Preparing Collection Letters

How Do I...

Collection letters play an important part in generating revenue from slow-paying customers. Sometimes all it takes is a friendly reminder that an account is past due to get a customer to pay.

The following table illustrates how important it is to get paid early, because the longer a bill remains unpaid, the less chance there is of collecting.

# of Days Overdue

% Uncollectable

1 to 30

2%

31 to 60

10%

61 to 90

20%

91 to 180

30%

181 to 365

50%

Over 365

90%

Since most people will pay if reminded, collection letters can be an effective way to get people to pay you what they owe. Past due amounts can be quite a burden on a company's cash flow, so it is worthwhile to send a letter designed to get results.

Collection letters can vary in tone and urgency depending on how late the payment is. For example, you might send a friendly reminder to someone who is less than 30 days past due, but you would not send the same letter to someone who is more than 90 days past due. It is important to remember that while you want to collect, you probably still want to keep the customer. Because of this you want to be careful in wording the letter; you don't want to unconsciously or unnecessarily offend the customer.

The letters included in Sage 50 are grouped by severity of tone, which is tied to lateness of payment. Thus, the less-than-30-days-overdue letter is relatively "soft," while the 61-90-days-overdue letter is much firmer in tone. All of these letters can be edited. You know your customers and what you want to communicate to them. Here are a few tips you might keep in mind when writing collection letters:

Sage 50 comes with five predefined collection letters.

When you print collection letters, it is the oldest outstanding invoice, a filter option, that determines when a collection letter prints for a customer. As an example, look at the sample Aged Receivable report below.

Aging Brackets as of 3/31/11

0-30

31-60

61-90

Over 90

Customer A

459.34

275.00

Customer B

213.04

104.90

Customer C

263.27

139.36

157.26

When you print collection letters, the letter date selected impacts which customers are selected as well. On March 15th, you run the Aged Receivables report, with This Period selected as the date. The Aged Receivables report shows a date of March 31, 2011. You want to print collection letters for the customers in the 31-60 day aging bracket, so you choose the Overdue 31-60 Days - Medium collection letter and set the Oldest Outstanding Invoice to 31-60. However, the letters do not print as expected. The collection letter date defaults to the current date, March 15th, and the 15-day difference has changed where the invoices are in the aging brackets.

If collection letters do not print as expected, check these settings:

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