This website is provided as an educational service not as legal advice (see important legal notice).  Except as otherwise indicated, all contents copyright ©2000 and thereafter by Alexander L. Ullenberg.  All rights reserved worldwide.


Law Office

101 Camelot Dr., Ste. 2b

Fond du Lac, WI  54935


Phone:  (920) 924-9878

            (877) 924-9878

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The 3-Step Collection System


Let’s be honest, no business enjoys collecting money due them.  We would all rather just be paid for the work or goods we provide without having to work for free or “bug” our customers to pay.  However, if we do not collect the amounts due us, we’ll soon be out of business!


You could say then that collecting is a necessary hassle of being in business.  But sending out collection letters, making follow-up phone calls, and haggling over payment arrangements can also take a toll on your existing business because it takes time away from your paying customers and clients.  It is also a part of business engulfed by a legal “mine-field” of state and federal laws with numerous technical requirements that punish even “honest” and technical mistakes severely. 


In the end, to be effective, you need a system that doesn’t send good money chasing bad, that doesn’t create more problems by angering customers to the point where they tell everyone how terrible you are or worse yet file a lawsuit against you for credit law violations, faulty goods or malpractice, and that produces consistent results.  That’s where the 3-step collection system comes in...



What is the 3-Step Collection System? 


The 3-Step Collection System is a “comprehensive approach to addressing delinquent accounts promptly to correct customer dissatisfaction and obtain payment before further financial difficulties develop for your debtor which result in non-payment.”  In short,, the system allows you to quickly resolve potential service problems and assess collectability of delinquent accounts (before you spend the time and money of sending the accounts out for collection) and thereby maximizing your ability to convert delinquent accounts into cash!  And it works whether you have one or one thousand overdue accounts!


The System is built around a professional but persistent approach to identifying possible collection problems and obtaining prompt payment on overdue amounts.  Its prompt systematic approach requires only minimal initial contact on your part (usually only the sending out a letter or two and a follow-up phone call). 



How does it work?


As you could probably anticipate, Atty. Ullenberg’s 3-Step Collection System has 3 steps:


Step 1.


After your customary grace period has ended and you still have not received a payment from your customer, you send out a brief letter written in a courteous but firm tone informing them that your records show no payment and inviting them to contact you if there is a problem or if they need to make payment arrangements.  The letter should be carefully tailed to your specific business situation.  If your customer has moved, the letter will be returned usually revealing the new address to which you will remail the letter.


A good number of your customers will contact you giving you the opportunity to resolve any service problems or set up a payment plan.  Sometime your customer may not contact you for a variety of reasons, some of which are legitimate, others of which are not.  For example, they may have been on vacation during this time, or could be very upset with your services / goods.  In these cases, where you do not receive a response to your letter, you initiate telephone contact with your debtor – once again for the purposes of resolving any service disputes or setting up a payment plan.


However, when you receive no meaningful response to these inquiries, you move quickly and systematically to step 2.


Step 2.


When your customer fails to get in touch with you or stops making the promised payments, you will send them the final letter of your system that informs them that if they do not get in contact with you within two weeks (tops) you will refer the matter to your attorney for collection proceedings.  Non-responding accounts are prepared and forwarded immediately after that time expires. 


Step 3.


After the two-week period, any accounts not settled are transferred to your collection attorney for collection.  At Ullenberg Law Offices, we then send out an initial letter which highlights that we have been retained, are aware that you have contacted the customer previously and been unable to appropriately resolve the matter, and we invite them to contact us within 30 days to contact us to discuss the account further while warning them that failure to do so will usually result in legal proceedings being commenced.



Why it works?


In a nutshell… because its professional and systematic.


Successful collection depends upon quick action.  Courteous and professional behavior also reduces debtor frustration and resistance.  However, unfortunately, few businesses can balance these two competing forces.  Many times, before my clients came to me they reported frustrating collection results.  Often times the problems fall in two categories:  (1) they routinely waited months before bringing the problem accounts to my office and their debtors got into further financial difficulties in the mean time and (2) they were too kind to their problem debtors and were often times taken advantage of.


