19. Aug 2019 |

How to Write a Dunning Letter for Overdue Invoices

The latest technology has provided many avenues for clients to pay business firms, small and large from all over the world. With services such as credit cards and cryptocurrency now being acceptable modes of payment, the possibilities are endless. And yet, the challenges of yesterday find themselves in the modern business world. The way to deal with this is to get your facts straight. Writing a dunning letter, also known as debt chasing or debt collection letter or simply as reminder letter, still helps you to chase the payment of overdue invoices.

Dunning Letter
Writing a dunning letter: The gentle nature of the email is a sure way to maintain business relationships. (© Pexels)

How to Write to Clients Due to Overdue Invoices

When writing to clients about overdue invoices, never forget to highlight if it was sent and when it was sent, and that the due date has passed even though the customer received the invoice.

A business must set down a timing policy on which overdue letters are sent after a specified period. The most dramatic yet trustworthy method of determining the timing is to let the clients decide when it is comfortable to them and convenient for the business.

The tone of your letter should be strictly official and leave no room for disagreement. The tone must be in tandem with the friendly nature of business persons. The first reminder letter needs to be polite, friendly and must serve the purpose of reminding the clients of their loyalty to the business.

Have a section that provides avenues to help the clients make payments on their invoices such as credit card, PayPal addresses, bank accounts, and Cryptocurrency wallet addresses if it is acceptable.

After the first reminder letter is sent and the payment is not forwarded, room is given for you to send a second and even third accompanying letter. Ensure to remind them of the due date and the number of days that have proceeded from then. Advice that a fee will be amassed to the amount owed and ask for an immediate reply to the invoice sent.

Reminder letters are always useful when accompanied by the previously written invoice that details the income expected by the business on which due date. If you conveniently apply an extra fee due to late payment as instructed from your timing policy, then a new invoice with that amount and the due date should also be included. The right billing address should be provided to collect payment.

Dunning Best Practices

The issue of demanding payment known officially as dunning is complex. The dunning letter is beneficial in quickening the acquisition of income from invoices. Thus, it is prudent to lay down some of the effective ways of dunning;

  • Remember Your Business Objectives

If you have profit projections that you must meet, then the terms specified in the reminder letters may be stricter and imply more urgency.

  • Telecommunication

Clients may require a support team or an address for their complaints, and setting up an email address is a good start. Then the miracle of mailing lists will help you send emails to your clients as newsletters, calls to action and urgent messages.

Creating a Dunning Cycle

Insist on going for a lunar cycle of 28 days as your standard dunning cycle. This ensures clients receive only dunning letters scheduled to be sent on that month.

Dunning Email/Letter Templates

A blueprint of the dunning letter is as the one below;

 

Amarula Coffee Barn

7th September 18

Manager Light and Dark Café

356 Bleecker Street

New York

Sub: Payment unaccounted for.

Dear Sir,

A balance of USD 6000 is accredited to you in our account. The due date for payment is done as of 2 weeks prior on the date 21st August 2018. We appreciate your loyalty to our business. However, the date may have escaped your notice, and we are reminding you to settle these payments.

If you may find yourself preoccupied with other matters, please reply immediately with an explanation or payment details.

Yours truly,

Majid Abdul
Treasurer
Amarula Coffee Barn

 

Dunning Letters

Speeding up the collection of money is made simpler and can be used to track payments by use of a dunning letter. With the increasing interval from the due date, more reminders are sent to the clients. The last letter describes a situation in which the account will be handed over to a larger agency for credit score assessment. The gentle nature of the email is a sure way to maintain business relationships.

1. First Reminder

The first past due letter is sent after the due date and brings attention to the amount owed to the business. Follow up by call or text and implore them to pay as soon as is feasible. Provide the information on penalties for defaulting payment. Be appreciative of the relationship and loyalty to your business.

2. Second Follow-Up Letter

After 60 days past the due date, the probability of payments falls by a large margin. This follow-up letter is more formal and begins with keywords to show the urgency of the matter. The problem may be more profound than the surface, and by constant communication, you may realize the root of the problem.

3. Final Follow-Up Letter

Between 90 and 120 days past the due date, the probability of getting payments is almost null, and your ability to be formal yet cautionary in the email will be tested. The trick is to give them a short window to which they may settle their accounts and write off their bad debts. Italicize, emboldened, or different fonts highlight the urgency. State how the bad debts may affect your mutual business relationship either in termination or blacklisting.

4. Letter Before Action

A repeat of the same techniques is still a possibility after 120 days past the due date. This is the last call to action to the client who after that, might find it difficult to clear their bad history. Remind them in a polite tone of how much time they have been given to empty their accounts.

The professionalism needed to send out a polite dunning letter is necessary. We hope to see you succeed in light of these step-by-step testimonials on how to capture the attitude of a dunning letter.

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