'Special' Letters

Complaints, complicated default situations, and arrangements to pay over a period need to be dealt with in writing - and they should be dealt with by way of a letter rather than by e-mail unless you are one of those rare people who routinely run off hard copies of e-mails. 'Special' letters are evidential. You may need to produce and rely on them to prove or dispute a Claim. You obviously won't be able to do that if you've inadvertently erased them or they have been lost.

Way back in 1918 William Strunk, Jr. published 'The Elements of Style'. It's a very small book, and it's now a very old book, but it's still in print and anyone who writes business letters can't do better than to follow the advice given right at the beginning of it:

"Vigorous writing is concise. A sentence should contain no unnecessary words, a paragraph no unnecessary sentences, for the same reason that a drawing should have no unnecessary lines and a machine no unnecessary parts. This requires not that the writer make all his sentences short, or that he avoid all detail and treat his subject only in outline, but that every word tell."

• Establish what you want to achieve with your letter before you begin to write it.
• Don't stray from the point. Ensure that you are aware of all the relevant facts before you begin the letter and use only those facts.
• Set out facts and arguments in logical sequence. Use facts as paragraph topics.
• Be clear and concise and omit unnecessary words. Replace several words with one word wherever possible. Short sentences are easier to assimilate and have greater impact than long ones: aim at an average length of 15 or 20 words. Sentences can be shortened by adding full stops and/or removing purposeless words that add nothing to the sense of the sentence - but remember that this pruning process may require that you reorganise what is left.
• Say what you have to say in plain everyday English. Don't use unusual words.
• Be 'friendly'. Letters that use 'I', 'you' and 'we' are more appealing (and therefore more effective) than those that use a colder, more formal business style - and as a reader pays far more attention to a letter if he or she is referred to constantly, use the word 'you' as much as possible.

Presentation matters.

• When you have finished composing your letters, proof read them - and don't rely on your spell check to do that for you. Spell check makes contextual mistakes - sometimes ridiculous mistakes that could make you look ridiculous. Read your letters over and check spelling and punctuation yourself before sending them.
• Check your letters for clarity. Does your letter say what you want it to say? Is it clear what you expect as a result of it?
• Check that everyone necessary has been copied in.
• Check that enclosures or attachments, if any, are present and legible.
• Sign ALL letters. (Yes! There really are people who don't bother to do that.) Try to develop a firm legible signature, and if you can't do that - and actually I can't myself - make sure your name appears typed beneath your signature. You won't always be writing to 'friends' - and no one is going to be in a hurry to call you or write to you to try and resolve anything if they can't figure out what your name is.

E-mails have made us all sloppy about presentation, spelling, and punctuation, but however sloppy you are prepared to be in your e-mails, you can't afford to be sloppy about your letters. Your letters are YOU - and they are the public face of your Company. They must be professional and look attractive to the eye. Ask yourself how you would react to a sloppy, ill-spelled, badly presented letter. How seriously would you take it? What impression would you form of the writer?

Presentation matters!

Basic Collection Letter

Good collection letters follow a basic format:

First Paragraph: Facts and Terms. Collection letters should always begin with the facts relating to the debt - precise amounts, dates and invoice numbers - and go on to remind the debtor of your Company's Terms of Trading.

Second Paragraph: The Demand. The purpose of a collection letter is to induce the debtor to act in a specific way. Be clear about what action you want - payment of a specific amount by a specified date.

Third Paragraph: Making Allowances. This is optional. Some people like to allow for the fact that payment may already have been made by the time the letter arrives. In my view, it's bad practice. Certainly you should never say, "If payment has been made please ignore this letter" - and "If there is any dispute please contact us" is another no-no. If the debtor has already paid someone will let you know. If there is a genuine dispute someone will say so. In the meantime you shouldn't invite your debtors to ignore you, or encourage them to manufacture disputes to delay payment.

Fourth Paragraph: The Threat. Make it clear that if the debtor does not pay, you will take action. You have potent threats at your command which do not involve taking legal proceedings. You can:

• Put the account on stop.
• Hold orders.
• Withdraw credit facilities.

Your customer may need your goods or services now or in the future - particularly if your Company's product is unique or proprietory, or work in progress is incomplete. Putting the debtor on stop or holding orders can force a debtor to pay immediately, or come up with a reasonable payment plan.

These days withdrawal of credit facilities is a very serious threat indeed. Withdrawal of credit will affect the debtor's credit rating (and so make it difficult to get credit elsewhere) and could end by making it impossible for the business to continue to trade.

Fifth Paragraph: Closing. Use the last paragraph to repeat the demand. Again, be clear about what action you want - payment of a specific amount by a specified date.

