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Effective dunning letters can reduce the need for collections

On Behalf of | Jan 6, 2023 | Construction Disputes

One of the many tools you have in your arsenal as a business owner in the construction industry to collect payment that’s owed you is something called a “dunning letter.” Many people who use these don’t know them by that term, which is derived from a centuries-old word for demanding payment of a debt

You may just call it an overdue notice or collection letter. These often aren’t handled through the mail (or at least exclusively that way). More often, depending on how a customer chooses to receive communications, they’re sent via email – at least initially.

How to make an effective demand letter

Whatever you choose to call these notices, you want them to be effective. They need to stand out from a typical invoice or statement. You also want to be consistent about using them. Many companies automate them so that they don’t have to worry about remembering when a customer has become past due and don’t show favoritism to some customers or others they do business with when it comes to paying their bills on time.

While automation is the most efficient way to handle these reminders, one issue with that is that a customer’s payment may cross with the notice going out. Although it happens to everyone, no one likes getting overdue notices for payments they already made. It doesn’t reflect well on a business’s efficiency. It’s important to minimize the possibility of this occurring as you set up your system.

It’s best to have a schedule for when these letters go out – for example, beginning at 30 days past due and then every 30 days up to the point where you’re prepared to get a third party involved to collect the money. You never just want to give them one notice before you take collection or legal action.

It’s important that the language and tone of each escalating letter are different. A 30-day past-due letter can be a polite and somewhat gentle reminder. By the time you’re at 120 days, you should make the recipient aware that this is their last opportunity to pay before you hand off the account to someone else to collect.

Whether you’re establishing your policies and procedures for collecting payments or you’re looking at having to take legal action against a non-paying customer or someone who hired your business to do work, it’s crucial to have experienced legal guidance.