Guest Article: Optimizing Your Credit Letters

Is your current letter strategy set up to aid the collector's efforts or compete with the collector? Are you using the letter strategy in tandem with a collector's dials or instead of their dials? You must decide if a letter series is going to replace the collector's efforts or if it is going to be assisting there collection efforts.

Quick Exercise: If you'd like to put your collectors' efforts to the test, discontinue the use of customer touches via letter strategy. Create an escalated letter series that runs without a collector making a phone call. I would measure it for 60, 90, and 120 days and measure the collector's recovery rate. Is the collector performing at lower, higher or the same rate of recovery? How did the customers that never got phone calls and only got the letter series perform? How much cash came in without a collector calling?

Is your current letter strategy saying the same thing each time or does it have escalated intent in the verbiage? If you want to make the most of your letter series, they should look and sound different.

Letter 1- Should be sent about a week before the invoice is due and include a copy of the invoice. This way, if they lost or didn't receive, the invoice for the first time, you are automatically resending.

Letter 2- Should be sent a week after the invoice is due, notifying the customer you haven't received payment. If they want to avoid late fees, maximize discounts with you, etc. they should process payment immediately online. If you are sending this via email or pop-up message on their portal, the link should be included to process payment. Automatically offer the customer the discounted rate if they process payment before end of business day. If you don't have a payment portal, honor the discounted pricing with payment process via phone that day.

Letter 3- Should be sent approximately 10 business days after letter 2 if payment still hasn't been received. You should be mentioning possible service interruption, loss of discounts and/or late fees if unresolved. You want it to be clear that the account is in jeopardy of service interruption if not resolved within 5 business days.

Does your letter strategy have dates and accountability? You want to ensure that urgency can be read in the tone and verbiage chosen. It shouldn't be open ended, and it should always offer the customer the ability to resolve the delinquency. If they haven't filed an invoice dispute with you by now, that's a problem. If you don't receive the payment be prepared to temporarily disrupt service.

Letter 4- Should be sent approximately 5 business days after letter 3 if payment hasn't been received. You should include a date for service interruption, loss of discounts and/or late fees, and mention reporting the delinquency to the credit bureaus.

Quick tip: If you want the customer to make you a priority than you should be reporting your delinquent customers monthly. You can set up to automatically send an aging report to the credit report providers. This is a great tool to help the customer in making you a priority for payment.

Does your letter series clearly communicate the penalties if payment is delinquent after service interruption? Does the customer understand if you have to send them to a third-party collection agency that they will incur additional costs?

Letter 5- Should be sent 5 business days after letter 4. It should include an incentive to pay you immediately. However, it should clearly state if payment isn't received the incurred actions taken and fees associated. This should be your final demand for payment.

My recommendation is for the letter strategy to be used in addition to collector calls. If you want to maximize the efforts of your collectors than you should use a dual strategy. Many organizations use a dual strategy today but don't sleep on the fact that you could have a very effective letter series, if developed and executed properly.