How to write effective reminder letters?

 My column last week on sending collection letters drew a lot of feedbacks from my readers. As what I have said, personally in my nearly 20 years of credit and collection experience, sending collection letters is one of the most widely used instruments in receivables management not because it is effective, but it is prescribed. However, sad to say, this strategy rarely produces the desired result. I guess it has something to do with how it was written and actually doing what was written, that made a lot of difference. 

 With regards to writing effective reminder letters, as these are sent mostly soon after an invoice falls overdue, their primary objectives are to collect the money owed while simultaneously preserving your relations with customer or what we commonly call as good will. According to Dr Angelo Loanides, there are 6 strategic elements to incorporate in writing Reminder Letters, these are:

 1. Verify The Account. In order to minimize confusion and delays it's essential that you outline all the details associated with the debt. As a bare minimum you should always include what was purchased, the delivery receipt, invoice, the amount outstanding, when it was due and your terms of payment.

 2. Diffuse Tension. While the account is indeed overdue, at this point you want to avoid making any accusations or judgments that may create an adversarial relationship. As such you should diffuse any tension by briefly conveying the assumption that they have simply overlooked this invoice.

 3. Clarify Desired Action. Having effectively 'let them off the hook' you must now clearly state what you want them to do next.. Namely: to settle the account. This must include how much need to be paid as well as a due date. Furthermore, to make payment as easy as possible you should provide a range of payment options as well as provide your full contact details.

 4. Open Communication. In addition to simply forgetting about or misplacing your invoice, there are three other reasons why your customer has not yet paid you. These three reasons are a) they are experiencing financial difficulties; b) they dispute the invoice and/or the quality of goods/services received; and c) they have no moral conscience and do not intend to pay.

 5. Set Expectations. Conclude your letter by thanking your customer for attending to this matter in a timely manner. You may also wish to touch on a benefit of settling this account such as maintaining an open account with your business or preserving relationship. Doing so reinforces your expectation of payment as well as conveys your desire to maintain good relations.

 6. Personalize Your Letter. It's good practice to sign off the letter with a real signature. Doing so demonstrates both your regard for the customer as well as the importance you place on payment.

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