one off clients a shorter payment term,
- conducting credit checks if necessary,
- always invoicing on time, and
- following up invoices with statements.
To avoid spending valuable time and effort chasing late payments you should consider having collection letter templates ready to use and a timing process for sending each one already in place.
As well as having a set policy in place it is also important to document everything, for example, when and what letters are sent, or outcomes of any phone conversations with the customer. These may become legal records later if you have to take action with a collection agency or solicitor.
These letters should range from a friendly reminder to a final notice:
1st letter – short and friendly reminder, can be included on statement page
2nd letter – follow up to reminder, more direct and less cordial than the first
3rd letter – demand payment within 7 days or threaten legal action
4th letter – demand payment and state legal proceedings will be started by a certain date.
Keep in mind that the goal of these letters should be to retain customer goodwill as well as to encourage prompt payment.
If you do end up having to send a final notice to a client it is important that you don’t make empty threats but be prepared to follow through with collection measures. Often a firm letter on solicitors’ letterhead will get more immediate results.
Below are examples of outstanding account letters that can be downloaded for use and edited as required.