In some South East Asian countries, debt is on the rise. According to Moody’s Analytics, household debt-to-gross domestic product (GDP) ratios in Malaysia and Thailand are among the highest, followed by Vietnam and the Philippines. If you’re a law firm in this region, you’ll sometimes be in a situation where your clients owe you money. It’s stressful, and nobody likes to be in that position. Here, we’ll learn what a debt collection letter is, its benefits, and how you can tactfully craft it.
Let’s start by defining a debt collection letter.
A formal notice you send to a client who has not made their payment on time is known as a debt collection letter. It outlines a request to your client to pay an unpaid invoice balance. This letter can facilitate conversation to reach a reasonable resolution for your client and your law firm, helping to resolve debts amicably. Additionally, a debt collection letter may help further your cause if you need to pursue legal action to recover your debts.
Before sending the letter…
Ask yourself if you’ve taken all reasonable steps to remind your clients they haven’t paid their bills and whether you’ve made the payment process more straightforward for them before sending this letter. Online legal practice management systems like CoreMatter can help prompt your finance department to action with automated memos as a reminder to reach out to clients for outstanding invoices during reasonable timeframes.
Besides reminding your clients, you can also make payment options more manageable. Online bill payments with credit cards are preferred by some people, while other people like other payment options like cheques or cash. Respecting your clients’ choices could improve payment efficiency and enable you to bill for all the time spent working on a case.
Suppose your client responds to your call by explaining their debt situation and their desire for an agreeable resolution. In that case, you may begin a negotiation directly to establish a payment plan that they can manage better so that you can still gain what was owed to you.
What’s Great about Debt Collection Letters?
Holding up your end of a contract with a client and not getting paid is frustrating. A debt collection letter offers clients a clear chance to pay their debt rather than dismissing unpaid invoices. These are the three main ways that debt collection letters can be helpful :
- It notifies customers of unpaid invoices: The client’s failure to pay your legal firm’s invoice might have resulted from a plain error or misunderstanding. In these situations, sending a client a plain-language lawyer collection letter can swiftly settle the matter by informing the client of what is still owed.
- Begins the payment negotiations: A debt collection letter might start a payment negotiation and result in a solution that benefits both the client and the lawyer. For example, a payment plan can be a strategy to guarantee that you are paid in a manner that your client can accept. Additionally, your client will see that you prioritize their demands, which could help maintain a more favorable client relationship.
- It can initiate the legal procedure: If a client refuses to pay, there are times when you may opt to file a lawsuit. You can take legal action, employ a collections agency, or report the non-paying client to a credit reporting agency. In certain circumstances, a formal lawyer debt collection letter may be used as evidence that the lawyer tried to inform the client of the unpaid debt—and that the client refused to pay.
If your clients have yet to respond, what can you do?
You should construct the debt collection letter if your clients have yet to respond. No matter who writes it and to whom, every lawyer’s debt collection letter must have a few specific components listed below:
- Official elements
Your official letter should include the date and time of writing, a goal-oriented subject header, your full name, company name, and mailing address. Include your client’s full name and registration address when addressing the correspondence to them.
- Description of the issue and provide facts
Refer to the original contract or agreement that details the services the client is responsible for paying you for, the precise amount due, along with any fees or interest incurred from the initial due date to the day of payment. Give specific points and evidence of the disputed debt. Include the total payable if there are various amounts.
- A timeline of the events
A timeline of events in chronological order can make the situation clear to your client. To ensure that you and your client are on the same page and prevent misunderstandings, give as much context and detail as possible.
- Encourage action from the client
After outlining the problem, make it clear what the client should do next. You might refer to additional payment clauses or particulars from your first contract. You could also propose a new payment schedule to encourage action from your client.
Indicate the timeframes you anticipate receiving their payment until the final payment is settled. Be sure to use professional language without being overly aggressive to be clear that action is expected.
- Request that the client get in touch with you
Put in a kind request for the client to get in touch with you and specify what will happen if you are still waiting for a reply by the due date you’ve established. Avoid threatening language, rather express the consequences authoritatively and clearly. For instance, be explicit about the possibility of legal action should the deadline not be met.
Debt collection can be difficult and sometimes unpredictable. To manage client expectations and reduce unnecessary conflict, take proactive steps to remind your client of outstanding payments, have a frank discussion with them for a solution, and always be ready by having documentation like the debt collection letter in place. Retaining copies of your contract, email communication, debt collection letter, and any possible response will help you solve the issue professionally.
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