In the Philippines, we are used to sending three (3) collection letters or even more. I came across with this company that has a credit and collection department that sends a reminder letter (1), a demand letter (2) and final demand letter (3). Then what is really incredible is that they have a “legal department” that sends another “notice” (4). So in total they are sending four letters to a particular delinquent debtor, when I ask them why this is so. Their reply was to “give chance”. Obviously, they missed the objective by a mile. The objective of sending reminder or demand letters is not to give chance – but to collect!
I agree that, the first letter may begin with suggestion of oversight by the customer. This offers the overdue debtor an opportunity to “save face”. This is why it is normally called, the reminder letter. While many people advocate sending a series of Reminder Letters with increasing assertiveness over time, doing so in my opinion needlessly sets you up to fail. Statistically, the more time you give people to pay the less money you'll actually recover.
In my nearly 20 years of 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. Not because, it is not effective per se, but how it was written and actually doing what was written, that made a lot of difference. Remember, the person in charge of writing collection letters can try different approaches but must always bear in mind the most important objective of them all: obtaining payment from the customer/ debtor.
As such, if a debtor does not respond to your first Reminder Letter, this is already a clear “danger signal”. I always suggest that you give them a call to know if the letter is received, inform them of their overdue and discuss payment immediately. Should they then fail to settle the invoice or alternatively agree to a repayment plan then it may also be evidence that you're dealing with a “professional debtor”. In this instance you should immediately send them a Final Debt collection letter.
Overall, if the reminder letter does not deliver the required result, a second letter- demand letter may be sent. Then, if it fails to once again produce desired results, a final demand letter/ notice may be sent to reinforce the one sent earlier. The interval for each letters depends mainly to what you collection policy states. The “tone” of your first and second demand letters, will have to change increasingly as well. This is what we commonly call, escalation. Your collection policy must be clear regarding this, there must be no question that each letters sent must convey a strong message that a debt or an account is overdue or past due and it becomes demandable.
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