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
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)
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)
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)
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.