Collection Letters
Write a good collection letter and get paid. Say the wrong things and no deal!
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How to Write the Perfect Collection Letter
by Larry Barkdull, Award-Winning, Nationally Recognized Writer
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Who wants the hassle of collecting an unpaid bill? No one! If you are in a business that extends credit, however, one of the risks you will face is collecting payment on unsecured debts. In this article, you will learn about the various kinds of collection letters. You will also learn what actions you can take before turning an overdue account over to a collection agency.
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 Collection Letter
The first collection letter should only be a friendly reminder. Assume that the customer has forgotten to pay and courteously 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 plainly 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 Collection Letter
Before you employ any harsher means, 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. The Inquiry Collection Letter demonstrates your willingness to help the customer solve his/her current financial difficulty by offering new terms. 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.
Remember, it is better to collect your money through a series of payments than not to collect it at all. It is also better to work with your customers than to alienate them as their present difficulties may resolve and they may prove to be more reliable in the future.
Tip for the first inquiry letter: Make a request for prompt payment, and add your willingness to help the customer by offering new terms for repayment.
Tip for the second inquiry letter: Use positive wording, but state firmly that the customer will pay a penalty for continued nonpayment such as a late fee, a collection fee, or interest on the amount owed.
The Appeal Collection Letter
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, personal pride, or his/her desire to maintain a good credit standing and its connected privileges. 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 he/she may incur additional debt through collection fees and/or interest on the amount owed
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: what the customer purchased, your repeated efforts to collect, etc. Give a deadline for payment or for the customer to commit to a repayment agreement--otherwise you will take legal action to reclaim the purchased goods and/or turn the account over to a collection agency. 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 action.
If the Ultimatum Collection Letter fails to bring results, be sure to follow through with your stated action.
Note: Debt collection is not an enjoyable pastime, but if you follow these logical steps in preparing your collection letters, you will succeed in collecting payment on many of your delinquent accounts.
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