Your whole series of collection letters should follow this basic format, differing only as to their increasing strength as time goes on. Your collection effort should be consistent and persistent. Series situations often arise as the result of neglect. Best practice is to e-mail contacts within a week of a missed payment, and to send the first reminder letter by post and e-mail the following week. Other, increasingly strong, letters should follow at 14 day intervals - unless, of course, you are pursuing a habitual delinquent, in which case you should short-circuit your own system and come down hard and early.

Presentation Matters - and Don't be Too Predictable!

Many companies have a standard set of letters to deal with specific default situations - a series of simple collection letters that increase in strength as time goes on. The letters can fail to get results for all kinds of customer-related reasons - but failure can be down to you, too.

Standard letters regularly fail to get results if they are computer generated, or run to a fixed pattern - every 14 days, for example.

In the first place, computer generated letters are usually instantly recognisable for what they are. Quite often, they hit the bin unread just because they are recognisable for what they are - particularly if they are sent out unsigned, which many of them are.

By all means use a basic template - it makes life easier - but don't get lazy about it. Make sure the letter looks professional, and is arranged well on the page. Vary the content to suit specific people and circumstances: if you are writing to a 'friend', for example, you might want to 'top and tail' the letter - hand write the saluation and the closing - so as to personalise it. And remember: using templates can be dangerous because they encourage silly and embarrassing mistakes - failure to change the date is a very common error.

Presentation matters. It can make the difference between being taken seriously or being ignored.

Secondly, customers who make a habit of paying late or exceeding credit limits receive reminder letters frequently, and are therefore well aware of exactly how far they can push a creditor before they find themselves in real trouble. The answer, of course, is to sort-circuit the system and come down much harder, much earlier. Where delinquents are concerned, don't make your collection process too predictable.

Please Pay. Pay Now. Pay or Else.

Reminder letters are one of the most effective methods of making formal 'definitely on the record' contact with a debtor company - but it can also be the least efficient if you give your debtors an excuse to ignore them. Reminder letters are likely to be ignored if they are:

• unclear;
• too long;
• contain no demand;
• contain no threat;
• convey no urgency;
• contain inaccurate facts, or
• are sent to the wrong person

And, of course, if they are sent exclusively by first class post. It really is a good idea to 'double up' and send a hard copy by post, and a copy by fax or e-mail attachment.

Many people try to make their collection letters stand out by using gimmicks like coloured paper or humorous wording. It doesn't work. Reminder letters just need to be clear, short, and unambiguous, contain correct information, and be addressed to the appropriate person in order to get attention.

The letters need to contain three basic elements:

• Please pay X amount.
• Pay it now.
• Pay it now, or else.

and use wording and a style that is going to have the greatest impact on the reader. You might use capitals or italics to highlight attention grabbing words or phrases - 'please telephone us now', for example, or 'YOUR CREDIT RATING IS AT STAKE'.

Nudge a 'Friend' - or Disable a Classic Excuse

You can use e-mails in two ways - to nudge 'friends', or to make it more difficult for people to deny that they have received more formal reminders. 'Lost in the post' is a classic delaying tactic, but e-mails rarely go astray - and you can ask for confirmation of receipt when you send them.

Nudging e-mails to 'friends' are much more difficult to ignore than standard reminder letters - and you can start the nudge process (and so set the ball rolling) much sooner. Most reminders go out at 14 days overdue: you can send a nudge to your contact in the Accounts Department a week earlier - and yes! - you should attach a copy of your statement or invoice to it.

The reply - or the fact that you don't get one! - will either reassure you and produce full or partial settlement, or put you on notice that there might be a problem and that you should nudge your other contact right away.

If you don't ask, you won't get.

Your main objective - obviously! - is to collect your outstanding accounts as quickly and economically as you can. There are three ways to do that:

• using e-mails and letters
• making telephone calls
• paying visits

The same basic principles apply to all three options:

• If you don't ask you won't get.
• The sooner you ask, the sooner you are likely to get.
• The more you ask for, the more you are likely to get.

The longer an account is overdue, the harder it will be to collect - and the longer you wait before trying to collect an account, the more likely your customer will be to consider that you have accepted the situation and continue to pay at 60 (or even 120!) rather than 30 days.

If yours is a very small company and you're unable to delegate even part of the collection process to someone else, you will likely not have the time to devote the same amount of effort to every account. Where that is the case, concentrate first on those accounts that represent the greatest risk to you - new accounts, customers that have exceeded their credit limit, accounts that have high balances, and customers that have missed the first instalment - and on customers that are consistent and deliberate delinquents.

