July 14, 2017

Do Debt Collection Letters really work?

This is a question which lawyers are often asked. So what is the answer and is it a simple straightforward one?

Lawyers are becoming increasingly aware that in small business getting paid for your work (and materials) is becoming more and more difficult.

Whereas in the past, it was commonplace to allow 30 days for payment of accounts, that period has been reduced to 14 days and in ever increasing numbers, to 7 days. Getting paid is vitally important to your business. It is the justification for the time you spend in your business but importantly it is the cash flows that results and this is the life blood of your business.

Failure to ensure payment of your accounts on time ultimately results in you funding your clients and as a small business operator, you do not want to be a branch of your local bank. If you are not getting accounts paid in a timely manner then there is a cost to you, either you are paying interest on your overdraft or there is the lost opportunity cost to you. If your account includes material which you have had to supply then this will be an additional cost as well.

So being on top of payment of your accounts is not any longer an option – it is now just plain simple business practice.

Your accounts person needs to be on the job and alert to the slow payers and all over the non-payers.

When it comes to getting paid by the slow payers or non-payers then don’t let things slip. Once the time allowed for payment has passed then adopt the following steps:

  1. Have your accounts person send a reminder notice but always have the reminder notice followed up with a telephone call.
  2. If the response to step 1 is not positive then send a letter of demand and again follow the letter up with a telephone call.

Always make the telephone call because your customer or client may be experiencing cash flow problems and this will allow you to make an informed decision as to whether or not you are prepared to give your customer or client time to fix up the payment. This person might be a very good customer or client and you don’t want to burn this customer or client off.

Sending a reminder or a letter should be the starting point but we all know from our own experience that written material can be ignored. It is much more difficult to ignore a telephone call. Genuine customers and clients will generally pay on receipt of a reminder or demand. This customer or client is not your problem – it is the customer or client who doesn’t intend to pay at all.

So once you have assessed where the customer or client is, then you can decide if you want to chase payment more aggressively.

Our free e-book on Debt Collection can be downloaded by you at any time.

The free e-book sets our letter from the polite to the very firm – but always remember that you can go directly to the very firm letter and any time for payment which you want to allow is a matter for you.

Decisiveness is the key to collecting payment of your accounts. If you discover that your customer or client is having all sorts of financial issues then you should contact your solicitor and discuss your options. Don’t get left behind – other creditors will act and you want to be there.

So the answer to the question, ‘Do Debt Collection Letters Work’, is that they do but sometimes they need to be used in conjunction with other weapons in your financial armoury.

Don Gayler is the principal of Gayler Legal with almost 40 years experience as a practising lawyer and can be contacted on 4124 7100