This information is designed to give you insight into some techniques to get the cash flowing to your business more freely.

The 3 surefire ways involve new ways of writing to your customers, talking to your customers on the phone, and giving your team some incentives.

Let’s explore this critical area even further. It really is vital to collect as much money as quickly as possible and keep your debtors to a minimum. These tools will help you do that. 

1.         Use letters that really reach a person instead of letters that badger them! And some examples for you.

Here are some letters to get what you’re owed back into your pocket.

As you’re probably aware, most debtor letters are negative and threatening. (Conversely, most businesses NEVER send a thank you note for receiving payment.)

These sorts of letters alienate the customer. People don’t like being threatened even if they know they’re in the wrong. It makes them resentful and uncomfortable. This also makes them less likely to pay quickly and certainly less likely to purchase from you again.

Better to reach a debtor on a person-to-person basis.

You see, almost everyone has owed money to someone else at some point. Even you perhaps?! Maybe you forgot a small account. Maybe you were having difficulty paying a larger one at some point. Maybe you were just too busy to get to it. Whatever it was, usually though, you would never have purposely just NOT paid someone. (Very occasionally, someone might do so, but why punish and alienate the majority for the sake of a troublesome minority?)

Bearing that in mind, let’s take a quick look at a couple of typical debtor letters. The first, in particular, seems to be the norm for those businesses that bother to write requesting the dollars owed.

Dear Customer,

It has come to our attention that your account is outstanding.

The overdue amount is :       $56.54

Please correct this situation immediately by sending a check or money order today or visiting the premises.

If your arrears fail to be received within the next 14 days, you will leave us no choice but to seek legal action. Of which you will be liable for this amount and all court costs.

Legal action will be taken if the amount of $56.54 is not paid.

In the meantime, we appreciate your business and if you have already paid this account, please disregard this letter.

Yours faithfully,

Or another, not quite as harsh but a bad letter just the same:

Dear Client,

We refer to your outstanding account with our firm. As you are no doubt aware, the amount charged to you is our selling price. While we do not provide any goods or materials, we do have a very large infrastructure that must be financed. Not the least of these is our commitment not only to keep up-to-date with legislative changes, but also to keep touch with the current best business practices.

In order that we can provide you with better services, our cash flow is of prime importance. We would therefore ask you to make payment as soon as possible.

If you have some complaint with our services or are experiencing cash flow problems, please call to discuss the matter. I’m sure any problems could be solved to our mutual advantage. If you are having cash flow problems, perhaps we can help you to plan your business objectives and review your business practices. This could well solve both our problems.

As you can see, both letters are harsh. Both fail to consider the customer’s point of view. The first is threatening and overbearing, only to say ‘but thanks anyway’ at the end! The second talks about the accountant and not about the client. It’s a complaining, almost indignant style of writing. As is the case with these types of letters, it’s not unusual for debtor letters to come across as negative.

Perhaps yours are written in a similar style? If so, consider this:

People pay people they like! And the purpose of any debtor letter is to retrieve your money in full.

As such, it should not make you feel good and the client feel awful. It should build empathy in your direction!

Instead, try a letter like this one:

October 28, 1998

Susan Smith

ABC Company

PO Box 123

Your Town

Spring Hill, Thursday, 2:50 p.m.

Good morning, Susan,

You know, bank managers and accountants can be such pains in the butt!

They do, though, have one very important function—they remind me occasionally that I’m running them out of business by competing with them.

“Look here Zane,” they say, “we’re the ones who lend money, NOT you. And you don’t charge any interest either.”

You see, Susan, I’ve effectively loaned you $1,200. The $1,200 you’ve owed us since May 5.

Now, you might feel a little uncomfortable about that, so acting on this letter may well help you feel a little better.

All you have to do is drop your check for $1,200 in the mail. I’d really appreciate it if you could do that right now or please call me so that we can find a solution to the problem.

Thanks in advance for taking some action, Susan, and for doing it quickly. That way we can both keep our paperwork piles down.

Keep at it…

Zane Hamilton

PS And I guess we can make at least one bank manager happy, too!

Or perhaps a letter like the one below:

November 10, 1998

Michael Smith

ABC Company

PO Box 123

Your Town

Spring Hill, Tuesday, 2:50 p.m.

Good morning, Michael,

You know, I’ve tried 47 different ways of starting this letter to you. And then, it finally hit me.

