If your business is handling its own debt collection methods internally, then you already know the need to send out demand letters to non-paying clients that arise from time to time.

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. Careful Professional Wording

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 it’s rightful or not. This defensiveness can often become retaliation and prompt them to become even more stubborn about not paying your unpaid bills.

Your demand or collection letters should stay on point, and clearly communicate that the customer owes an unpaid debt, and encourage them to pay. This is often incentive enough to get your customer to pay.

2. Be Accurate

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 Plan

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. Late Fees

Mentioning the possibility of late fees or penalties might be a further incentive for some customers to pay. Your demand letters could mention tacking on additional late fees if the account continues to remain delinquent. Faced with the possibilities of still more fees, some customers will find the money needed to pay the debt.

These suggestions can increase the cash flow to your business, by receiving smaller payments over a period of time. They will also encourage your late-paying customers to pay their past due accounts.

If you’re dealing with your debt collection procedures in-house and writing your demand letters yourself, you must not 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 you’re working with a government department to recover debt. You’re also not allowed to imply the threat of garnishing a customer’s wages to recover debt.

It’s also a violation of federal statutes to try to make your demand letter look like it’s 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.

David P. Montana has been a distinguished business professional, business consultant plus author when it comes to collection agencies providers for thirty years. He offers additional important recommendations and details about Creating an effective demand letter.