If you are handling your own debt collections in house, then you already recognize the need to periodically send demand letters to delinquent customers.

Many business owners would rather use the “gentle” approach by first sending a friendly reminder. The idea is this may serve to help “jog” the customer’s memory of the past due bill.

These are often effective, but they can be improved by learning some tips to help you write a better demand letter. This can help make customers want to pay you sooner, as opposed to later.

1. Wording That Is Professional

Your demand letter should never contain any kind of threatening language or terms that can imply threats. People can become very defensive if they feel they are being attacked, whether its rightful or not. This defensiveness can often become retaliation and prompt them to become even more stubborn about not paying your unpaid bills.

Your collection letters should be worded professionally, with communication that is non-personal, emotional, stay on the point, and communicate clearly that the letter is a reminder of an unpaid debt. This usually proves to be enough of an encouragement to get the customer to pay the bill.

2. Exactness is Key

Demand letters should clearly state the exact amount that is late and past due, as well as when payment was due. It can be good to also remind them of the products or services originally purchased. These letters should be succinct and brief.

3. Payment Settlements/Arrangements

Some customers may avoid all contact with you, possibly out of embarrassment to admit they’re going through financial straits. A payment plan offered to them might be more financially feasible, with smaller payments.

They could become more cooperative after being offered payment arrangements, because smaller payments are less financially stressful.

4. Penalties And Late Fees

Some business owners may find that mentioning the prospect of adding a penalty fee on top of any seriously delinquent accounts can become effective. Throughout your demand letter, point out that if an account remains unpaid for a further 14 or 28 days, then the account may incur a penalty fee. Many people will suddenly find enough money to pay their debt rather than face an extra cost on top of the amount they already owe.

By receiving smaller payments over time to your business, you can increase the cash flow by following these suggestions. At the same time, you’re encouraging your delinquent customers to pay their past due bills.

If you’re handling your own debt collections and writing your own demand letters, you cannot imply that a debt collection agency is involved in the collecting.

You should also be careful not to use wording that can imply a threat of any form, nor can you use any form of deception in your letters. This means you may not imply that the customer could be facing legal action or that youre working with a government department to recover debt. Youre also not allowed to imply the threat of garnishing a customers wages to recover debt.

Its also a violation of federal statutes to try to make your demand letter look like its been written and sent by a state or federal agency or from a court.

Use a professional tone in your writing, using your own regular business stationary. Generally, you should send two demand letters, spaced about 30 days apart. If these aren’t proving to be successful, perhaps it may be time to think of alternative debt collection methods, including hiring outside collection agencies to help you with your collections.