All I had to do was say H E L P !

All I had to do was explain that I had a problem and needed your help. I figured you’d want to know exactly how you could help.

You see, someone in your organization currently has an account they’re “sitting on” for $2,900. Sure, it’s not taking up any space, but it can be annoying to have paperwork piling up.

So, you can reduce that pile and help 3 people at the same time.

First, you’ll help me. Second, my bank manager will change his scowl into a smile. And most importantly, you’ll help yourself by getting rid of something that might just sit there like a thorn in your side.

Thank you in advance, Michael, for taking action on it now. I really do appreciate your help. Keep at it and keep on enjoying…

…good things.

Zane Hamilton

PS If for some reason you can’t act NOW, I understand. But please do call me so that we can find a good solution.

The idea behind these letters is that they’re ‘friendly.’ And people don’t like owing their friends money. And most don’t like to think they’re making someone feel badly.

Also, you’ll agree these letters are different. They certainly stand out from the rest of the debtor letters your customer may have ever received. 

Because of that, you can be sure they’ll be read. 

Your customer will understand your position better while relating to your message, instead of being offended by it. Many will get the ‘guilts’ and feel compelled to do something!

2.         Create a debt collection system and use a critical resource—the phone—to collect your money. And some examples for you.

It’s important to create a debt collection system. At each point in the collection process, the action you take moves up in ‘gradient.’ That is, it gets more and more proactive on your part.

Such a system must be created with a view of having people move out of that system—having paid their debt—before you take the most serious steps, such as legal action and so on.

In this light, it can be useful to call your clients, perhaps even more than once, before you write to them.

Because most people don’t mean to fail to pay. Receiving a nasty letter can take them by surprise and make them indignant! The initial phone call, then, should be designed to offer a friendly reminder, a service more than anything else.

Whereas a more formal letter would have been sent in the past, these days the phone is totally accepted as a means of dealing with such issues. With the next phone call becoming more serious, and so on. In this context, your letter often has greater power to it as well. 

In that respect, there are a multitude of strategies that can be used to increase the results of your debt collection efforts.

Phone call #1

Simply get on the phone to your customer. This phone call could go something like this:

‘Hello [Customer Name], this is [Your Name] from [Your Business Name] and I’m calling for 2 purposes. First, I wanted to make sure everything is OK with your [product or service] and that you’re happy with everything we did for you.’

Let them respond. Most will say: ‘Oh yes, everything’s fine thank you.’ You can then go on to say:

 ‘That’s great. I’m glad to hear it all went well. [Customer Name], there is one thing I need to remind you about. We haven’t received your payment for your [product or service] yet [pause], and I was wondering if we could take care of that right away then?’

Many people will be surprised, or apologize, or make excuses. At this point, you can go on to say:

 ‘Oh OK, well it would be best if we could take care of that now. What would be the best way for you—credit card or a check, say by the end of the week?’ 

This, in a friendly way, gives the customer 2 clear options, and you can take it from there.

For those few who mention something they are or were unhappy about, acknowledge it as a legitimate comment and resolve it, if possible. After that, go on to confirm:

 ‘Despite that, would you say you’ve been happy with everything else?’

Most will say, ‘Oh yes, everything’s fine thank you.’

From here, depending on the severity of their unhappiness, you can either continue or let them know you will call them again to check everything has been rectified. In the latter case, be sure to mention:

 ‘[Customer Name], one last thing. Your account hasn’t yet been finalized for that [product or service]. Of course, I’ll take care of this for you first, but you’d appreciate that we will need to take care of this account then. I’ll talk with you again shortly and make sure this is made perfect for you. Bye for now.’

Phone call #2

This next phone call gets a little firmer about the outcome. You’ll find an example of the style of script you should be using below:

‘Hello [Customer Name], this is [Your Name].

Here you will engage in rapport-building conversation.

The reason for my call is to check that your payment for the [product or service] hasn’t gone astray.

I’ve just been speaking with Nicky in our Accounts Department, who brought it to my attention that we don’t seem to have any record of receiving your payment.

Don’t pause at this point.

And [Customer Name], I just wanted to determine whether your payment has gone astray at this end, or perhaps it has been overlooked by your Accounts Department.

Can you shed any light on the subject?

