Letters of collection – Tutorial

 

 

Debt collection is not an enjoyable pastime, but if you comply with the following logical steps in preparing your collection letters, you will succeed in collecting payment on many of your delinquent accounts.

Do not suggest in any collection letter that the customer might be dissatisfied with the product or service he/she purchased from you. The point of the collection letter is always to collect the money that is owed. A new type of collection letter is sent each time you escalate your demand for payment. Below are examples of several types of collection letters that may help you to collect your money.

THE REMINDER

The first collection letter should only be a friendly reminder. The customer has only forgotten to pay. You should politely invite him/her to pay promptly. Most people will make a payment after a couple of reminders. If there is no response to these reminders, you should assume that the customer is not paying because of financial, medical, or other personal difficulties.

Suggestions for a typical format:

  • Send a copy of the original bill.
  • Stamp on it Reminder or Past Due and highlight the amount past due.
  • Include a short statement indicating the amount due, the due date, late charges (if any), and the account number.
  • Make sure the address where the customer should send payment is indicated. Including a pre-addressed envelope for payment (with or without postage) is also helpful.

If the customer has not even made a partial payment after a couple of gentle Reminder Collection Letters, you can send a final reminder collection letter to ask why the customer is not paying. A final reminder letter should explain that there will be consequences for continued nonpayment. If no payment on the amount owed is received, then you will need to take a more aggressive approach in follow-up collection letters.

The Inquiry

Before you begin to be more aggressive, try to discover if the customer has extraordinary circumstances that are preventing him/her from making any payment. You can help maintain a good relationship with the customer and go a long way toward collecting your debt if you are sensitive to any potential problems. If you are willing to accept a partial payment now with regular payments after that, most people in financial difficulty will be grateful for this option and agree.

The Appeal

If the customer fails to respond to any of the Reminder Collection Letters or to the Inquiry Collection Letters, you must take a more aggressive approach. Because the customer has not responded to date, you should assume that he/she will probably not respond to any further demands for payment. This is why many organizations at this point turn their debtors over to a collection agency. If you do choose to continue the collection process yourself, there are two basic approaches you can take:

  • Positive appeal approach: Try to appeal to the customer's sense of fairness.
  • Negative appeal approach: If the positive approach is ignored, inform the customer that continued nonpayment could result in various penalties:
    • the loss of his/her good credit standing and its connected privileges
    • the initiation of legal action to reclaim any purchased goods; any services will be discontinued

The Ultimatum Collection Letter

If the customer does not answer any of your collection letters, you can give him/her a final chance to pay. The Ultimatum Collection Letter needs to state the specific action you will take if the customer does not send payment by a certain date. Your statements should be fair, reasonable, and logical. In your last letter:

       First review the history of the account. Give a deadline for payment. 

       Be careful not to use name-calling or to make accusations, which are both illegal. Always be careful with what you put in print! Simply state the facts and why his/her inaction is causing you to take a legal action against him/her.

Study the two samples of collection letters

SAMPLE 1

Dear Mr. Tukks,

Our records indicate that your account of 25 September in the amount of $25,000 is now 30 days overdue.

If you have already submitted payment, please disregard this notice.

In the event that you have not paid this account, we would appreciate receiving your remittance or being advised of your repayment plans as soon as possible.

Sincerely,

Jack Willows
Account Manager

SAMPLE 2

Dear Ms. Fitz,

We write to inform you that we have not yet received payment of invoice 07-01256 for $5,000 due on 20 August 2007.

I have enclosed a full statement of your account as at 31 August 2007.

I'm sure you must have mistakenly overlooked this but could I ask that you give it your prompt attention now.

If payment has already been sent, please disregard this letter. If you have any queries about your account, please do not hesitate to contact me.

 Yours sincerely,

John Ports
Account Manager