Collection letters

The preliminary steps in debt collection are as follows:

1. A first end-of-month statement of account.

2. A second end-of-month statement of account with added comment.

3. A first letter worded formally.

4. Second and third letters.

5. A final letter notifying that legal action will be taken unless the amount is paid within a stipulated period of time

A customer whose account is only slightly overdue would understandably be offended to receive a personal letter concerning this. This is why the first 2 reminders usually take the form of end-of-the-month statements of account. Even where the second of these statements is marked with such comments as 'Second application', 'Account overdue - please pay’ or 'Immediate attention is requested', this is unlikely to give offence.

FIRST APPLICATIONS FOR PAYMENT

It is not wise to write a letter until a customer has been given the opportunity to pay on these impersonal statements. Letters requesting payment of overdue accounts are termed 'collection letters'. They aim to:

1. persuade the customer to settle the account;

2. retain custom and goodwill.

It would be easy to give offence so any letters must be written with tact and restraint. It may also be the case that the supplier is at fault, as in the case where a payment received has not been recorded, or goods sent or service given is not satisfactory.

A printed collection letter

A first collection letter may be printed as a 'form letter' as in this example where the individual details arc keyed in appropriately. Alternatively the details may be stored on a word processor so that the letter may be personalised.

Dear Sir / Madam

ACCOUNT NUMBER...

According to our records the above account dated ... has not been settled.

The enclosed statement shows the amount owing to be £...

We hope to receive an early settlement of this account.

Yours faithfully

Personalised collection letters

There may be circumstances when an individual letter rather than a form letter is more appropriate. It should then be addressed to a named senior official and marked 'Confidential'.

(a) To a regular payee

Dear

ACCOUNT NUMBER 6251

As you are usually very prompt in settling your accounts, we wonder whether there is any special reason why we have not received payment of this account which is already a month overdue.

In case you may not have received the statement of account sent on 31 May showing a balance owing of £105.67, a copy is enclosed. We hope this will receive your early attention.

Yours sincerely

(b) To a new customer

Dear Sir/Madam

ACCOUNT NUMBER 5768

We regret having to remind you that we have not received payment of the balance of £105.67 due on our statement for December. This was sent to you on 2 January and a copy is enclosed.

We must remind you that unusually low prices were quoted to you on the understanding of an early settlement.

It may well be that non-payment is due to an oversight, and so we ask you to be good enough to send us your cheque within the next few days.

Yours faithfully

(c) To a customer who has sent a part-payment

Dear

Thank you for your letter of 8 March enclosing a cheque for £500 in part-payment of the balance due on our February statement.

Your payment leaves an unpaid balance of £825.62. As our policy is to work on small profit margins, we regret that we cannot grant long term credit facilities.

We are sure that you will not think it is unreasonable for us to ask for immediate payment of this balance.

Yours sincerely

Reminder to customer who has already paid

The need for a cautious approach is always necessary since the customer may not be at fault, as where the payment has gone astray, or where the supplier has received it but failed to record it

Request for payment

Dear Sir/Madam

ACCOUNT NUMBER SS42

According to our records our account for cutlery supplied to you on 21 October has not been paid.

We enclose a detailed statement showing the amount owing to be £310.62 and hope you will make an early settlement

Yours faithfully

Customer's reply

Dear

YOUR ACCOUNT NUMBER S542

I was surprised to receive your letter of 8 December stating that you had not received payment of the above account.

In fact our cheque (number 065821, drawn on Barclays Bank. Blackpool) for £310.62 was posted to you on 3 November. As this cheque appears to have gone astray, I have instructed the bank not to pay on it. A replacement cheque for the same amount is enclosed.

Yours sincerely