A final demand letter can be one of the most significant strategies in the collection of past due accounts for the majority of companies around the world – especially those who sell on ‘net’ terms, i.e. Net 10, Net 30, Net 45, etc.
Let’s first address the final demand and what it should contain; a final demand should always contain the entire balance owed, the entire address and contact persons of the customer (all of them if there are more than one), a physical address (not a PO Box), a clear deadline with date (time where applicable) with a clear notification of what will happen after the deadline comes and goes. The last part of the demand is critical because this deadline will work in your favor if you take the necessary action you said you would.
Clearly defining the end action and following this action is key to the demand’s success and everyone’s credibility, i.e. if no payment you will be placed for collections, if no payment you will be sued, if no payment you can never do business with us again, etc. The follow through here is the most important element for it gives you credibility and your staff credibility for they now know what the consequences are for a client whom does not pay their bill.
Next, when included in a clearly defined policy followed by a company, the final demand will become a weapon where everyone knows the outcome and all of your staff will be well equipped to manage the outcome, whether you are paid or not. This ‘arms’ every member of your staff/team empowering them to handle difficult clients.
Now, if you are already using a 3rd party collection service, this company should provide “free” demands on your behalf. There should be some basic rules which go along with the aspect that they are free; one being the account should not be older than 120 days in age or past due (the construction supply industry can drag this to 180 days but a formal demand should be no older), the account should still be in business with an active working phone number, no formal demand has been sent with a deadline by the client and the “entire” balance owed should be presented in the notice. If the customer does not pay the balance on the account or establish a PPA no older than 30 days with 50% of the balance paid immediately and the remaining balance paid within the remaining 30 days, then the account should immediately be placed for 3rd party collection without exceptions.
The FINAL DEMAND is a tool in everyone’s toolbox and, if utilized correctly, this tool will build your teams confidence, collect those accounts you would not otherwise collect and forearm your 3rd party partner thus putting you in the best possible position in order to get paid.
David VanNewkirk – Director, JSD Management Inc. – doc@jsdinc.net