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Small Business Debt Collection Letter Writing

Writing a debt collection letter is one of the most important skills of any small business owner. Do you have what it takes to get the money youve earned?

I have a confession: I'm a business writer who's let clients get away with not paying me--a huge sign of failure of my writing abilities. You see, I never learned one of the most important writing skills for any self-employed person or small business owner: how to write a debt collection letter.

Debt collection letters--an overview

"Debt collection letter" in the singular may be an oxymoron, since unfortunately, one is rarely enough. You should have a series of letters to send to deadbeat clients, each one becoming a little more insistent. Here are some ideas for a five-letter series.

1. Dont make your first letter look like a collection letter at all. Make it a friendly note. Youre more likely to get money from someone who thinks of you as a partner than a dun.

2. If that first letter doesnt get a response--and usually it wont--send another the next week thats more urgent and directly asks for the money. Express your concern that you have not been able to contact the client. Ask if he or she is all right, and if he or she is having any trouble paying.

3. The next week, if you still have not gotten a response, send a letter referring to the payment terms in the agreement you and the client originally made (you did have some kind of written agreement, even if it was just on the back of your invoice, right?). Mention the effect this nonpayment is having on your cash flow, and that your businesss cash flow is just as important as theirs.

4. Still no response by the next week? State plainly that you are asking for the money for the final time before referring it to collections. Include a copy of the entire agreement between you and the client.

5. If you still have not heard back from the client, and are confident that you do not simply have a problem with their contact information, call a collection agencyin fact, you may have wanted to have gotten a collection agency from step one (more on that below).

More Tips for Successful Debt Collections

Tip: Dont wait to start asking for your money.

If its been a week since the payment deadline passed, its been a week too long. Send out that first reminder letter today. Dont hesitate to send these letters as little as a week apart from each other. The longer your bill goes unpaid, the less likely it is you will ever see that money again.

Tip: If youve been sending email, try sending paper.

For whatever reason, there are people who take a paper letter more seriously. Theres also the real chance that your emails really are not getting through reliably, or are ending up at the bottom of an overflowing Inbox.

If you do send email, make sure its digitally signed. A digital signature proves that you sent the email to the specific recipient. In fact, you might want to make sure all your emails to clients and prospects are digitally signed, to have solid documentation of everything you said, and everything they owe.

Unlike with regular emails, the date, time, to and from fields cant be forged, so the email has legal standing, even more than certified mail. While web-based email programs cannot send digitally signed email, there are third-party services that will let you send hundreds of digitally signed emails from a desktop email program for only a few dollars a month.

Tip: Follow up your debt collection letter with a telephone call.

As any collection agency will tell you, telephone calls are useful if your debtor has ignored the collection letters. But with caller ID, Caller Blocking and voice mail - if people don't want to take your calls it is hard to reach them. This technique could be especially effective in the case of someone with whom you know will answer their own phone.

Of course, your writing skills wont go to waste: you need to make sure you have scripted what you want to say. You should take the same attitude and touch on the same points as your letter. Whatever you do, dont let yourself get sidetracked, and dont be embarrassed. Theyre the ones who are putting you out.

Dont know your deadbeats telephone number? Try looking up the Whois record of the businesss website, which usually has the owners telephone number.

Does all this sound like too much work?

If youd rather be writing proposals than collection letters, there are small business collection agencies that will take on debts for as little as $20 each. After all, your client had enough sense to go to you rather than doing your specialty themselves. Shouldnt you have as much sense when it comes to your debt collection letters?

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