The Timely Collection of Accounts Receivable: Part III (Urgency and Ultimatum)
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The Timely Collection of Accounts Receivable: Part III (Urgency and Ultimatum)

Believe it or not, occasionally the Notification, the Reminder, the Inquiry and the Appeal Stages of the standard collection series do not motivate sign customers to pay.

By Mike Raymond

Believe it or not, occasionally the Notification, the Reminder, the Inquiry and the Appeal Stages of the standard collection series do not motivate sign customers to pay.

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  • The last wave is the Urgency and the Ultimatum stages. The last two stages of collection require a serious turn in the tone and strategies. At these stages, the sign shop has to admit a very real likelihood that it will not collect its money.

    This dismal prospect should help the transition in tone: force now overshadows goodwill. Getting near the end of the collection series, the prospect of “last chance” is painted. The squeeze is on. There is no going back; there should not be backsliding, second chances, or request for explanations or excuses.

    THE URGENCY STAGE

    Some larger sign shops use their management structure during the latter stages of the standard collection series. During the Inquiry and Appeal stages, the letters are sent and signed by someone in middle management. The idea is that the money owed has the serious attention of someone other than the billing department.

    By the Urgency stage, things have gotten very serious. So larger sign shops sometimes have their owner or the big boss send the letter. The late payment is so important that it has gotten the attention of the person or people with the real power.

    Regardless of who sends it, the Urgency letter must communicate the strong sense that things are getting very serious. Your shop is at the end of its patience. If this letter does not work, you have only one more stage in the standard collection series.

    In some ways, the letter written for the Urgency stage is much like the letter sent during the Appeal stage. Just more forceful. Usually it focuses on the economic interests of the delinquent customers. It develops the idea that the customers will be helping themselves by paying you.

    Economic self-interest can take a variety of forms. If they pay, they keep their money, their reputation in the business community, or their means for making a living. They could be saving their credit rating, future sign purchases, or—perhaps—that sign outside their business.

    Occasionally—depending on the customer—the Urgency letter may speak to costs of collection to the customer, such as legal action. However, this is usually best reserved for the last stage of collection. To speak of legal action, essentially prevents any hopes for remnant of goodwill. The very idea of lawyers doesn’t breed goodwill.

    Goodwill? Yes, while delinquent customers may have forfeited their status as credit customers, they still could be potential cash customers in the future. To eliminate all goodwill is to eliminate any chances—however remote—for doing business later.

    Finally, the Urgency letter tries to avoid setting an absolute deadline. That is to be reserved for the last stage of the collection series. Consider adapting the following letter for your Urgency Stage:

    When you began [name the business], your excellent business reputation in [name the town] made it possible for you to get loans. Then, as your hard work paid off and you paid promptly, your business and credit rating improved. As you know, this excellent business and credit reputation is a major key for continuing your future success.

    ABC Sign has not received your check for the [fill in the amount] for invoice [fill in the number], covering [fill in the product or services provided] on [date].

    Some arrangement for settlement of this amount must be made immediately. In order to protect your business and credit reputation, ABC Sign is willing to accept [fill in acceptable terms].

    For the benefit of [name the customer’s business], your customers, and your creditors, please settle your account some way with ABC Sign today.

    This Urgency letter opens in the first paragraph with its central point by connecting business success with a good credit reputation. However, the letter does not linger: it immediately shifts by naming the sign business and the specific debt for the specific products or services.

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    The third paragraph gets down to the bottom line—payment. The request is insistent and immediate, but it is linked to the sales point of good business/good credit reputation.

    The letter begins with a reader benefit—serving the debtor and the customers—and ends with a strong restatement of the central message of any Urgency letter—pay up and pay now.

    By being short and to the point, the Urgency letter not only says “pay up and pay now,” but also shows that you are short on patience and mean business.

    THE ULTIMATUM STAGE

    After the long series of collection stages—the Notification, the Reminder, the Inquiry, the Appeal, and the Urgency—and the money has not come in, it is time to turn the final screw. To tighten it down. To squeeze the debtor. To think of the old days in England when debtors were thrown in prison.

    It is time for the Ultimatum Stage.

    You have to assume that pressure is the only chance you have of getting your money. By now, you should admit that, if debtors are given any more slack, they will run will it. They have your money. The money is worth less and less the longer they keep it from you.

    In the Ultimatum Stage, you tell the debtor—calmly, reluctantly, and firmly—that on a certain date you will turn the debt over to a collection agency or a lawyer. The only way for the debtors to prevent this action, they must pay what is owed before the deadline.

    It is usually good policy to review briefly the whole case and to show what you have done to collect the overdue debt. It sounds fair, it documents due process, and it adds the weight of correct business practices.

    The Ultimatum letter requires some specific details and therefore takes time to write. Feel free to adapt the following sample to your collection needs.

    When ABC Sign [fill in the products or services provided] on [fill in the date], we extended credit for the amount of [fill in the amount].

    Since then, we have tried to be both reasonable and considerate with our standard business procedures for collecting the money owed. Notifications [dates], reminders [dates], and letters [dates] were sent in our effort to assist you in making the agreed-upon-payment.

    On [fill in date], your account will be turned over to [name the action, such as the collection agency or the attorney]. This action will result in a “delinquent” report to the appropriate credit bureaus and may add court and legal costs to your debt.

    In the interests of your credit rating and business reputation, you are urged to pay [fill in the amount] to us in full by [fill in date].

    Reads like a hammer to the forehead, doesn’t it? It should: it is an Ultimatum letter. It opens what is owed to you and why. Then it documents your collection efforts. The third short paragraph drops the hammer: pay by this date or this will happen. The letter closes with a whiff of reader benefit (“reputation”) and then the final demand for the money by the deadline.

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    There should be no mistake: this is the last chance; there is no backtracking; payment is the only solution. This is business, and you mean business. Short, but not sweet. The Ultimatum Stage is the last step in the standard collection series, so this letter has to get the job done.

    As most business these days, the sign industry is often a big-ticket operation and almost always is done on a credit basis. Both conditions make collection a part of doing business. The use of a standard collection series can improve the timely receipt of payment by your sign shop.

    Remember that throughout its six stages—Notification, Reminder, Inquiry, Appeal, Urgency, and ultimatum—a standard collection series has two main objectives: to collect the money owed as promptly as possible and to retain the goodwill of the customer.

    A standard collection series is the timely use of writing for your business to encourage full and timely payment. The procedure must be started promptly, followed systematically, developed with increasing force, adapted to the customers, and evaluated according to circumstances.

    Regardless of its size or market share, every sign shop should have a standard collection series.

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