The world’s best collection letter
Part two – this thing really works!

June 17, 2011 · 13 comments

About six months ago, I posted a blog article about what I call “the world’s best collection letter.”

This collection letter is totally amazing. As business owners, we all occasionally must deal with a customer who won’t pay us. The world’s best collection letter is a very hard-nosed, “last resort” technique I have personally used when all else fails. It’s kind of like dropping a bomb on the past-due payer. In case you missed my original blog post that explained all the details and content of the world’s best collection letter, it’s included again at the end of this blog post.

I wanted to revisit the idea because it seems like I’m hearing more and more printers describing how they’re having difficulty collecting on large past due amounts. If you’re in a situation where a customer owes you a lot of money and has been unresponsive, the world’s best collection letter might be your solution.

I recently received an email from Eric Pearson, a printer in Eugene, Oregon, who had great success using the world’s best collection letter. Here is his e-mail. I thought you might like to hear another printer’s comments about the world’s best collection letter in his own words:

Last summer a long-time newsletter account of ours sold to a new owner. The new owner printed two or three issues before we realized he was behind. We cut him off. He paid part of his bill with a bad check to get his third issue processed. Then he went electronic with the thing.

Despite our best efforts, including a menacing letter from one of our attorneys, he didn’t pay, and we decided, “What the heck? Let’s give ‘The World’s Best Collection Letter’ a try. The account is long-gone anyway.” We gave him 30 days before 1099ing him. We had half the balance within the 30 days and the balance within the ensuing three weeks.

All told, Mr. Stevens, you helped us collect $3075 and change that was otherwise lost. Can we send you over a couple of bottles of fine, fine Oregon wine?? 😉

If you’d like to use the world’s best collection letter at your printing firm, here’s the original post…

The world’s best collection letter

 
If you have a customer with a very long-overdue bill, here is a little known way to collect it: Tell your customer that you plan to write off your tax-deductible loss and report your customer’s gain to the IRS. When you do this, the amount you write off becomes income for the debtor. You must file a 1099A form if the debt is secured, but you may also file on an unsecured debt. Then, send a copy of the 1099A form and the letter shown below to your client and allow them 30 days for payment. In many cases, your worst debts will get settled quickly, because most people don’t want the IRS poking around in their old tax returns.

Here’s what I call “the world’s best collection letter”…

world's greatest collection letter
(click here to view downloadable text for this letter)

In 23 years, I used this letter six different times. The results from using this letter were remarkable. I collected from five of the six late payers that I mailed it to, and the total amount collected was over $22,650. Only one late payer continued to do business with me, but I figured I didn’t lose much because they weren’t paying me anyway.

In August of this year, I shared this collection letter with a printer friend named Yvonne. She emailed me this comment about a customer who owed her a lot of money: “Guess what? Thanks to the deadbeat letter, the deadbeat paid within 24 hours of receiving it — the debt was $2000 and over a year old. I am ecstatic!”

I wouldn’t suggest using this letter unless you have pretty much given up hope on a large past-due debt. If you send this letter, you should also realize in advance, that you are probably ending a relationship with this customer. Losing the customer at this point probably isn’t a bad thing anyway, because in most cases when a customer gets seriously past due, they will stop buying printing from you anyway.

One last thing, and I hope you understand this. I always encourage you to use any of the information in Gutenblog in your marketing materials. However, from time to time I’ll share an idea — like this one — that is so good I would highly recommend that you not share it with all of your customers. I share “the world’s best collection letter” with you, but respectfully ask that you not share it with others. Let’s keep this great collection letter idea “in the family.”

Leave a Comment

{ 12 comments… read them below or add one }

Gighatch July 17, 2016 at 1:29 am

Its remarkable. Technique works well. Thank you.

Reply

Jody April 9, 2015 at 5:13 pm

The 1099-C (Cancellation of Debt) instructions
indicate that this is for lending institutions and the like, so I called the
IRS for clarification. They said this is
not applicable for cancellation of debt for services (which is actually an
extension of credit). It would be applicable
if we lent money to someone and they didn’t pay it back. Then it would be considered income for them. So while it would be a scare tactic it is not
something that can be followed through on.

Anyone, PLEASE let me know if you find out
differently. Thanks!!

Reply

Mike Stevens April 13, 2015 at 11:32 am

Thank you for the information, Jody…

Reply

Dave February 19, 2015 at 9:27 am

Would that work for a non-profit organization? For clarification, this is not a charity but just a company that hides behind a non-profit and doesn’t pay their bills. The CEO drive a shinny new BMW.

Reply

Mike Stevens February 23, 2015 at 7:53 am

Actually, that’s a very good question. I’m not sure “legally” it would work with the IRS because of their non-profit status… however… this 1099A collection letter technique still has a tremendous “smoking gun and scare the snot out of somebody” effect.

I think this is one CEO that needs to have his cage rattled – and I think you’d look good driving his BMW!! haha… I’d go for it, you have nothing to lose. Send him the letter.

Please let me know how it works out…

Reply

Jason C. December 22, 2014 at 10:50 am

Everyone is afraid of the IRS. What a country we live in huh?

Reply

Christa March 24, 2014 at 3:38 pm

This is a great letter, but is it legal?

Reply

Mike Stevens March 25, 2014 at 11:54 am

Yes, it is. I know many printers who have used this approach over the years.

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Brian February 4, 2014 at 11:32 am

Good info. However, after doing some research on this I think that you want to mention IRS Form 1099-C…not -A. The -A is for Aquisition or Abandonment of Property, while the -C is for Cancellation of Debt. Basically you are “forgiving” the debt, but it does indeed require the debtor to report it as income so it could be very effective. Also, I would be very very careful of the language you are using here, especially at the bottom. You don’t want to encourage the debtor to send this to their attorney, who would be more than happy to sue for false and threatening language on befalf of the debtor. I would also make sure that you use the proper terms associated with 1099-C. The formal name is “Cancellation of Debt”. Thanks for the idea.

Reply

Michelle June 21, 2011 at 7:46 am

Thank you Mike, for sharing this.
I hope we don’t have to use it, but I’m saving it just in case.
michelle

Reply

Bev Harmon June 17, 2011 at 12:39 pm

Thank You! Wish I had this 3-4 years ago. We have been extremely lucky with collections – rarely do we have one uncollectable – haven’t for 3-4 years but I have filed this and will definitely use when all other avenues have been pursued.

Reply

Becky Raney June 17, 2011 at 11:40 am

This letter really works. I used it against a car dealership that was over 6 months old and they called me and asked if they could use it against their past due accts… and we had their $3000 in 2 payments over 2 weeks.

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