While demand letters that threaten suit are common in business debt collections, they don’t often work. This article will discuss why demand letters are usually ineffective, and why diplomacy and litigation are your best tools for getting paid.
In Business Debt Collections, First Try Calling The Customer
In business debt collections, you don’t want to shoot first and then ask questions. The first thing to do is call the customer when it’s a couple weeks late, politely mention the unpaid invoices, and ask if there’s a reason it hasn’t paid them.
Maybe it was just an oversight, maybe the customer has a question about a bill, or maybe there’s another explanation. As long as the customer is acting in good faith, you can usually resolve things amicably. If there’s a genuine dispute, try to find middle ground, and if it’s a cash flow issue, consider offering a payment plan.
In Business Debt Collections, Demand Letters Can Be Counterproductive
In contrast, sending a demand letter before you speak can set the wrong tone, damage your relationship with a good customer, and make collections harder. Before you know the reason for nonpayment, threatening suit is premature and often counterproductive.
In Business Debt Collections, Demand Letters Are Usually Ineffective
Finally, demand letters usually don’t work. Customers who can’t pay or choose not to will generally ignore them. But unlike threats, an actual lawsuit will force them to deal with you or face a possible judgment.
In business debt collections, if the customer’s acting in good faith, you’re more likely to collect through dialogue than threats. And if it’s acting in bad faith or can’t pay, there’s no substitute for an actual lawsuit.
For more information on business debt collections, or if you’d like to discuss a specific collection issue, call me at 856-667-1669 or contact me here.
This material is for informational purposes only and should not be construed as legal advice. No person should rely on this information without seeking the advice of an attorney.