This document discusses best practices for writing collection letters to customers with past due accounts. It notes that collection letters should be persuasive rather than forceful in order to get payment while maintaining goodwill. The purpose of collection letters is to collect money owed, keep the customer, and build goodwill. The document outlines a series of collection letters that start mild but become more insistent if payment is not received. It provides examples of language for a friendly reminder, request for explanation, appeal for payment, and final collection letter before legal action. Throughout, the letters should remain courteous while firmly requesting payment by a specified deadline.

1. 1 | P a g e N o t e s B y J u n a i d A m j e d
LETTER WRITING
CollectionMessages(letter):
Def. “Letters that are written to the customers for collecting past
due accounts are called as collection letters.”
No matter how carefully a company chooses its credit customers, there will
be times when a bill goes unpaid. Therefore steps to collect that bill, must be taken.
The problem when writing a collection letter is how to get payment and at the same
time keep a customer. The writer of a collection letter wants to get the money owed
and maintain goodwill.
Collection letters, therefore, should be persuasive rather than forceful, firm
rather than demanding. A fair and tactful letter gets better results than an ironic or
abusive one. In fact, collection messages (letters) should be "you-oriented";
courteous, selfless, and concerned about the customer's best interest.
The purpose of collection letters is:
 To get the money.
 To keep the customer and future business.
 To build goodwill.
The purpose of the collection process is to maintain Goodwill while collecting
what is owed hence, collection is a sensitive issue.
The following practices may be avoided:
 Harassing the debtor
 Using offensive language
 Threatening violence
 Misrepresenting the legal status of the debt
 Misrepresenting the legal status of the debt

2. 2 | P a g e N o t e s B y J u n a i d A m j e d
Right attitude for successful collections:
Any emotional reaction on the part of the debtor may reduce the chances of
recovery. Successful collection depends to on the following factors.
 Understanding of Human Nature.
 Knowledge of collection policies and laws.
 Use persuasive / positive appeals effectively.
Begin with assumption that most people will pay
 Give no impression that you doubt the honesty of the debtor.
 Use a courteous, reasonable tone but become firmer.
 And more demanding during the later stages of the series.
 Remain with the law, don't harass.
 Show understanding and flexibility while writing delinquent accounts.
 Send collection notices quickly and regularly.
 Never imply in you messages that payment can be avoid or postponed.
 Retain goodwill throughout the series.
Collection letters are usually sent in a series. The first is mildest and most
understanding, with the letters getting gradually more insistent. The final letter in
this series, when all efforts have failed, threatens to turn the matter over to a lawyer
or collection agency or court of law. Of course, the tone of any letter in the series
will vary, from positive and mild to negative and strong, depending upon the past
payment record of the particular customer. The intervals between the letters may
also vary, from ten days to a month at the start, from one to two weeks later on.
Every letter in a collection series should contain certain information.
1. The amount owed;
2. How long the bill is overdue;
3. A specific action the customer may take.
The majority of bills are paid within ten days of receipt, with nearly all the rest
being paid within the month. Therefore, when a bill is a month overdue, action is
called for. Still, the collection process must begin gently.

3. 3 | P a g e N o t e s B y J u n a i d A m j e d
Statement of Account / Reminder
STEP 01
The monthly statement reminds the customer of unsettled bills. If it is
ignored, it should be followed (about a week or ten days later) by a second
statement. The second statement should contain a notice stating "Past Due" or
"Please Remit". An alternative is to include a card or slip with the statement, alerting
the customer to the overdue bill. The notice could be phrased in formal, possibly
even simple language; it is an objective reminder that does not embarrass the
customer with too early a personal appeal:
Our records indicate that the balance of PKRs. 1, 42000/- on your account is
now past due. Payment is requested.
OR
Our records show that your September payment is more than a week over-
due. If you have recently mailed your cheque for PKRs.1, 58700/- we thank you. If
not, please send it in quickly.
STEP 02
If the objective statement and reminder fail to get results, the collection
process must gradually become more emotional and personal. The second
collection message, however, should still be friendly. It should seek to excuse the
unpaid bill as an oversight; the tone should convey the assumption that the
customer intends to pay. At this stage, too, stress on future sales, rather than on
payment.
Consider the following letter:

