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Collection Letters


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Business depends heavily on credit. The suppliers, manufacturers, etc., give credit to the buyers. There are certain credit norms set up by every organization, and after this, the debtor has to clear the payments. The lender sends reminder letters to the debtor to repay debts. These letters are known as collection letters.

The collection letters, as the name suggests is a letter that is written to the borrower or the customer, to request him/her to clear the payments. This letter serves as an official record. When these letters are constantly ignored, it leads to some legal action like sending a legal notice, or confiscating the assets of the borrower, etc.

Since a business depends on the customer, the letter is written thoughtfully. It does not scare or abuse the reader. It is written in a decent requesting tone. However, the letter becomes more and more precise with time, and when a series of such letters have been ignored, it allows the sender to take legal action against the borrower. Since the tone of the letter becomes more precise with every letter, it is also known as a 'dunning letter'. A dunning letter means making continuous demand for payments.

'Customer is the King' but a business needs 'capital' to function. If the customers get the privilege of delaying payments and sheer leniency is shown towards collection of payments, the organization might suffer immense losses, and go bankrupt. If the organization does not get payments from clients on time, it cannot pay to its suppliers, staff, etc. Thus, it is an entire circle, and the organizations credit history and credit score is affected badly. In USA, TransUnion, Equifax and Experian, keep a track of all the payments of every individual and business organization. Any organization that does not clear debts and the amount of debts sees an increase in debts and delayed payments gets a bad score from these three credit rating agencies. This bad score leads to many problems for the organization, and might as well lead to closing of the organization due to bankruptcy. Thus, these organizations are very particular of recovering the payments, so as to not fall within the viscous circle of debts.

Since it is business, one cannot just walk up to a client, and start demanding the payments. A proper procedure is followed. One step of this procedure is the collection letter. When this is ignored by the client, the seller has the right to take further action. It initially reminds the customer that he/she has to pay a certain amount. There are two main types of letters:

Reminder Letters:

These letters are sent just after the payment date is missed by the customer. The customer is politely reminded that he/she has failed to make the payments on time, and thus requests him/her to pay the amount. A copy of invoice and a return envelope is sent along with this letter, to make it simpler for the client to send a check to clear the dues.

Every organization has its set rules and they send a fixed number of reminder letters. After this, the organization takes an action as per their rules and policies.

Final Demand letter:

Before taking any legal action like sealing or confiscating, the organizations send a final warning letter. It is known as a Final Demand letter. This serves as a final ultimatum to the client/borrower. In this letter, it is clearly mentioned, that if the payment is not cleared on time, the client would face severe legal action.

Format of a collection letter:

These letters are strictly formal letters. The letter is written as per a set format. The letter will contain some specific details like:

  1. Date
  2. Name of the client
  3. Invoice details
  4. Reminder letter number
  5. Subject line
  6. Body of the letter

The letter would be precise, and would have around 3 paragraphs. The opening paragraph would speak about the purpose of the letter. The second paragraph would elaborate on the deal and the clause of payments, thus requesting the client to clear the payments. The last paragraph would be a decent closing by thanking the reader. Enclose a copy of invoice and any other essential documents.

Refer to the sample collection letters given in the links below to write effective collection letters that will help you get your payments on time, and not spoil your rapport with the client.

Acceptance Letters
Apology Letters
Appeal Letters
Application Letter
Appointment Letters
Appreciation Letters
Asking Letters
Business Letters
Change of Address Letter
Charity Letters
Christmas Letters
Collection Letter
Complaint Letters
Confirmation Letters
Condolence Letters
Congratulations Letters
Cover Letters
Credit Letters
Donation Letters
Employment Letters
Farewell Letters
Formal Letters
Fundraising Letters
Goodbye Letters
Hardship Letter
Holiday Letters
Inquiry Letters
Introduction Letters
Invitation Letters
Job Letters
Leave Letters
Marketing Letters
Meeting Letters
Memo Letters
Offer Letters
Promotion Letters
Proposal Letters
Recommendation Letters
Reference Letters
Request Letter
Resignation Letter
Sales Letters
Santa Claus Letters
Scholarship Letters
Sponsorship Letters
Tax Letters
Termination Letters
Thank You Letter

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