Does anyone have a Change in Terms Letter? I have customer we have on open terms that I want to send notification that we will be changing their terms to cash in advance.
Change in Terms Letter
(4 posts) (4 voices)-
Posted 1 year ago #
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Fay,
Advising a customer that he no longer qualifies for open terms is not unlike trying to punch someone without hurting them. It's not easily done. Personally, I don't believe a form letter is the optimum approach. In the credit field, I believe we are all reluctant to pull credit and do so only as a last resort. Consequently, we have given the account ample means to hang themselves and many times they willingly do so. Thus, you should have reams of facts on late pays, broken promises, and disregarded voice mails.
Armed with these facts, but before I pull credit, I give them one final verbal warning that the late payments and unwillingness to cooperate must cease immediately or open terms will automatically be revoked. I explain to them clearly the payment performance standards that will be acceptable - - the level of communication and when payments are due. Anything below that will trigger a removal of open terms. In the case of customers with small invoice totals, I simply advise them that the profitability does not overcome the time taken to seek delinquent payments.
It is your call whether or not you want to hint that it will be out of your hands at that time, whether it is "policy" or whether or not it is your decision. That is a call made on a case-by-case basis depending upon your relationship and how you want to be perceived by the account in the long-term.
When the inevitable late payment recurs, I send them a letter detailing enough past history such that any reasonable person would conclude that credit revocation was not taken lightly and was done with sufficient justification. It's tough for them to argue with facts staring at them in black and white. In any event, despite any protestations to the contrary, unless they are living in Fantasy Land, they know full well they have pushed the envelope too far. They are not really surprised and anything they say to dispute your facts are hollow words intended only to save face. There is no reason to take them seriously.
Finally, I temper the punch by leaving a window open to renewing open terms should enough time elapse. I give no timetable but only that it would be a sufficient time and mention only that we would be willing to review the account after a new credit application and investigation is completed.
Posted 1 year ago # -
I agree with Guy that a phone call may be best, however for low volume accounts that may not be a priority, perhaps a letter along these lines:
Thank you for the recent payment to bring the account current. Our pricing is structured to provide the lowest possible cost for our dealers and does not include extra margins to cover the additional expenses for slow payment.
In reviewing the payment history on the account, we noted there is a consistent pattern of not paying within the terms we had offered. At this time, we are withdrawing the Net30 terms, and will offer COD company check terms for all future orders.
Posted 1 year ago # -
Date
Name
Address
AttentionDear
After careful consideration and much internal discussion, we have decided the effective immediately we will no longer offer open account credit terms to your company. Future sales will only be made on a Cash in Advance basis.
Please contact me if you have any questions, comments or concerns.
Thank you.
Company Name
Name
Titlecc:
Posted 7 months ago #
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