Understanding the first step in debt collection

Unfortunately, you can’t escape unpaid bills in your business. While this can be a stressful time, it’s a normal part of business and thankfully, you have options to get those debts paid.

But many business owners and executives don’t know the debt collection process. After all, you have a lot on your plate, and you can’t understand every process.

That’s where we come in. We’ll walk you through the first and most crucial step in debt collection. The better informed you are, the more smoothly your operations can run.

The first step in collecting money is a letter requesting payment for the unpaid bill. This is sometimes called a letter of demand, a debt validation notice or a debt collection letter.

The letter is a written record that you contacted the debtor and explained that they’re overdue for paying their monetary obligation. Even though you’re broaching the topic of an unpaid bill, it’s important to treat the customer in a friendly, compassionate way.

You’ll also need to outline a payment amount and deadline and explain the dispute process. At some point in the letter, you’ll also need to outline the next steps if the debt remains unpaid, including possible collection/legal actions. It’s after you send this letter and possibly a follow-up letter and fail to get a response to your satisfaction that hiring a professional debt collection organization may be needed.

Here are the elements that any initial debt collection letter should contain:

• The amount of money owed
• The name of the creditor or who is owed the money
• The initial payment due date.
• The new due date for payment
• The instructions on how to pay the debt
• Instructions on how to address a dispute, including a timeline
• A phrase that asks the debtor to let you know to disregard the notice if the bill has already been paid in full
• A sentence notes that you still value and want the customer’s business but that payment is required to continue the relationship
• A sentence or two explaining the next steps if the bill is not paid by the new due date
• Clear and compassionate verbiage explaining possible legal action if the debt remains unpaid, including the process of sending the debt to a collections agency and possible legal action

The first letter sent out to a customer/client sets the tone for the entire collection cycle. It should be clear, firm, and compassionate and contain critical information about the debt that the recipient needs to pay and the timeline for payment. The letter should conform to all debt collection best practices and rules/regulations.

If a letter requesting payment isn’t successful, it’s a great time for a professional debt collection firm to step in. Statistics show that the longer a business waits to hire professional debt collection assistance, the less likely it will ultimately collect on its debt. Having a professional step in after a letter or two fails to result in payment can make all the difference in getting paid and failing to receive at least partial payment for the amount owed.

When you’re ready for a professional debt firm to step in, contact us. At FCR, we believe no debt is too small to collect. We specialize in working with businesses of all sizes, from small, independent businesses to hospital systems. And we’ve worked with many big-name brands you trust, like UHAUL, Barnes and Noble and Textbook Rentals. We strive to always provide cost-effective, ethical, reliable and high-quality collection services. Visit our website to learn more about us and our process: https://www.fcrcollectionservices.com/