You have sent your customer an invoice with payment due several days ago. It’s time to make your first contact to find out why the invoice has not been paid, but should you pick up the phone and call or do you send them a letter, a fax or an email?
As I said, the purpose of the first contact, which should happen when the invoice is 3-5 days past due, is to initiate a dialog and find out why the payment is late. You are asking for information and not demanding a payment. You do not want to introduce an adversarial or confrontational tone to the discussion at this stage. In many cases, particularly for larger customers, an invoice with a problem of some kind will sit until you initiate contact to get the matter resolved.
Ideally this first contact is made by phone. A two-way conversation with the right party can get to the point very quickly. However, not every business has the resources to call every past due customer in a timely manner and in many cases it is difficult to reach a knowledgeable person at your customer, especially if it is a very small business and you are trying to reach the owner. It is appropriate to send a written request for information for invoices less than a specific dollar amount, bypassing the initial attempt to reach them by phone, or for customers where you have left two messages and not been called back.
This written communication should be very brief and to the point: “Payment for invoice 1234 was due on March 15 but as of today we have not received payment. Can you please take a moment to complete the bottom portion of this letter and return it to me or, if it’s more convenient, give me a quick call to discuss the matter.” Provide a phone number, fax number, mailing address and email address on the letter. The letter will have the same content regardless of how it is sent.
A critical element of the letter is the checklist you have provided for their response. Providing an easy form for your customer to complete will speed up resolution. The specifics can be tailored to your industry and customer base but might include some of the following options:
· Payment was mailed on _____________ by check number ____________
· Payment is scheduled for ______________
· Invoice not received. Please provide a copy.
· Need Proof of Delivery in order to process for payment.
· Need approved time sheets in order to process for payment.
· Need Purchase Order number (or copy of PO) in order to process for payment.
· Other reason: ____________________________________
The next question is whether to send this letter by postal mail, fax or email. There are advantages and disadvantages to each.
· Mail is more expensive because of materials cost and postage and takes longer to get there. However, a professional looking envelope sent to the Accounts Payable Department of any business will be opened and read. Further, you will be notified if the mail is undeliverable – potentially a serious problem – and can request “Address Service” to be informed by the Postal Service (for a small fee) that mail is being forwarded, allowing you to update your records.
· Fax requires that you have a working fax number for the business that goes to the right department. Some small businesses do not have fax lines and large corporations can have many. Ideally you would have requested a fax number on your credit application or order form but that does not always happen. Depending on your office equipment, sending a fax can take significant effort and may be just as costly as mail.
· Email is easy, fast and inexpensive but does not always get to the right person. Email can be easily ignored, blocked by spam filters or sent to a generic address (firstname.lastname@example.org) and wind up nowhere. Also, the email address on file is often the purchaser and not the Accounts Payable department.
My recommendation is to use email only if you have the personal email address of a responsible individual that you have reason to believe will receive and read your emails. You might want to test that by sending a “welcome” email to new customers and asking for a response of some kind to verify that it was read. Send a fax if it’s easy to do so and the customer has provided a fax number for their accounting or accounts payable department. Mail works in every other case.
Follow up on these communications. Give the customer no more than five business days to respond to a letter or three days to respond to an email or fax. If they do not respond within this time move to the next step in your collection process, which could be a phone call or, for smaller transactions, an initial demand letter. A second written communication should be sent by mail and not by fax or email.
One final thought: in collections if you don’t ask for the money you don’t get the money. Understanding where you stand in the payment process is essential for getting paid for the work you do. Remember – you’re a business, not a bank!