Yesterday I was talking about how important it is to 'be friendly', reasonable, and accommodating, but post 2008 being 'reasonable and accommodating' involves recognising that attitudes and expectations have to change - and that applies to everybody. The first step toward ensuring that your deliberately delinquent customers understand exactly what your attitudes and expectations are post 2008 - and what theirs ought to be - is to make plans to stop accommodating them, and (if necessary) decide to get rid of them altogether.

Customers who always pay late, or consistently raise queries in order to delay payment are expensive, time-consuming, and a pain to deal with. Unless they are very large customers whose business is vital to the survival of your own Company, they are an expensive, time-consuming pain that you can likely do without. Bad times are good times to come down hard on persistent delinquents and get rid of those who don't get the message: it can't help but improve cash-flow and reduce administration costs.

If, of course, your delinquents are very large customers, then you won't be able to even think about getting rid of them - and it would be very unwise to come down hard and risk being delisted. The Supermarket Code of Conduct was intended to ensure fair trading practices, but despite proposed revision it hasn't done so, and large organisations remain able to bully small traders into accepting iniquitous terms and bad behaviour.

Do-it-yourself debt collection isn't difficult - but you'll be much better at getting your own money back if you follow some simple rules, develop a professional attitude, and don't make 'getting your own back' part of the process.

Your attitude toward your debtors matters - and building good relationships with your customers matters even more.

Successful debt collection has never been about aggressive or confrontational behaviour. In fact that sort of behaviour can bring out a mulish 'neither to be driven nor led' attitude in quite a lot of people, and that's something you need to avoid at all costs. Making friends and influencing people is the secret of getting money out of can't pay, pay late, and even won't pay customers, so if you want to do some or all of your own debt collection, making friends and influencing people has to become a priority.

Ideally, that means laying the groundwork for good working relationships with all your customers from day one - and those relationships need to extend not just to the proprietor or Director(s) of the company, but to the person who handles your account on a day-to-day basis as well.

Of course it's essential to identify, and make yourself known to, the person at the top of the heap - after all, that person usually signs the cheques - but the credit controller or bookkeeper who handles your account can be just as influential when it comes down to who, out of the whole of his her ledger, gets paid on time - or at least less late than other people.

Making 'friends' of those two important contacts and getting onto first name terms with them isn't as difficult as you might think, because these days most people tend to treat their commercial contacts (even unwelcome commercial contacts like me!) very much as they treat the 'virtual friends' they meet through Facebook or any other social networking website; talk to them in the same informal, familiar and confidential way, include personal information in their e-mails, and take the time to exchange views on totally unrelated subjects in their telephone conversations before getting down to the nitty-gritty of what the call or the e-mail is really about. In fact, having been around for as long as I have (and that has been rather a long time!) I'm perpetually astonished - and delighted! - at how simple it's become to get onto first name terms with debtors, and into that confidential space where negotiation and settlement becomes a real possibility.

The habit (and it is a very widespread habit now) of making 'virtual friends' willy-nilly out of people who are actually total strangers can give you a huge psychological advantage when things go pear-shaped if you adopt and use it yourself - as in fact I have - because you'll cease to be just a name on a ledger or a useful but otherwise anonymous entity and become a real person and, of course, a 'friend'.

Most people tend to feel guilty about the prospect of letting a friend down, even if that friend is just a 'virtual friend' rather than someone they might meet for a drink or invite to dinner. In bad times, that automatic emotional response can put you at the top of the payment queue - and as these are very bad times indeed, at the top of the payment queue is more than ever where you want to be.

Deliberately using social networking tactics to gain a commercial advantage probably sounds like a very cold and calculating thing to do, but in fact it isn't. Commercial 'virtual friendships' can of course be very shallow - but they can also become genuine friendships that are strong enough to outlive redundancy, relocation, or retirement. They may dwindle away over time to the odd e-mail or a card at Christmas, but they survive because they are human relationships that can be interesting and enjoyable as well as supportive and useful. And it's worth remembering, of course, that when people move on, they tend to stay in the same trade if they possibly can, so the next port of call for a job-swapping or relocating 'friend' could mean a new customer or supplier for you - just as, over the years, other people's debtors have become a source of fresh clients for me.

If you're not working at building 'friendly' relationships with your paying customers, you should be. And it's not too late to begin to build 'friendly' relationships with customers who aren't paying, aren't paying on time, or consistently use delaying tactics to avoid payment. It's really just a matter of being 'friendly', reasonable and accommodating until being 'friendly', reasonable and accommodating becomes an unreasonable proposition.

And incidentally, whilst we are on the subject to making friends and influencing people - don't forget your suppliers. You, too, may one day need to delay payment, negotiate settlement over a period, raise queries, or settle disputes. If that happens, you'll find that 'virtual friends' can be much more prepared to be reasonable and accommodating than virtual strangers.