Collection process is spread over different stages. The first notification which the customer receives is the invoice or the statement which is sent to him immediately after the supply of goods on credit.
It is, in fact, a standard notification, often computerized, stating clearly the total amount due, and the date by which the bill is to be paid.
Most customers follow the regular schedule as stated in the invoice and make their payments according to it.
But, if the customer does not pay by the due date, creditors begin sending a series of reminders called Collection Process.
See Also: Types of Sales Letters
Different Stages of Collection Process
A well-planned collection process usually has the following three stages in collection letter:
- Reminder Stage
- Discussion Stage
- Urgency Stage
Reminder Stage
Messages sent in the reminder stage are direct requests that aim at shaking the customer’s memory.
They are written under the assumption that some minor problem has delayed payment, otherwise, the customer has every intention of paying and needs only to be reminded.
These messages are very simple in their contents and form, very often comprising a few lines. The number of such reminders ranges from one to five or six.
These reminders do not include any persuasive appeals, nor do they make any suggestion that the creditor questions the customer’s integrity to pay.
Instead, they contain just small messages that include necessary information on the subject.
However, with the lapse of time the expression in these reminders undergoes a gradual, imperceptible change.
Discussion Stage
If routine request-reminders fail to bring the creditor any response, he progresses into the second stage of the collection process.
This is the stage of inquiry and discussion. Even at this stage, the creditor should not assume that his customer plans to ignore the debt, especially if he has paid his bills promptly in the past.
However, the time has passed for assuming that the delay is mainly an oversight. Rather, he should assume that some unusual circumstance is preventing payment.
His purpose should then be to get the debtor to send the payment or at least give an explanation.
For this purpose, the writer should personalize his message in addition to using positive appeals, to stimulate a desire in the debtor to do what he should do.
Depending on the situations, discussion messages may range from two to five, or more.
Successive discussion messages, however, become progressively stronger, ending with a hint of negative appeal in the last letter.
Urgency Stage
When reminder notices and discussion messages fail to cause a favorable impact on the debtor, the creditor is forced to progress into the urgency stage.
See Also: Types of Letters of Credit
This stage represents a significant escalation. Prior to this, the writer has been using persuasive appeals but, now he has to resort to the strongest negative appeal of fear.
Although in urgency stage the objective of the collection manager is to give a sort of ultimatum to the debtor.
It is desirable to include at least one positive appeal to give him a chance to avoid the drastic action of legal proceedings against him.
During the first two stages, messages may have been signed by someone in the credit or collection department, but the urgency stage letter should preferably be signed by a higher executive to make the debtor realize the seriousness of the matter.
