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Small Business Debt Collection Letter Writing

by: Joel Walsh

Writing a debt collection letter is one of the most important skills of any small business owner. Do you have what it takes to get the money you�ve earned?

I have a confession: I'm a business writer who's let clients get away with not paying me--a huge sign of failure of my writing abilities. You see, I never learned one of the most important writing skills for any self-employed person or small business owner: how to write a debt collection letter.

Debt collection letters--an overview

"Debt collection letter" in the singular may be an oxymoron, since unfortunately, one is rarely enough. You should have a series of letters to send to deadbeat clients, each one becoming a little more insistent. Here are some ideas for a five-letter series.

1. Don�t make your first letter look like a collection letter at all. Make it a friendly note. You�re more likely to get money from someone who thinks of you as a partner than a dun.

2. If that first letter doesn�t get a response--and usually it won�t--send another the next week that�s more urgent and directly asks for the money. Express your concern that you have not been able to contact the client. Ask if he or she is all right, and if he or she is having any trouble paying.

3. The next week, if you still have not gotten a response, send a letter referring to the payment terms in the agreement you and the client originally made (you did have some kind of written agreement, even if it was just on the back of your invoice, right?). Mention the effect this nonpayment is having on your cash flow, and that your business�s cash flow is just as important as theirs.

4. Still no response by the next week? State plainly that you are asking for the money for the final time before referring it to collections. Include a copy of the entire agreement between you and the client.

5. If you still have not heard back from the client, and are confident that you do not simply have a problem with their contact information, call a collection agency�in fact, you may have wanted to have gotten a collection agency from step one (more on that below).

More Tips for Successful Debt Collections

Tip: Don�t wait to start asking for your money.

If it�s been a week since the payment deadline passed, it�s been a week too long. Send out that first �reminder� letter today. Don�t hesitate to send these letters as little as a week apart from each other. The longer your bill goes unpaid, the less likely it is you will ever see that money again.

Tip: If you�ve been sending email, try sending paper.

For whatever reason, there are people who take a paper letter more seriously. There�s also the real chance that your emails really are not getting through reliably, or are ending up at the bottom of an overflowing Inbox.

If you do send email, make sure it�s digitally signed. A digital signature proves that you sent the email to the specific recipient. In fact, you might want to make sure all your emails to clients and prospects are digitally signed, to have solid documentation of everything you said, and everything they owe.

Unlike with regular emails, the date, time, �to� and �from� fields can�t be forged, so the email has legal standing, even more than certified mail. While web-based email programs cannot send digitally signed email, there are third-party services that will let you send hundreds of digitally signed emails from a desktop email program for only a few dollars a month.

Tip: Follow up your debt collection letter with a telephone call.

As any collection agency will tell you, telephone calls are useful if your debtor has ignored the collection letters. But with caller ID, Caller Blocking and voice mail - if people don't want to take your calls it is hard to reach them. This technique could be especially effective in the case of someone with whom you know will answer their own phone.

Of course, your writing skills won�t go to waste: you need to make sure you have scripted what you want to say. You should take the same attitude and touch on the same points as your letter. Whatever you do, don�t let yourself get sidetracked, and don�t be embarrassed. They�re the ones who are putting you out.

Don�t know your deadbeat�s telephone number? Try looking up the �Whois� record of the business�s website, which usually has the owner�s telephone number.

Does all this sound like too much work?

If you�d rather be writing proposals than collection letters, there are small business collection agencies that will take on debts for as little as $20 each. After all, your client had enough sense to go to you rather than doing your specialty themselves. Shouldn�t you have as much sense when it comes to your debt collection letters?

About the author:
Joel Walsh is a regular contributor collection-agency-information.com Read all his articles on small business debt collection: [Web publication requirement: use "small business debt collection" as anchor text/visible link text for

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Picking A Small Business Accounting Program
by: Stephen L. Nelson, CPA

A small business accounting program should accomplish three tasks: track income and expenses, generate business forms, and keep detailed records for other assets and liabilities.

Tracking Income and Expenses

The task of tracking a business�s income and expense is really the most important job of an accounting system. If you own or manage a small business, obviously, you need some tool for measuring your income and your cash flow.

Although checkbook programs like Quicken and Microsoft Money does little more than keep a checkbook, you can actually keep financial records for a business right out of a checkbook. To do this, you simply categorize deposits as falling into some income category. And when you write a check or make some other withdrawal, you categorize expenses as falling into some expense category.

One problem with using a checkbook program, however, is that by using a checkbook program, you are implicitly using cash-basis accounting to track your income and expenses. Cash-basis accounting counts income when you receive a deposit and counts expense when you write a check.

Cash-basis accounting is easy to understand, and that means you are less likely to make errors in implementing it. However, cash-basis accounting is generally too imprecise for more complicated businesses. If you use inventory in your business, for example, cash-basis accounting isn�t very accurate�and the Internal Revenue Service does not allow it.

And there are other circumstances, too, in which cash-basis accounting produces serious and usually unacceptable errors in precision. For example, if you often receive money before you have actually earned it or if you often incur expenses long before you actually have to pay for them, you need to use a more sophisticated accounting program than a checkbook program.

Generating Business Forms

The second task that a small business accounting program should help you with is the generation of business forms. The most common business form is simply a check. Any checkbook program help you do this. Other business forms that small businesses commonly need to produce include invoices, credit memos, monthly statements, purchase orders, and so forth.

If you have a small business with very simple form requirements�perhaps you need only checks�then a checkbook program may work very well for you.

However, if you have extensive or complicated business form generation requirements, a more full-featured small business accounting package, such as Intuit�s QuickBooks, Peachtree�s Complete Accounting, or Microsoft Small Business Accounting will do a better job for you.

If you produce more complicated forms, but you produce these other forms with a word processing program, then a checkbook program may still work for you.

Detailed Record Keeping for Other Assets and Liabilities

The third task that a small business accounting program should help you with is detailed record keeping of your most important assets and liabilities. A checkbook program lets you keep good detailed records of cash, and for some businesses that is the principal asset. But many small businesses have other significant assets and liabilities they need to track, for example, accounts receivables, inventory, and vendor payables.

Whether or not a particular software program�s accounting tools provide adequate asset and liability record keeping depends on the situation. However, no small business accounting program does everything you need it to do. Any accounting program that provides an extensive list of features, by its very nature, becomes a challenge to use. For example, moving to the accrual basis of accounting adds an entire layer of complexity to financial record keeping, and keeping detailed records of inventory adds another layer.

For these reasons, even when a particular program doesn�t do everything you need it to do, your best choice still may be to use the program�and then simply live with its shortcomings.

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