Getting Paid: How to Handle Accounts Receivable 5

Reprinted with permission from Janet Attard* Copyright 2004. All rights reserved.
     
The third letter should be a little firmer:

Dear Mr. Southard,

We still have not received your check for $230 for invoice #1234 dated April 25. Since you have not questioned previous statements we assume our records are correct. To preserve your credit privileges, please forward us your check for $230 today so that we may bring your seriously overdue account up to date. If you cannot pay the full amount at this time, please call our main office to work out a payment method you can abide by.

Thank you for your speedy cooperation in this matter.

The fourth letter should specify what you will do if you do not receive payment by a specific date. You must be careful not to make such letters threatening or to misrepresent what you will do. Don't say you will report the customer to credit bureaus or sue unless you plan to do those things, and don't say or imply anything that could otherwise be construed as threatening. To be sure your collection letters don't violate any laws, it would be a good idea to have an attorney review and approve them. Here is a sample of what your fourth letter might look like.

Dear Mr. Southard:

Over the last two months we have sent you several reminders about your overdue payment of $230 for invoice #1234. At this time, your bill is still unpaid.

Please remit your payment of $230 within 5 days to prevent further collection action. Sincerely,

Can I send postcards instead of letters to alert people to past-due accounts?

No. By law, there can be no marks or visible indication referring to collection efforts on anything you put in the mail. If you use envelopes with see-through windows allowing the address to show through, make sure nothing about late payments shows through the envelope window.

How should I handle phone calls to collect money owed me?

Collection phone calls should pretty much follow the procedures described for letters. The one thing you will need to do, however, is make sure at the outset that you have reached the right individual. Even if the person's last name is unusual, you could have phoned the wrong person, particularly if you looked up his or her phone number in a telephone book. As noted in the list of collection practices to avoid, you also should avoid making your calls at unusual hours.

Does it pay to use a collection agency?

Most people do not like to be contacted by collection agencies, and some will pay up when they see their account has been turned over to one for collection. Additionally, the agency may be more persistent and routine in its collection efforts than you are. However, a collection agency doesn't have any methods available to it that you don't. They can't threaten, harass, or mislead the customer into paying the debt, and they have no legal means of forcing payment. Nothing short of a court order can force your customers to pay up.

What do collection agencies charge?

Collection agency fees range from one-third to one-half the amount collected. Be sure you know in advance all the fees you will be charged. For instance, will you have to pay a fee for each letter the agency mails on your behalf or just give the agency a percentage of the amount collected?

A customer owes me a lot of money and seems to have skipped town. Is there any way I could track this person down and collect?

If the amount owed is significant, you might want to consider hiring a private investigator to do the search.

My customer is from out of state. Where do I file the lawsuit?

In most cases you have to file suit for collection in the legal jurisdiction where the customer is located.
   
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