Collection letters play an important part in generating revenue from slow-paying customers. Sometimes all it takes is a friendly reminder that an account is past due to get a customer to pay.
The following table illustrates how important it is to get paid early, because the longer a bill remains unpaid, the less chance there is of collecting.
|
# of Days Overdue |
% Uncollectable |
|---|---|
|
1 to 30 |
2% |
|
31 to 60 |
10% |
|
61 to 90 |
20% |
|
91 to 180 |
30% |
|
181 to 365 |
50% |
|
Over 365 |
90% |
Since most people will pay if reminded, collection letters can be an effective way to get people to pay you what they owe. Past due amounts can be quite a burden on a company's cash flow, so it is worthwhile to send a letter designed to get results.
Collection letters can vary in tone and urgency depending on how late the payment is. For example, you might send a friendly reminder to someone who is less than 30 days past due, but you would not send the same letter to someone who is more than 90 days past due. It is important to remember that while you want to collect, you probably still want to keep the customer. Because of this you want to be careful in wording the letter; you don't want to unconsciously or unnecessarily offend the customer.
The letters included in Sage 50 are grouped by severity of tone, which is tied to lateness of payment. Thus, the less-than-30-days-overdue letter is relatively "soft," while the 61-90-days-overdue letter is much firmer in tone. All of these letters can be edited. You know your customers and what you want to communicate to them. Here are a few tips you might keep in mind when writing collection letters:
- Avoid words that will insult the reader. You want to be strong in your message without losing the customer's business.
- Be specific when telling the customer how to take care of the matter. Give dates to pay by, as well as the amount due.
- Don't give too many options. You can offer the possibility of working out different forms of payment, but if you give too many options, you might appear irresolute.
- Get to the point. Avoid lengthy letters that will bore the reader or hide the central message (that you want your money).
Sage 50 comes with five predefined collection letters.
- Overdue <30 Days - Soft: Prints collection letters with soft tone for customers with accounts that are less than 30 days overdue.
- Overdue 31-60 Days - Medium: Prints collection letters with medium tone for customers with accounts that are 31-60 days overdue.
- Overdue 61-90 Days - Firm: Prints collection letters with firm tone for customers with accounts that are 61-90 days overdue.
- Overdue >90 Days: Prints collection letters for customers with accounts that are more than 90 days overdue.
- Overdue >90 Days - Coll Agency: Prints collection letters for customers with accounts that are more than 90 days overdue and warns the customer that their account will soon be turned over to a collection agency.
When you print collection letters, it is the oldest outstanding invoice, a filter option, that determines when a collection letter prints for a customer. As an example, look at the sample Aged Receivable report below.
|
Aging Brackets as of 3/31/11 |
||||
|---|---|---|---|---|
|
0-30 |
31-60 |
61-90 |
Over 90 |
|
|
Customer A |
459.34 |
275.00 |
||
|
Customer B |
213.04 |
104.90 |
||
|
Customer C |
263.27 |
139.36 |
157.26 |
|
When you print collection letters, the letter date selected impacts which customers are selected as well. On March 15th, you run the Aged Receivables report, with This Period selected as the date. The Aged Receivables report shows a date of March 31, 2011. You want to print collection letters for the customers in the 31-60 day aging bracket, so you choose the Overdue 31-60 Days - Medium collection letter and set the Oldest Outstanding Invoice to 31-60. However, the letters do not print as expected. The collection letter date defaults to the current date, March 15th, and the 15-day difference has changed where the invoices are in the aging brackets.
If collection letters do not print as expected, check these settings:
- Check the Oldest Outstanding Invoice filter range option on the Preview and Print filter screen when you print the collection letters. If the customers for whom you want letters printed have invoices beyond the aging bracket selected, these customers will not be selected when you print the letters.
- Check if you are aging invoices by due date or invoice date. This affects when the invoices appear in your aging brackets. For example, you have an invoice dated of 3/1/11, due on 3/30/11. If you age by invoice date, the invoice will appear in the 31-60 aging bracket on March 31st. If you age by due date, however, it will not appear in the 31-60 aging bracket until April 30th.
- Check the date in the Date these letters field on the Preview and Print filter screen when you print the collection letters. Sage 50 determines an invoice's age based on the collection letter date, not the end of the period. The Aged Receivables report shows invoices as of the end of the current period by default, which might not be accurate for the current date.