The 3-Step Collection System helps strike that important balance between being professional (and thereby increasing the likelihood your customer/clients will respect your actions and possibly remain your customer) and being prompt.  Step 1 is carefully designed to quickly isolate customer dissatisfaction (and possible counterclaims) and quickly assess what steps are needed to ascertain payment.  Within a few weeks, Step 1 helps you determine whether someone is dissatisfied with your services or goods and gives you the opportunity to resolve those problems before they create further dissatisfaction.  Within 30 days, Steps 2 and 3 help you determine the likelihood you will be paid or whether legal action is necessary.  And when legal action becomes necessary, you have made that decision within 60 days (not six to nine months when your debtor is on the verge of bankruptcy, etc.).


In addition, the 3-Step Collection System keeps your customer/client informed of where they stand in the collection process and that you require action. 


It also minimizes the time delinquent accounts remain unpaid by (1) forcing both you and your debtor to deal with the issues that commonly underline payment problem s and (2) facilitating the natural progression of problem accounts into legal collection.  Initially, the system may seem fast to creditors who have relied on other means in the past, but it is this inherent aggressiveness that makes the 3-Step Collection System so effective.



The Results...


Atty. Ullenberg’s 3-Step Collection System helps:

· You deal with problem accounts promptly and gives you the opportunity to resolve problems or customer dissatisfaction before larger problems develop.

· You maximize the likelihood that you may keep even your delinquent customers as repeat customers, because the entire collection system treats your customers with professionalism and courtesy.

· You and your staff minimize the time spent dealing with delinquent accounts or figuring out which letters to send where and when.

· You reduce personal frustration and dissatisfaction with having to collect your own debts because of the systematic approach to resolving the problem of not having your customers remit prompt payment.

· You have the assistance of an experienced collections attorney when it becomes obvious that you will need to use more forceful collections techniques.

· You minimize the very real risk of violating the legal “mines” because you are using the services of an experienced collections attorney right away.

· You maximize the amount you can collect on your own (thereby minimizing collection costs and expenses) without unreasonably delaying the collection process employed by your collections attorney.


And you avoid…

· Creating needless dissatisfaction among your customers and making enemies out of your old customers who many times are your best advertisers.

· Burning out yourself and your staff by devoting substantial amounts of time to collection of accounts that just won’t pay.

· Becoming just another customer in a high-volume collection agency portfolio who puts your accounts second in line to other customers.

· Having to worry about whether your current credit and collection practices are or have violated current law and exposed you to potentially expensive liability.

· Paying collection fees on accounts you could have easily collected yourself.



How do you get started using the 3-Step Collection System?


The first step in increasing the amount you collect on overdue accounts and reducing annual write-offs, is making the commitment to address the problem.  Make a commitment to yourself and your business that you want to solve the problem.


The second step is to determine how long you need to wait before it becomes apparent that your customer/client is not paying you.  This varies from industry to industry.  For example, in the health care industry, bills are not usually considered overdue until three months after services are rendered because it often takes that long for any insurance claims to be processed.  Likewise in the financial services arena, the Wisconsin Consumer Act usually dictates that a consumer credit card is not in default unless the consumer has missed two payments within any 12-month period. 


The last step is to set up your 3-step collection system.  Design the initial contact letters and the process you will undergo.  While we prefer to be a part of this design process, we are also willing to work within your design or make some suggestions for any necessary improvements. 



Does the 3-Step Collection System always work?


Not all delinquent accounts you have will be collected using the 3-Step Collection System.  Sometimes, debtors have just overextended themselves, or for some other reason cannot or will not pay you.  That’s part of being in business.


However, what is important is (1) how much of these delinquent accounts you can collect on your own using the system, (2) whether you can continue to retain a good rapport with those people who cannot pay you but may become paying clients again in the future and (3) how much is ultimately collect by you and your collections attorney.


The key to successful and effective collections is not money, attitude, or rudeness.  Quite the opposite-- its speed, persistence, and courtesy.  In the end, treating your debtors as you would want to be treated goes a long way.  What a novel idea.  And it works!