Best practice for credit control chase letters

Anyone who’s been in business for more than a matter of months is likely to have faced a late payment on at least one occasion, and as time goes on, it’s an obstacle you have to get used to overcoming.

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Effective credit control can flag up the high-risk customers, as well as setting sensible credit limits on each customer’s account, but even so, sometimes an invoice will genuinely go astray or a client will be facing a cash flow problem of their own, and decide that you are the bill they will try not to pay.

When this happens, the first step is to remind the customer that payment is due – so what is the best practice for credit control chase letters of this type?

First of all, make sure you can be certain that your letter has been received; send it by registered post to get proof of delivery or, if you conduct your business online, send it as an email with a request for a read receipt.

Next you need to know what to include in your chase letter – and the simple answer is, include everything.

List the products or services for which payment is still outstanding, and the dates of when they were delivered, if appropriate or possible to do so.

Include a copy of the original invoice – including the original deadline date. Do not be tempted to issue a reminder invoice with new dates on it, as this will simply give the client even longer to wait before paying you.

You can take the opportunity to remind the client of any payment terms they have already agreed to, but remember that you can’t simply introduce new clauses at this late stage; Ts & Cs should be agreed upfront before you carry out any work for the customer.

Provide any supporting evidence you might have, such as the client’s signature on a delivery slip, or emails accepting that the agreed work has been provided to them.

It is best practice for credit control chase letters to summarise all of this information, as well as to spell out what will happen if payment is not swiftly forthcoming – any penalties to be applied, and formal action to be taken, such as taking the customer to court.

Rather than thinking of it as a standalone letter, imagine that the chase letter bridges the gap between the initial invoice, and the action you will take next.

It should restate the current position – with all of the relevant evidence that may have been mislaid by the customer in the meantime – and make very clear the financial and potentially criminal sanctions that may be applied if the debt is not settled.

Ultimately the letter is a scare tactic, so don’t be afraid to threaten quite severe action – just remember not to come across as ‘threatening’ in the aggressive sense, or as though you are harassing the customer.

Some customers may genuinely have mislaid the original invoice, so be firm but fair, and make sure if they pay promptly that they know there are no hard feelings, particularly if you still want to do business with them in the future.

 

 

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