If the payment has been overlooked…

So [Customer Name], there are a couple of ways you could fix that with us now. The quickest way to sort it out would be to pay with a credit card. Is there any particular card you prefer to use?

If “no” to use of a credit card…

Then [Customer Name], why don’t I fax you a copy of the invoice so that you can have your Accounts Department process that for us?

Wait for a response.

Great. I’ll fax that today. That way, we can anticipate receiving your payment by when?

Agree on a specific date.

Thanks for your help with that, [Customer Name]. I really appreciate it and I forward to finalizing this.’

You’ll notice that it gets straight to the point in a very nonthreatening way. But it does get to the point.

You’ll also see that it creates action. You now have a direction or end point that you can work toward so that you can mark when your next follow-up should occur.

A way to make this even more powerful is to send a ‘Just wanted to say’ card that reinforces the end point, which is the specific date you can expect to receive your client’s payment.

For significant debts especially, it is better that you personally make these follow-up phone calls. The message is strongest and people tend to feel more beholden to you. If you don’t like doing this yourself (where the message is strongest), delegate it to a team member.

The next step from here would be a combination of a letter and another debtor follow-up call.

In this instance, you take the control away from the debtor. You write to explain that they need to pay the account, and you tell them that you’ll be calling in the next couple of days to follow up the letter and to determine when your accounts people can expect the payment.

You’ve clearly defined what will happen and what you expect. This way you’re in control from the time you send out the letter until the money is in your pocket. The script and the letters should follow a format similar to the examples you’ve read here.

From here, if you haven’t had a response and received payment—stay in touch. Call constantly. The old theory of ‘the squeaky wheel’ rings true here. People pay bills by prioritizing their creditors and their cash flow. If you’re determined and constantly in touch, many will often pay you first just to get you out of the way!

3.         Give your team an incentive and watch the $$ flow in. And some examples for you.

Provide your team with an incentive or reward that will focus them on the debtor problem at hand. It’s sometimes hard for team members to grasp the seriousness of the situation because their salaries don’t alter as the level of debt alters. The debt gets higher, yet the salary stays the same. The debt gets lower and the salary still stays the same.

Most times, the best way to solve a problem is to have the whole team focus in on it. Set team performance goals to reduce the debt. Give your team the systems, skills, and support they need to get out there and reduce your debtor problem.

Empower your team to make deals, such as payment schemes. And give them an incentive, a profit share—whatever it takes to get your money.

If you were to hire a debt collector, they would take 20% of what is returned. Yet in most cases, your team will do it so much more efficiently and nicely for the opportunity to win a day off.

The cost to you is very little, and it really focuses your team. Once they learn about the difficulty of collecting debt, they may just be a little stricter with their controls on credit.

When you’re in charge of collecting debt, you soon work out ways of bringing the debt under control. When you look to your team to share the debt responsibility, you’ll find that, in most cases, your team will devise more effective controls for outstanding amounts. And this is great leverage of your time.

Take the example of one company that tried a ‘day of reckoning’ that’s had astronomical effects. Literally hundreds of thousands of dollars have been collected in just one single day! Simply by having everyone in the company focus for a whole day on one particular aspect of the debt problem. Teams of people who normally had no contact with clients got on the phone and called debtors in an all-out attack on the problem.

The day was set up with an Olympics-style atmosphere: The opening of the ‘Games’ was held early in the morning. Collection and tabulation of results occurred every half hour in a place where everyone on the team could see.

Medals were awarded for outstanding performance.

·         Gold for credit cards or payments that would be collected and banked that day.

·         Silver for credit card payment schemes where the client acknowledged his tardiness and offered to pay over a period of months.

·         Bronze for promised payment by a set date that could be followed up within the 'Post-Olympic Closing Ceremony’ that would occur in the following months.

Rewards were given at the end of the day for the most debt collected in each category. The company managers established records before the day, and many of these were smashed during the ‘Olympics.’

They even mentioned to their clients that the day they were calling was a special day. Their clients were interested and wanted to know more about the day and why they were doing it. This led in nicely to the fact the clients owed money.

It was surprising the amount of enjoyment and enthusiasm people had for what was normally a job that most would hate to do. It was great for morale, too. Everyone had the same purpose. No bosses handing out work, only team captains setting the rules of conduct. The end result was a better company financially, culturally, and spiritually.

How could you apply these great ideas to your business?

Your Action Plan: Go ahead, bring that money in!