An effective recovery policy requires some kind of formal system that ensures overdue accounts get paid. Letting late payments languish can disrupt cash flow and harm your company’s chances of success.  To keep receivables flowing smoothly, many businesses use a series of letters and phone calls to encourage customer to pay. These communications start out friendly and progressively become more serious and insistent as payments become overdue.

1. Customer satisfaction phone call

Dissatisfied customers are more likely to pay late. These friendly calls let you inquire about your performance to ensure you met your customer’s needs. End these calls by mentioning that a bill will be arriving shortly, and reinforce its due date.

Timing: 3 days after delivery of your product or service, but before payment is due.

2. First overdue notice

This is a friendly reminder that the due date has passed. You are assuming that the customer has forgotten, neglected, or lost the bill and will pay with a gentle prodding. One common method is to send a duplicate invoice with “past due” stamped on it.

Timing: 10 days after the invoice due date.

3. Second overdue notice

Another mild nudge reminds the customer that the account needs attention. This can be a short form letter with a duplicate invoice attached. Keep it friendly and non-threatening.

Timing: 10-15 days after first overdue notice was sent (20+ days after the invoice due date)

4. First phone call

Follow the overdue notices with a phone call to find out if there is a reason for non-payment. For example, the customer may be dissatisfied with your product or service, or may be experiencing cash flow problems. Be courteous, but also get a commitment to pay. Be prepared to handle excuses. For example, if the debtor says the check was sent, ask when it was mailed and where it was sent so you can determine the day it should arrive.

Timing: 7 – 10 days after second overdue notice is sent out (27 + days after the invoice due date)

5. First letter

Keep the tone of this letter consistent with the first phone call – courteous, but direct. Confirm in writing what was said in the call, and remind the debtor of his or her promise to pay.

Timing: immediately after the first phone call (28+ days after the invoice due date)

6. Second phone call

The account is now 30 – 40 days past due. Be polite yet firm, and ask for full immediate payment. Work to resolve payment problems. If the debtor cannot pay immediately, get him or her to commit to a payment date.

Timing: 5 – 10 days after the first letter has been sent (38+ days after the invoice due date)

7. Second letter

Now is the time to communicate the seriousness of the delinquency. This letter should demand immediate payment, and discuss the short-term consequences of failure to pay. Send this letter – and any correspondence that follows – via certified mail or overnight mail to give you a record that it was received.

Timing: 10 days after payment is expected from previous phone call (50+ days after the invoice due date)

8. Third phone call

While remaining polite and calm, stress the seriousness of the situation. Use this phone call to explain that this is the last opportunity for the customer to pay before you turn the matter over to a debt recovery law firm and possibly take further legal action. Be sure to communicate the benefits of resolving the issue – maintaining good relations or good credit. As with the previous phone call, get the debtor to promise to pay by a certain date.

Timing: 15 days after second letter is sent out (65+ days after the invoice due date)

9. Final letter

The tone is now stern and demanding. Use this letter to confirm what was agreed upon in the last call and demand payment. State that if payment is not received by the agreed-upon date, you will turn the account over to a debt recovery law firm.

Timing: 7 – 10 days after third phone call (75+ days after the invoice due date)

10. Turn over to debt recovery firm

The account is now about 90+ days in arrears and may require professional assistance. Receiving a letter from a debt recovery law firm often motivates a debtor to pay or, at least, works out a time schedule of payment.

We can effectively bring our various expertise and recourses to timely ensure the recovery of overdue account.