The objective of the collection letter is to collect money that is owed, and when possible, retain customer goodwill. To be effective, be sure your letter stays focused on these objectives. While even the most expertly written collection letter is no silver bullet, the information compiled here will help you stay on target with this traditional collection tool.

Preparation

Gather the facts before you begin. Review the account. Be prepared with specifics: what was purchased; how much is owed; what are the terms of payment; when was payment due.

Format

Keep the letter to one page.

Keep the letter brief and to the point.

Use short sentences and short paragraphs.

Sign the letter personally, if possible.

Mark the envelope "confidential" or "personal".

Indicate your request for address correction in case the letter is undeliverable at the original address on the account.

Style

Use clear, direct language that is easy to understand.

Avoid the use of adjectives, especially any that might be construed as derogatory or insulting.

Avoid any language that suggests the customer might be dissatisfied with the product or service they have received. Be unapologetic. Remember, you have a right to receive payment.

State the facts clearly.

Let the debtor know exactly the deadline for payment and the amount to be paid.

Include payment and contact information including any reference numbers, address, phone, fax and the name of the contact person.

Tone

Be firm and fair while creating a sense of urgency.

Be positive, possibly by letting the debtor know you value their business and giving them the benefit of the doubt (in the initial contact only). You understand that failure to pay may have simply been an oversight on their part.

Miscellaneous Tips

Remind the debtor of the benefit to him of making prompt payment, such as maintaining a good credit rating; avoiding having their account put on credit hold; etc.

Using a window envelope or stamping the envelope "past due" may help get the debtor's attention.

IMPORTANT: Never threaten an action you are not prepared to take. Think through any ultimatum, such as suing the debtor, before you include it in a collection letter.

An ultimatum, generally, is not the first type of collection letter sent to a past due customer, however. Here is a brief description of the various types of collection letters used.

Reminder Letter

This is the first type of collection letter generally sent to past due debtors. The tone and language should convey the assumption that the customer has merely forgotten to pay the invoice. The letter should be a friendly reminder and a courteous request for prompt payment. Including a statement showing the amount due with late charges together with a copy of the original bill with a Past Due stamp on it can be effective. Be sure to include information on where to mail the payment. Inserting a return envelope for the customer's convenience may help speed their response.

Inquiry Letter

On occasion, the debtor may be in the situation where he is willing to pay, but is prevented by extraordinary circumstances. To find out if this is the case before you proceed to adopting harsher collection measures, you can send an Inquiry letter. This type of letter is also effective if you wish to retain a good relationship with a particular customer who has fallen past due on accounts. In this type of letter you express you willingness to work with the debtor in arranging a payment plan that will allow repayment of the debt over an extended period of time. This is generally a better alternative to assure repayment than pursuing payment in full from a debtor who is in no position to comply.

Final Demand Letter

Once you've decided that harsher measures need to be taken, it's time to send the debtor a letter of ultimatum -- a final demand. This letter needs to clearly state the action you will take if payment is not received. It is important to be specific and clear about the amount to be paid, the deadline for payment, and what action will be taken if payment is not received. The letter should also include a review of the account, including what was purchased, amount owed, terms of payment, and your past attempts to collect.

Avoid any language that is inflammatory or may be construed as an accusation. State the facts and why, based on the debtor's inaction, you find it necessary to take firmer action on the account.

It is critical that you follow through with the ultimatum, should the letter fail to achieve results.

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This information is provided by ABC-Amega Inc. -- providing 1st and 3rd party commercial collection services since 1929, and collecting in more than 200 countries worldwide. For further information, contact info@abc-amega.com.