What is Letter of Collection?
Definition Letter of Collection
Written notification of the pending amounts, meant to prod
past-due customers to make a payment. Collection letters are sent usually one
after another, with the tone and language getting more direct with each
successive letter, until at least some payment is received. An effective letter
of collection achieves its purpose
without destroying the customers' goodwill that was painstakingly acquired over
the years. Also called dunning letter. Not to be confused with collection
letter
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Why a demand for
payment letter?
By sending a demand for payment letter, you are establishing
the first blow but it’s more of a wimpy punch that isn’t a total knockout. But
at this stage in the bout, that’s ok. It’s basically your attempt at being nice
and simply alerting the other side that they are late in their payments and
should take note of the payment owed.
Wait a minute…are
demand letters really that helpful?
They can be. It boils down to the party you are dealing with.
We hear people living in colder regions aren’t as chilled out as us beach
goers. But cold weather aside, the ultimate determining factor is that a demand
letter will serve its purpose–that is, it makes a demand to the other side to
either make a payment or set a timeline within which said payment should be
made. In the event that the payment is not made, the party who sent the letter
knows that it’s time to start a more formal, legal process, also known as
“let’s go to court.”
What about demand for
payment letters?
Again, they can be. If Beachy and Mountain Top have a decent
relationship, and the only issue is that Mountain Top forgot to pay, we don’t
see why Mountain Top would object. Things get a bit complicated the minute
Mountain Top refuses to pay. At the same time, if you are willing to
compromise, you could even recommend working with the other side on easing
payment terms. For example: “You can pay the amount due in installments of
$5000 over three months.” By offering a solution, you are showing the other
side your willingness to cooperate.
Typical Schedule for Demand Letters
Initial considerations:
1. The basic premise of your letter is
this: State why you have a dispute, and that if this particular attempt at
negotiation fails, you will take the case to court.
2. Make sure you send the demand letter
in a timely manner because waiting too long after your claim becomes due could
jeopardize your attempt at collection.
Particulars:
1. Use a letterhead. This makes the
demand letter look official and formal. State why you are writing the letter.
2. Outline the facts/story leading up to
the demand letter in a chronological manner.
3. State the legal basis for your claim.
4. State how you will pursue legal
action if your demand is not met, and include a timeline within which the
demand is to be met.
5. Do not threaten or use accusatory
language, as this definitely won’t help your cause!
6. Make and keep copies of your demand
letter and any response received.
7. Use a mailing option that requires
the recipient to sign for the document. This way, you know the recipient
actually received the letter and you can keep track of it.
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How to write a letter of collection :
Just as you wouldn't send a form
letter as a thank you letter, the process of writing a collection letter must
be personalized as well. The writer should maintain a professional tone at all
times, certainly, but the content should also:
§ Address the contact by name or with a
Dear X.
§ Reference the product or service
purchased.
§ Reinstate the terms of payment/sale,
such as "Net 30" or "Due Upon Receipt."
§ Express the precise date and method
payment is due.
§ Provide a "live body" for
contact and questions.
§ Thank the customer for their
business.
State these variables in a firm but
polite way. It's also a good idea to attach a copy of the original invoice.
Remember, anything could have happened to the invoice or, for that matter, the
customer. How you've written the collection letter will support your case if
further action needs to be taken to collect on the debt.
Example :
1. Polite First Reminder Letter for a
Good Customer
Dear {client};
You have been a valued customer for
many years, and you have always been conscientious about paying your bills
within the 30-day payment period. This is just a reminder that your payment of
{amount} for invoice # {0000} has not been received by our office. If you
forgot to mail us your payment, please send it today. If you have already
mailed your check, please disregard this notice.
As always, if you have any questions
or problems feel free to contact us at {phone number} or {email address}.
Sincerely,
{Your Name}
{Your Title}
2. Collection Letter - First Notice 30
Days Late
Dear {client};
We know that life can sometimes be
difficult and staying on top of invoices is not always easy. That’s why we
wanted to send you a friendly reminder regarding invoice # {000} in the amount
of {$.00} that is currently past due. If you experienced an issue with your
order, please do let us know. If you have any questions regarding this invoice,
please call us at {phone} or contact us via {email}.
We value your business and are here
to help you. If your payment has already been submitted, we thank you and
please disregard this notice.
Sincerely,
{Your Name}
{Your Title}
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Exercise :
Please fill the letter with following word
(Been, Provided, Well, Payment, Problem, Contact, Amount, Please, Us, Check,)
Please fill the letter with following word
(Been, Provided, Well, Payment, Problem, Contact, Amount, Please, Us, Check,)
Dear Happy Inc.
We hope that everything is going ____(1) for you and that you are enjoying
the products that we _______(2).
However, it has ____(3) two months now since we have
received a _______(4) and we are
wondering if there is some sort of ______(5)
we can help you with. Have you already put a _____(6) in the mail to us in the ______(7) of $.50 for invoice $100.000?
If not, _____(8) give this matter your attention today, since we want to be able
to extend you credit the next time you shop with ___(9).
Of course, if there is some sort of
problem, know that you can ______(10)
us at 021 – 2016XXXX or jurgenkloppp@gmail.com so we can help.
Sincerely,
Jurgen Kloppp
Manager Finance
Answer :
(1) Well
(2) Provided
(3) Been
(4) Payment
(5) Problem
(6) Check
(7) Amount
(8) Please
(9) Us
(10) Contact
