How to Do Collection Letters and Get Customers to Pay

Ann Marie Smith

Feb 8, 2021

We have all been there. You sell something or provide a service and extend credit to your customer. Then, they take their time to pay you or do not pay at all. It hurts your cash flow and distracts you from your paying customers.

On top of that, there is the time and effort it takes for collecting outstanding payments from customers and clients.

How to Avoid Slow-Pays or No-Pays

The best way to avoid having to spend time collecting late payments from clients is to check them out ahead of time, agree on terms, and put everything in writing.

Put Payment Terms in Writing

Before you start work or deliver products, make sure the customer understands the payment terms. Put it in writing so there is no misunderstanding later. If there is a contract or written agreement, have them sign it.

If possible, collect payment upfront or request a down payment. A down payment shows good faith and creates a paper trail showing their intent to pay in full.

Do Not Automatically Extend Credit

One way to avoid getting into slow-pay or no-pay situations is to run a business credit check on a customer before extending credit. With accredit, you can choose the right business credit check for your needs, click, and get your report instantly. Unlike a personal credit score, anyone can request a business credit report. It can give you a picture of their financial health and whether they are paying their other bills on time.

Send Invoices ASAP

Put systems in place to ensure you are sending invoices right away. Make sure they include ways to pay and the information they need. If a bill is past due, send statements to refresh their memory.

How to Do Collections

Even if you have done everything right, there are still going to be times where the customer just does not pay their bills on time. In that case, it is time to start the business collection process.

When bills are not being paid promptly, you will want to start a sequence of contacts that escalate as time passes. Contacts should always start on a positive and professional note. Bills and payments do get lost in the mail sometimes. People have other priorities and may have legitimately forgotten to pay. A gentle reminder can often do the job.

Collection Emails

Collection emails are an easy way to remind someone their bill is past due. Start with a non-threatening reminder. Follow up with additional business collection emails a week or so apart. Make sure you always attach a copy of the invoice or statement so they cannot say they lost it.

Collection Calls

Making a collection call is never easy, but they are an essential step in the process. There may be legitimate reasons why your customer has not paid or responded to your email. A phone call may be the thing that encourages them to pay.

If they do not answer, leaving a voicemail or two and asking for a call back will give you a good indication of their intent. If they still do not respond, it is time for a formal collection letter.

Collection Letters

A collection letter should follow a similar pattern by starting friendly and then escalating collection attempts and language. The first letter might simply state that the bill is past due and they need to pay it promptly. A second letter should remind them of the past due balance and inquire as to whether there is a problem you can help them with. By the third letter, it is time to be even more formal and let them know you need them to pay now.

How to Write a Collection Letter That Will Get Customers to Pay

If they have not made an effort to pay or respond by now, you will need to send a final demand letter, give them a firm deadline, and let them know the next step is to send them to collections and report their non-payment to credit reporting agencies.

If they still do not respond after this series of emails, calls, and collection letters, they are likely not planning on paying anytime soon.

An Attorney Letter or Collection Agency Letter

A final step would be to turn collections over to a professional collection agency. While you may damage any relationship that you have with the customer, if they are not going to pay you what they agreed to pay, you may not want them as customers anyway.

A letter from an attorney or collection agency shows you are serious about getting paid. Of course, there is a cost to doing that, so you will want to exhaust your other efforts first.

Collecting Late Payments From Clients and Customers

The old saying “the squeaky wheel gets the grease” applies here. If you are not persistent, it is too easy for them to ignore you. If you are persistent, you may get results or at least get paid before others who are not reaching out.

Collecting late payments from clients is never fun, but always remember you deserve to get paid for your work. Follow these best practices and be consistent.

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