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Streamlining Your Collection Tactics

If you're going to spend any of your own time collecting past-due accounts, you should make the time count. As anyone who has ever collected debts will tell you, debt collecting can involve a lot of wasted time. The key will be to minimize your wasted time so you can maximize your results.

The tactics that you will use to collect past-due accounts will vary, depending upon several factors such as your relationship with the customer and the reason for nonpayment.

Conventional wisdom holds that you start your debt collecting with a letter gently reminding the customer that the account is past due. That letter is followed up with still more letters, each one becoming a little more threatening than the previous one. After the sixth or seventh letter, you've threatened them with collection agencies, lawyers, and lawsuits. Sometimes it works, but most often it doesn't.

The problem with this approach is akin to the problem faced by the little boy who cried wolf once too often, and it illustrates a debt-collecting truism: a letter is not a particularly effective collection technique. Most people know how the game is played. They know that if they receive the gentle reminder, they still have a few letters to go before they have to get serious about paying the debt.

Tip

If you want to start with a letter, consider paying an attorney to write it for you. You can probably get one to write it for you for no more than $60-$85. The letter should say something like "I've been asked to contact you...." It cannot say "I've been retained by..." because that's not true. You're just paying the lawyer to write the letter; you're not hiring him or her — at least not yet. However, the attorney's letterhead serves to show the debtor that you are serious.

Letters are the least effective technique because they can be so easily ignored and because you have a relatively limited opportunity to exchange information with your customer. If letters are the least effective method, then personal visits are the most effective. Telephone calls fall somewhere in between.

The actual combination of approaches that you will take — letter/phone call/visit, lawyer/collection agent/yourself, etc. — will probably vary from customer to customer and will depend upon factors such as the location of your customers, your relationship to your customers, and your business needs.