Sometimes peanuts just have to do …

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Sometimes peanuts just have to do …

This is the the second step of an ongoing, “live” Case Study.  Click here to go to go to the beginning of this story. 

… so, dear reader, what happened next?
12 May – the registered letter was sent as suggested.
28 May – the school advised that the Post Office advised that it was collected by the parent on 15 May but there had been no response from her (but we knew, that she knew, that we knew that she’d received our letter – difficult to say, but you get my meaning!)
01 June – the school received a handwritten letter from the parent to say “can’t afford any more; will pay more if things change”.  (Note: Often good to wait a week or so AFTER a deadline – using Fear of the Unknown again)

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… where to from here?
We have a debtor who’s willing to pay but the school’s not happy due the amount being paid and how long it’ll take to finalise.  There are three main options:
1:  Take legal action – expensive, very poor public relations but realistically, what’s the point if this parent really can not afford to pay any more as ALL previous indicators have suggested? (there’s a very long history here)
2:  Write it off as a Bad Debt – no, she’s paying, although not very much, it appears that her INTENT to pay is there. Hasn’t missed any payments.
3:  a: Agree to accept the payments as they are in writing – but charge interest.  In other words, provide her with the ability to “pay it off”.
    b: Offer (again) to accept a reduced amount if paid by a set deadline.

We chose the third option and enclosed a detailed spreadsheet with the letter to be sent so that 3b appears much more attractive IF she really could raise the greatly reduced balance.

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This is the wording of the letter being sent …

Dear Mrs Potter,
Outstanding School Fee Balance – $4,423.50
  Thank you for your recent note.
  It is the School’s normal policy to take legal action to recover unpaid accounts once students are no longer at the school. However, when the matter of your account was discussed again at Board Level, the consensus was to accept your fortnightly payments of $32.50 as long as the School is not being disadvantaged financially by doing so.  In other words, charges interest on the reducing balance.
 This decision was made in view of your comments and because you have indeed been paying regularly each fortnight.  With that in mind, I have attached a payment schedule for you to see.
  Another option I have been asked to put to you is to offer to accept the sum of $2,200.00 as full and final payment as long as that amount is received on or before the close of business of Friday, 29 June.  That represents a very substantial reduction for you and may be the option you prefer.  In that case, the school would “write off” the remainder and your debt would be fully cleared.
  However, if you would like to continue paying as you currently are, please sign and return one copy of the enclosed payment schedule in the envelope provided so that I can inform the Board accordingly.
  Please be quite clear, however, that if we are not in receipt of the signed copy of the enclosed offer, the school will immediately revert to policy as outlined above without any further notice to you.  This offer is quite exceptional; I hope that you accept it in the spirit being made.
  Regards,

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This is what was sent with the letter and spreadsheet to the school

Hi Mary,
  Please find attached
    *  suggested wording for a letter to Mrs Potter
    *  a pdf copy of the payment arrangement (with interest)
  Please check the wording so that you’re happy with this approach.  If you are, please enclose TWO copies of the arrangement spreadsheet as well as a stamped, self-addressed envelope.
  Before you send it though, what WILL you do if she DOESN’T sign and return it?  WILL the school sue?  I’d suggest a solicitors LOD to stir the pot if she doesn’t. Buys a bit more time, keeps the pressure turned up.  Shows her that the school’s serious.
  Let me know?

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So, what will happen now?
1:  Nothing – the parent won’t respond and payments will carry on as normal, OR
2:  She will write again and either
     a:  accept the arrangement in writing, or
     b:  say she won’t pay any interest.

But no point in planning too far ahead here. If she adopts options 1 or 2b, a letter of demand from a firm of lawyers will be the next step.  Until further developments …

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Note:
The headings on the spreadsheet sent were
*  Date
*  Outstanding balance
*  Two week’s interest @ 8%  (Outstanding balance x 0.08/26)
*  Total Due
*  Amount to be paid
*  Balance Remaining

By | 2017-10-24T04:35:15+00:00 June 12th, 2012|case studies|0 Comments

About the Author:

Have you ever wondered why a client does business with you and then ignores your invoice like they had no intention of paying it in the first place or they treat you like their own personal line of credit, leaving YOU dangling, waiting months for their payment? Unfortunately this situation is all too common and can even be puzzling for the most experienced business owner. If you’ve ever had to handle outstanding accounts or you are just so over non-payers, then we can help. Real-world skills, solutions, tips & strategies to get more accounts paid on time, and, most importantly, how to maintain customer goodwill while keeping YOUR cash flow in the positive. You will find the blog posts helpful but to get real results, contact us by using any of the forms on this site, by email or by phone. I’ve been involved in the management of accounts for over 30 years, heard every excuse in the book, can spot a non-payer at 20 paces. Finance Companies in the 70s (systematic, tough), professional firms in the 80s (no systems, too gentle) and, since then, just about every other sort of business you can think of. I’ve written books on the topic, spoken all over the place about it and the blog in this website is my way of “giving back”. I hope you find it helpful.

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