Receivables Timeline/Lifeline (part 1 of 2)

Having a plan, complete with different treatment plans for different levels of risk, in place will create consistency and remove guesswork. Providing standard templates for written communication and scripts, or talking points, for person-to-person contact is a valuable tool in your Cash Flow Recovery System. This kind of preparation will make your collection efforts more effective and less stressful.

With that, tailor the steps below to suit your needs and use the following letter templates to improve your cash flow recovery.

Step 1:   Products and/or services delivered along with an invoice specifying the due date and a “Customer  Satisfaction Verification Letter”.

Step 2:  “Customer Satisfaction Verification Letter” (a sample copy included in the Resources Chapter) is sent immediately following delivery of products and/or services along with an invoice specifying the due date.

Step 3:  35 days after receipt of goods or services, letter #1 is sent.

Step 4:  45 days, letter #2 is sent.

Step 5:  60 days, letter #3 mentioning the Pre-Legal Department is sent.

Step 6:  90 days, Pre-Legal Department is utilized.

Step 7:  120 – 150 days, past due account is sent to an outside service (collection agency, lawyer, law       center, etc.) in order to realize a higher return while paying lower fees to the outside service.

Sample Letters and Documents

It’s important to begin communication with your customers early and detect any potential problems with their order.  Bad debts can arise from simple disputes and convenient memory loses.  We suggest that you also include your credit terms and conditions agreed to by the customer along with a copy of the invoice. The Customer Satisfaction Verification Letter below eliminates any excuses for your customer to not pay an invoice.

Effectively, you are closing all possible problems and excuses that could cause delayed or non-payments thereby making the collection process easier.

Customer Satisfaction Verification Letter – Step #1 & 2 of the Receivables Timeline/Lifeline

Dear Mr. Customer,

Thank you for recently allowing us to be of service.  Our customer service is extremely important to us and we wanted to make sure that you are completely satisfied.

Please take a moment to let us know if the delivery was on time, whether the PO matched the packing slip or invoice and if our merchandise and/or service meet your expectations.

We encourage you to let us know if there is anything else we can do for you.

Regards,

Customer Satisfaction Team

Your Company Name

Should an invoice become past due, it’s especially important to set the tone early in the relationship with the debtor by bringing the problem firmly, but professionally to their attention. It;s possible that the customer is testing you as a new vendor to see how sensitive you are to delays in payments so he can extend his cash flow to its maximum at your expense.

Use the following letters as a guide to reduce your DSO and improve your cash flow; the life blood of any business.

Letter #1 – Step #3 of the Receivables Timeline Lifeline (Sent 35 Days After Receipt of Goods/Services)

Dear Mr. Customer:

According to our records, your current balance due is $000.00.  Of this amount, $000.00 is more than 30 days past due. As you know, our normal terms require payment within 30 days after the invoice is sent to you.

Since you have established an excellent credit rating with us in the past, we are surprised to see a problem arise at this time. If there is some error, or you are unable to pay the amount due immediately, please contact me so that we can correct the situation or make suitable arrangements for prompt payment of this obligation.

If your check is already on its way to us, please disregard this notice.  Thank you for your attention to this request.

Sincerely,

Your Name

Your Company Name

If no response has been received from the customer a second letter, 30 days later, might read as follows:

Letter #2 – Step #4 of the Receivables Timeline Lifeline (Sent 45 Days After Receipt of Goods/Services)

Dear Mr. Customer:

We have not received any response from our statements nor to our letter of (Date of Previous Letter). Your entire account is now 45 days overdue, and you owe us a total of $000.00.

If there is some reason why this payment cannot be made immediately, please contact us so that we can make arrangements that will be mutually agreeable. Perhaps we can work out a payment schedule that would be realistic for your present circumstances.

Naturally, we do not want to endanger your credit rating or destroy the good relationship that we have maintained in the past. Therefore, would you please take care of this obligation immediately so that we will not have to file an unfavorable report with  credit bureau or resort to the use of a collection agency or an attorney.

We have enclosed a self-addressed envelope for your convenience. Please return it as soon as possible with your check for the balance owed.

If your check is already on its way to us, please disregard this notice.

Thank you for your prompt attention to this request..

Sincerely,

Your Name

Your Company Name

If this is unsuccessful, a stronger letter should be sent at 60 days:

 Letter #3 – Step #5 of the Receivables Timeline Lifeline (Sent 60 Days After Receipt of Goods/Services)

Dear Mr. Customer:

We still have no response from our statements from the past three months, nor from the letters that we sent you on (Date of First Letter) and (Date of Second Letter).

Your entire account is now seriously past due: It is obvious that our efforts to clear the account on a mutually agreeable basis have had no impact. Unless we receive payment from you within seven days, or can work out a mutually agreeable arrangement to discharge this obligation, we will have to refer your account to our pre-legal department.

If this fails, the account will be turned over to a collection agency or to our attorneys for further action. Since this is a  costly procedure for both of us, and will cause serious damage to your credit rating, I would suggest that you call immediately so that we can clear the matter at once without resorting to such procedures.

Sincerely,

Your Name

Your Company Name

If you still do not have payment at the end of step 5, it is time to move on to a series of “Pre-Legal” letters.


Please visit Dynamic Legal Recovery’s website or call us at 877-777-7564 for your complimentary evaluation.

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