Collection Letter

Collection Letter

Collection Letter-The collection of the account receivables is the main concern of the businessman. In business operations, realizing payments from debtors

What is a Collection Letter?

The collection of the account receivables is the main concern of the businessman. In business operations, realizing payments from debtors is a difficult task and to accomplish it, you need to know the right way to write a collection letter.

Mainly such problem of debtors arises due to the credit sales. Selling goods on credit is the traditional business policy to enhance the sales volume. Under this policy for the payments of due, there is a definite period given to the customers. The unexpected delay in payments compels the seller to write a collection letter in order to give a reminder.

There are series of a collection letter. Now you must be wondering, what does these series of letter means? The series of the letter means that such a letter starts with a simple reminder and ends with a warning letter, indicating strict legal actions that will be taken against the debtors.

In order to allow your business to grow and succeed, it is important for you to learn the right ways to draft or compose a collection letter. It is important to focus on two objectives while writing a collection letter:

  • First, is to collect the money
  • Second, is to retain customer goodwill

Features of the Collection Letter

Do you know that the collection letters are different from the other business letters? Yes, it is the known fact and here are few features of the collection letter:

Two parties are involved

In this type of the letter, there are two parties involved among which one is the buyer to buy products on credit and another is the seller who sells product on credit. For payment of dues, such a letter is written by the seller to a buyer.

Written in a series

Collection letters are written in a series and it starts with the reminder letter. Later on, this continues with the inquiry letter, appeal letter, urgency letter and ends with the warning letter.

Main principle

While writing such a letter you need to understand the main principle of the letter that is to retain the customer with the company, while receiving your debts.

Refer to the previous letter

When you write such a series of the letter, then in every letter don’t forget to add the reference of the earlier letter.

Make use of friendly language

While writing a collection letter you should make use of the friendly language but be straightforward when it comes to defining motive of the letter.

Legal action

If it is the last letter of your collection series, then you can threat the customer for taking any kind of legal action.

Send such a letter through registered post

It is always advisable for a seller to send such a letter through the registered post, in order to avoid unwanted delays.

Purpose of Writing the Collection Letters

However careful you may be, but sometimes you may end up making mistakes when it comes to selecting the credit customers. For unpaid bills, it becomes important for you to take some kind of action by means of writing the collection letter. How to get back the payment? How to retain the customer? These are the two main purpose of writing a collection letter which should be fulfilled by writing a letter in such a way that it is influential rather than being forceful.

Main purposes of writing the collection letter are:

  • First, to get your money back
  • Second, to maintain the customer for the future business
  • Third, to build up your goodwill

These are the three main purposes of writing such a letter. The collection is the sensitive process and so here are the few practices which you must avoid:

  • Don’t try to mislead the customer by saying that the lawsuit is filed
  • Don’t get in touch with employees of the debtors or family members, to get your collection
  • Don’t get into the communication with people or competitors that the concerned person is in debt
  • Don’t harass the debtor
  • Don’t make use of an abusive language
  • Don’t make use of an offensive language
  • Don’t give intentional stress to the customer
  • Don’t threaten the customer by carrying out violent activity
  • Don’t disclose the matter publicly
  • Don’t misrepresent the legal status of the debt
  • Don’t make use of mode of communication that can make the recipient physically ill

Right Attitude for Successful Collections is Necessary…

Don’t write the collection letter in such a way that the debtor finds it easy to give an emotional excuse. Emotional drama can reduce the chances of recovery. It is important to maintain right attitude for the successful collections like:

  • Understand the human nature and the way he or she will react
  • You should have good knowledge about the collection policies and laws
  • Make use of positive appeal in your letter related to justice, sympathy, goodwill etc.

Begin the Letter with the Assumption that People will Pay…

Here are few examples of the way to begin such a letter:

  • Don’t start the letter in such a way that you doubt the honesty of the debtor
  • Be firm with your tone but that does not mean you will not be courteous or reasonable with the debtor
  • Don’t try to harass, but instead take action maintaining the law
  • Be little flexible and show your understanding
  • Keep on sending such notices regularly
  • Don’t ever maintain the impression that the payment can be postponed or avoided

Several Types of Collection Letters

Every letter in a collection series should contain information like:

  • The amount owed
  • How long is the overdue?

Reminder Collection Letter

The reminder collection letter is written in a friendly manner. This letter is written with the assumptions that customer has forgotten to make the payments or is facing some financial or medical difficulties. You can receive the payments after sending a couple of reminder collection letters.

Inquiry Collection Letter

Try to find out whether the customer is facing any extraordinary circumstances before writing an unforgiving letter. If you are sensitive to certain problems while collecting debts, then it can make it easy for you to maintain the good relationship with the customer. In the inquiry collection letter, you can show your willingness to help the customer. In such a letter, you can give the option of making partial payments.

Appeal Collection Letter

If your customer is not responding to any of the collection letters, then you can write the appeal collection letter. In this letter, you can show your aggressive approach. Maintain fairness and personal pride while making an aggressive approach.

Ultimatum Collection Letter

In this type of a collection letter, you can mention the action that you will take if customer fails to revert back or pay your money. In such a letter you should add logical and fair statements.

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