4. 4 | P a g e N o t e s B y J u n a i d A m j e d
HEADER
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Subject: _____________________
Dear Mr. Asim,
Enclosed is a duplicate list of your credit charges from December 15th
, 2016.
It is sent to you as a friendly reminder that the balance on your account with us is
past due.
Please take a few minutes today to send us your cheque for PKRs. 2, 55000.
Use the postpaid addressed envelope provided for your use.
Yours Truly,
___ Pvt, Ltd.
When a credit customer does not respond to personal reminder messages, you can
assume that something is preventing the customer from paying. It may be that the
customer is unhappy with the purchased merchandise or is facing financial difficulty.
Whatever the reason may be for holding up payment, you want the customer to
1. Explain why the payment hasn't been made or
2. Settle the account.
The following letter illustrates the approach generally used in requesting an
explanation:

5. 5 | P a g e N o t e s B y J u n a i d A m j e d
HEADER
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Subject: _____________________
Dear Mr. Asim,
We are concerned about your overdue account. Several reminder notices
have been mailed to you, and we expected to receive your PKRs. 2, 55000/- cheque
in the mail. But so far we haven't.
There may be a circumstance beyond your control that prevents you from
settling this account. If so, please write me about it. I'm confident we can work out
a payment arrangement after we know what your situation is.
Just think how good you will feel, Mr. Asim, when your account with us has
been paid in full.
Yours Truly,
___ Pvt, Ltd
Appeal (s) for Payment:
STEP 03
The next collection message is an appeal to the credit customer to pay. This
is a stern (harsh) letter, but calmly written.
Your appeal for payment should not threaten to take the debtor to court
unless you actually plan to. Give the person another chance to save a good credit
standing by sending payment before the deadline usually 10 to 12 days from the
date of the letter. The following letter is an example of a courteous request for
payment which appeals to both the customer's pride and his sense of fair play.
This letter should stress the customer's self-interest by pointing out the
importance of prompt payment and the dangers of losing credit standing. The letter
should convey the urgency and seriousness of the situation.

6. 6 | P a g e N o t e s B y J u n a i d A m j e d
HEADER
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Subject: _____________________
Dear Mr. Asim,
Your good credit reputation enabled you to purchase of PKRs. 2, 55000
merchandises from us over three months ago. We were glad to place your name on
our credit list at that time, and we made it clear that accounts are due on the 15th
of the month following the purchase. When you bought the goods, you accepted
those terms.
Your credit reputation is a valuable asset. We want you to keep it that way
because of the advantages it gives you. You have enjoyed a liberal extension of time,
but to be fair to our other customers, you must pay the amount that is past due by
March 2.
Won't you please send us your check for the said amount today?
Yours Sincerely,
___ Pvt, Ltd
OR
We are truly at a loss. We cannot understand why you still have not cleared
your balance of PKRs. 2, 55000/-, which is now three months overdue.
Although you have been a reliable customer for 5 years, we are afraid you are
placing your credit standing in jeopardy. Only you, by sending us a check today, can
ensure your reputation and secure the continued convenience of buying on credit.
We would not like to lose a valued friend, Mr. Asim. Please allow us to keep serving
you.

7. 7 | P a g e N o t e s B y J u n a i d A m j e d
STEP 04
Finally, payment must be demanded. The threat of legal action or the
intervention of a collection agency is sometimes all that will induce a customer to
pay. In some companies; moreover, an executive other than the credit manager
signs this last letter as a means of impressing the customer with the finality of the
situation. Still, the fourth collection letter should allow the customer one last chance
to pay before steps are taken.
Final Collection Letter:
HEADER
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Subject: _____________________
Dear Mr. Asim,
Our Collection Department has informed me of their intention to file as you
have failed to answer any of our requests for payment of PkRs.2, 55000/-, which is
now 4 months overdue. Before taking this action, however, I would like to make a
personal appeal to your sound business judgment. I feel certain that, if you request
me, we can devise some means to settle this matter out of court.
Therefore, I ask that you get in touch with me by the 25th of the month so
that I may avoid taking steps which neither of us would like.
Yours Sincerely,
___ Pvt, Ltd