The process of collecting overdue debts begins with a formal payment request from the customer. At this stage, we still do not know why the customer has accumulated a debt in arrears, and it is possible that he did not pay for a reason related to the organisation and not due to his unwillingness to pay off his debt. The formal requirement can be made in several ways – depending on the type of organisation, the organisation’s policy regarding customer retention, and the number and nature of the customers.
Request for payment letter
A letter to the customer is the most important and basic form of application for requesting payment of overdue debt, and it is of particular importance if we end up having to sue the customer in a legal proceeding. The content of the letter should be as detailed as possible, to allow the customer to make the payment without the need for further check or contacting the organisation again. Details such as the numbers of the invoices to be paid and their dates will allow the customer to quickly check whether or not he has paid the debt claimed from him and to pay according to the results of his check.
A demand letter that includes only the customer’s balance without the details of the invoices will cause the customer to call the company or ignore the letter. Also, it is appropriate that the letter includes information on the potential escalation of the procedures if the debt is not repaid, and indicates how much time the organisation gives the customer to settle his debt. The time frame should be reasonable and practical, and the time of sending the letter by mail should be considered. A reasonable period is generally considered to be 7 to 14 days. You also need to make sure that the letter includes the name and phone number of the representative who can be contacted for any questions.
Telephone conversation
In cases where the number of customers who have accrued debt in arrears is small, or in cases where these are important customers for the organisation who may misjudge the receipt of the demand letter, it might be better to make the first demand over the phone.
Meeting with the client
When it comes to large clients, strategic clients or government offices, a meeting with the client is sometimes required at this early stage. As part of the customer retention policy and the long-term personal relationship with him, we consider the meeting with the customer to be of great importance.
Outbound IVR, emails and text messages (SMS)
For organizations with a large number of customers and/or small invoice amounts, it is sometimes useful to use additional means to fulfil the first formal demand. It is possible to contact a large number of customers almost immediately by using emails, text messages (SMS) or automated diallers that transfer the conversation with the customer to a representative as soon as contact is made (Outbound IVR). This topic is expanded in chapter 18, which deals with collection centres.
Control report for the first formal inquiry
It is interesting to monitor over time the effectiveness of each of the methods of formal customer contact. The generated reports will include the proportion of customers who paid (amount and number of customers) after contact out of the total number of new debts for that month.
Next: Debt collection in arrears, phase 2: treatment of reasons for non-payment