6. collection letters

1. Collection Letters
By
Kamlesh Joshi

2. Collection letters
• Introduction:
• A collection letter is written to
get the money from the
customers.
• It has to perform two functions, one is to get
the money and other is to retain the
customer’s goodwill.
• A uniform collection policy can’t be applied
to all customers.

3. Collection letters
• Collection letters are written in a series to
persuade the customer to settle his
outstanding account instead of directly
resorting to legal action.
• Collection letters are divided into three
stages:
A.Reminder stage.(1st
& 2nd
stage)
B.Inquiry-appealing stage.(3rd
,4th
,5th
reminder)
C.Warning- threat stage. (6th
& 7th
reminder)

4. Collection letters
A. Reminder stage:
• At this stage it is presumed that the
customer has failed to pay off the bill by
mistake. Therefore he needs to be
reminded that the payment is yet to be
made. This just a reminder so don’t insist
on payment and keep the tone mild.

5. Collection letters
• Hints for drafting reminder stage:
• Refer to the statements of account already
sent and the amount due.
• Say that the customer has perhaps
overlooked the statement sent.
• Request for prompt payment.
• Enclose the statement of account for
reference.

6. Collection letters
B. Inquiry-appealing stage:
• This second stage is represented by three
reminders, namely third, fourth and fifth
reminder.
• Here stress is given on the importance of
credit as the foundation of business and
reference to the contractual obligations and
the need to meet them in time.

7. Collection letters
• Hints for drafting inquiry and appealing
stage:
• Refer to the amount due and the time since
it has been due.
• Refer to the past reminder.
• State the problem faced by you due to non-
payment and inquire if there is any
problem.
• Offer to accept the payment in easy
installments.

8. Collection letters
• Suggest to return the goods that remain
unsold.
• Demand prompt payment.

9. C. Warning / threat stage:
• As far as possible, this is avoided but when
there is not any other way, this the last
option for any business person to collect his
money.
• Warning or threat stage is in the form of 6th
and 7th
reminder .
Collection letters

10. Collection letters
• Hints for drafting the warning / threat
stage:
• Refer to the steps taken by you. ( past
reminder)
• Say that all your humble efforts have failed.
• Give a definite time limit within which you
want the payment.
• Explain the course of action that you
propose to take if payment is not received
in given time limit.

11. Collection letters
• Opening statements:
A. This is just to remind you of your
outstanding account of Rs._____.
B. We are at a loss to understand why we have
not heard from you regarding your account
which is due from _____.
C. You have this last opportunity to set right
your account by paying Rs. ____ which is
due from_____.

12. Collection letters
• Closing statements:
A. We look forward to receiving your
remittance.
B. We expect you to promptly square your
account so that you continue to keep your
credit.
C. We are sure you will avoid the unpleasant
consequences of legal action.

13. Reminder stage
GUJARAT ELECTRICALS
Ahmedabad
15th
July, 2012
To
The Manager
Bharat Electricals
Rajkot.
Dear Mr. Jani,

14. SUB.: A letter of reminder for the payment due.
This is just a friendly reminder that
your account with us now is two months
past due perhaps you have overlooked it or
owing to your extremely busy schedule it
has escaped your notice.
We genuinely appreciate your business
and look forward to serving you better in
future.
Yours sincerely,
Reminder stage

15. Inquiry & appealing stage
GUJARAT ELECTRICALS
Ahmedabad
15th
July, 2012
To
The Manager
Bharat Electricals
Rajkot.
Dear Mr. Jani,

16. Inquiry & appealing stage
SUB. : Letter of reminder for the outstanding
Account.
looking into our records we find that your
credit worthiness is really high. We are
simply not prepared to count you amongst
the delinquent group. But unfortunately we
find that your May 15, 2012 balance of Rs.__
is much over due.
What really worries us is that even the first
reminder of ours has not been replied.

17. Inquiry & appealing stage
I hope everything is fine with you.
Let us know by return post if there has been
any lapse on our part. Are you not satisfied
with our goods or services? In settling the
account we can work it out.
You will always find us willing to accommodate
you. With this promise we eagerly await
your reply.
Yours sincerely,
-------------------

18. Warning / threat stage
GUJARAT ELECTRICALS
Ahmedabad
15th
July, 2012
To
The Manager
Bharat Electricals
Rajkot.
Dear Mr. Jani,

19. Warning / threat stage
SUB. : letter demanding the Payment due.
We deeply regret having to say that your
account has been handed over to our lawyers
for legal action. You have left us with no
option.
All efforts to receive a cheque from you against
your account of Rs.____ overdue, have failed.
Our chief accountant has already asked the
lawyers to move the matter to the court. But

20. Warning / threat stage
I have specially requested them to wait till___.
You have in this way one more week to retain
your credit with us. Please send the cheque
by return post and save yourself the cost and
consequences of legal proceedings.
Yours sincerely,
--------------------

21. Debtor’s reply
Request for extension of time
limit
• Introduction:
• Sometimes debtors have valid reason for non-
payment . The debtor may not be in a position
to settle the account due to certain problems.
• In such cases debtor may write a letter to
creditor and aware him of his real situation.
• the debtor may request him to make payment
in installments or to give some extension of
time.

22. Debtor’s reply
Request for extension of time
limit
• Hints for Debtor’s reply:
• Acknowledge creditor’s reminders for payment
• Offer apologies for non-payment.
• Refer to your past regularity in the payments.
• Explain the situation which prevents from
making the payment.
• Request creditor to grant extension of time.
• Assure the creditor for payment on agreed
date

23. Debtor’s reply
Request for extension of time
limit
Dear Sirs,
Re : Your bill no. A 3703 of MAY 10, 2012
We have received your letter of July 10, 2012,
requesting us to pay off the outstanding bill.
We are indeed very sorry as we have delayed
the payment for such a long period.
Actually we are facing severe financial crisis. Our
shop got damaged by earthquake. We had to
spend two lakhs in renovation.

24. Debtor’s reply
Request for extension of time
limit
Although our shop has been insured against
natural calamities, it will take some times in
getting compensation from insurance
company. We therefore request you to give us
an extension of two months for the payment.
We hope you will oblige us by granting the
extension.
Yours faithfully,
______________

25. Thank you