If the world was a perfect place where everyone paid for what they owed others there would be no need for collection letters. Sadly that is not the planet we currently occupy.
While the vast majority of people pay their bills on-time without incident, some need a little prodding. The most common tactic is simply sending a letter requesting payment.
Things to consider BEFORE using a collection letter
Now before I dig in too much, just because a payment is late doesn’t mean there is some huge problem. It could simply be a case of the invoice being misplaced or lost somehow. Or it may have actually been a problem you created!
For instance maybe you forget to mail the bill, sent it to the wrong address or mailed it with the incorrect amount owed. Over the years I’ve done each of those once or twice. I’ve even made the mistake of referencing the wrong purchase order number on the invoice. These type of mistakes are a sure fire way to create confusion and delay payment in the process.
Anyway… if you do your job right odds are you won’t have much of a problem getting paid for your work. As I mentioned in podcast lesson 097 most people do pay without incident. I have literarily done thousands upon thousands of jobs, yet only been stiffed on a tiny minority of them.
The way the payment process usually plays out for me is like this (within the commercial side of things)… About 25% of companies pay early (generally smaller mom and pop type businesses). Then about 50% pay right on time. So now that’s 75% paid up on-time.
The last 25% normally comes right after the due date, like within a week or so. Sometimes you may have a one or two stragglers that are two weeks late. Keep in mind that some customers pay late REGULARLY. With that said, once you get to know a customers “payment profile” you tend to get comfortable and not worry too much if they run a little late.
Collection letters you can use right away
The letters I’ll be making available as a free download are real basic collection letters that you are free to tweak as needed. Change everything in the letter or nothing, the choice is completely yours. Just remember this… do not panic and overuse the collection letters.
You’ll want to keep in mind that the ultimate goal of the collection letters should be to maintain the goodwill you have with the customer as well as to encourage prompt payment. You are not out to create enemies or make unnecessary threats! Ideally you want to keep them as paying customers.
Now on to the collection process for when it’s needed. Most times a three step collection process is used. These letters should range from a “friendly reminder” to a “final notice”. Generally the collection process goes like this…
1st collection letter: This is a short and friendly reminder. Enclose a statement page or copy of invoice in question.
2nd collection letter: This is a follow up to the first reminder. It’s a bit more direct and less cordial than the first letter. Including a statement or copy of the invoice in question is a good idea.
3rd collection letter: This letter basically demands payment within a set number of days (7 to 14 days or so) and threaten legal action if no payment is received. NOTE: You could also change the wording to say the matter will be referred to a “collection agency” instead of indicating legal action.
In all my years in the cleaning business I rarely used any of these letters, but I did feel comfortable knowing that I had them ready to go just in case. In all honesty, before ever sending a letter like these, I would simply make a call to the customer (or their accounts payable department).
That’s just me! I prefer to make a 60 second call holding the invoice in my hand as a reference. You of course can do as you please. As to “when” to start the mailing process, there is no strict guidelines as far as I know. If the customer is established, I would give them some leeway. For instance, if the payment was late I would wait 5 to 10 days before sending out the letter.
If on the other hand they were brand new monthly account it’s probably a good idea to send them a reminder pretty quickly. That may be anywhere from 1 to 3 days after the time it’s due. Again… this type of decision is 100% YOURS. You are the CEO and you need to make these type judgment calls from time to time.
Anyway… the collection letters are available for download below. These need to be edited slightly (you need to add clients name and address plus your information). As usual I’ll be making them available in OpenOffice format. Download the letters below…
Collection Letter #1
Click Here To Go To Download Page (LOOK FOR FILE #14A)
Collection Letter # 2
Click Here To Go To Download Page (LOOK FOR FILE #14B)
Collection Letter #3
Click Here To Go To Download Page (LOOK FOR FILE #14C)
Well… there you have it! A little bit of useful info on the collection process and some sample forms you can use as you grow your cleaning business. Before I go… If anyone has any questions about sending out collection letters simply leave a comment below and I’ll get back to you.
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