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Change Slow-Paying Customer to Cash-In-Advance

 
 
Change Slow-Paying Customers to Cash-In-Advance

 

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A while back on our listserv, a Member asked for an example of a letter to notify a customer that her company was changing its terms with the customer to cash-in-advance because of slow payments and a lack of integrity. She also wondered whether such a letter should be sent via "regular mail" or email.

This is a common occurrence for all in credit and can be handled with a simple letter. We'll give an example shortly, but there are a number of important principles surrounding such a letter.

 

Check out our download section download section. Sample Letters For All Collection Situations
Check out our download section. Sample Letters For All Collection Situations

 

First, you should always thank the customer for the payment and their business. Slow though it was, they paid.

Second, the tone should be business-like and polite.

Third, even though it's probably the most important factor, you should not mention the "lack of integrity." Always stick to quantifiable facts and avoid inflammatory issues such as this in all communications.

Fourth, if you used other information to help with your decision (such as credit group clearances or credit reports), you should not mention that.

Fifth, you should always send a copy to sales.

Sixth, you should emphasize that you would still like to do business with them.

And finally, you should make clear the new terms under which they can still purchase (CIA, COD, credit card, or whatever you choose) from you.

Sounds like a lot, but it's not really. And there's no need to be long-winded - the shorter the better! A list member supplied the following great example, which she sends via regular mail:

Thank you for your payment.

Since the payment was received 120 days after the invoice date, we will no longer be able to process your orders on "Net 30" day terms. Your company, as always, may still purchase from us on a prepaid status (VISA, MasterCard, or American Express is accepted).

If you have any questions regarding this decision or if there is any way that we can better serve your company, please feel free to contact me at (866) 555-1212 X177.

Sincerely,

Your Name
Credit Manager
Your Company

As to the question of whether to send via email or mail, we lean towards regular mail. Most communication is now via email, so an old-fashioned letter establishes a different and perhaps more serious tone.

Either way, you want to make sure they get it. All communication modes should cross-reference the other ways in which it was sent. For example, you should note in your email:

 

"Also sent via mail to ______ & via fax to (866) 555-2323."

 

 

 

 

 

 

 

 

David Schmidt · Order-to-Cash and SME Risk Expert, Credit Today

Dave is an order-to-cash and SME risk expert with over 27 years of experience. He focuses on the order-to-cash side of the working capital coin applying his knowledge and expertise with receivables, credit, and collection best practices and technology to maximize clients' performance. Dave aims at providing insights into the small and medium enterprise (SME) community by delivering actionable intelligence solutions for clients to drive efficiency, manage risk and grow revenue.