The collection level 3 is the last step of the amicable recovery process. It takes place to manage old overdues and after the completion of the previous steps of the collection scenario: pre-dunning, level 1 and level 2.

This is the last step of the amicable collection process. It ends with the sending of a formal notice including a deadline for payment.
Make sure your previous reminders have reached the good contacts before going to step 3 and formal notice. If you never got any answer to your e-mails and calls, there might be an issue in the management of contacts for collection.

A pre-litigation stage

Despite numerous reminders made since the issuance of your invoices, your client has still not decided to pay you while nothing justifies this delay.

The cash flow and the profitability of your company (due to financial costs incurred) are negatively impacted which weakens its financial structure.

This situation constitutes a break in the balance of the commercial relationship where one of the protagonists, the buyer, does not fulfill his commitment, which is unacceptable. It is appropriate to increase the pressure on your client and send him a letter of formal notice to let him know that you have reached the end of the amicable follow-up process and thus safeguard your rights for possible litigation.
This formal letter is a necessary precondition to a litigation action. It has a deadline beyond which you announce your intention to your client to use other means to recover your receivable (legal action, transfer to a collection agency, reporting of overdue to your credit insurance, etc.).
The sending of the notice gives credibility to your reminder actions with your client which often unblocks the situation. It is preferably sent via an electronic registered letter that is more efficient, immediatelly received, less expensive and less polluting.

It constitutes a threat that must be put into effect if your customer does not pay within the ultimate deadline.
Make no misunderstanding, the objective is always to avoid litigation which consumes time, is expensive and has an uncertain outcome. However, it is by showing your determination to enforce the contract concluded with your client that you have the greatest chance of being paid before reaching this final step.
Read our tutorials about How to collect bad debts?

Collection level 3 process

At this stage of the recovery process, the essential action lies in sending the formal notice. Nevertheless, a last interactive e-mail or phone call can be made to inform the buyer that given the unacceptable situation of late payments you have reached the end of the amicable recovery.
Do not hesitate to send a letter of formal notice (always with an acknowledgment of receipt). Through this type of mail you show your determination to get paid. The psychological effect that induced this letter is often enough to unblock the situation and the payment.

cash collection 31 to 60 days late
The decision to send the letter of formal notice must be shared within your company. The accounting department, the commercial leader must speak with one voice to the customer so that he understands that he has no alternative but to pay the bills. This mode of operation should be specified in a document defining the credit policy, shared and validated in advance by management.

If your customer wants to pay you but can not because of financial difficulties, you can agree with him about an establishment of a contracted payment plan. You will keep good chances to get your money back without going through the litigation step while commercial relation could be preserved.
Without payment received before the deadline of your formal notice, you must go to the litigation stage to collect your receivables.
Remember that formal notice letters must remain credible. Once it has been sent, there is no need to go back. If you do not pursue your litigation action and play into the customer's game when the latter persists in not paying, you risk chasing your debts for a long time.
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