Collection Letter

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A business house is busy with different transactions .A sizeable portion of transactions take place on credit. In such transaction there is a specified time of paying the outstanding amount .But the real picture is that some buyers are not paying the outstanding amount in time. So the seller is to write letter to the buyer informing him about the debt. The letter which is written by the seller to the buyer who got goods or services on credit but is not paying as per commitment, is called collection letter.
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A letter written by businessman to their debtors in connection with collection of over due amount is called collection letter According to L. Garside, Letters requesting payment of overdue amount are termed as collection letters. According to Prof.Hopson, The letter which is written by a creditor to his debtor to pay the amount due in his account is known as collection letter.
The probable reasons behind the nonpayment of dues by customers are mentioned below@ The customers may forget to pay. @ Customers overlook payments because they are very busy. @ Customers can not keep track. @ Customers may have plenty of money and they can not understand that others need it. @ The buyers cannot manage their affairs and employees.
@ Customers will not pay because of temporary lack of money. @ Buyers prefer to keep the money in the banks instead of paying. @ Customers may use the money for some other purposes. @ The customers may think that he is entitled to take time because he places large orders. @ The customer has too many credit obligations and is not very particular about all of them. @ The customer will pay only to avoid losing his credit reputation. @ The will pay only when frightened or threatened.Copyright @ faizullasker 11
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There is no standard approach of writing a collection or dunning letter. The reasons for delay in payment are quite different from case to case and in each case the treatment to buyer also will be different. As the main purpose of dunning letter is to collect the due amounts and at the same time to retain the customer, in writing a collection letter tact, persuasion, diplomacy, patience and must be mingled. The following guidelines may be suggested for drafting dunning letters
Be courteous, tactful and patient in dealing with the debtors. Always assume that the debtor is sincere and not delaying intentionally. Decide the extent of time gap between communication on the basis of the type of credit risk and the urgency of collection. The customers assets, volume of business, record of paying debts in the past would help you to come to a decision. You Viewpoint should be used to convince the debtors that he is to pay for his own advantage. Informal and friendly approach should be used to break the ice. Your attitude should be friendly but firm.
A collection letter should not be too brief. A too short dunning letter appears to be curt. Start by sending a regular monthly statement. Follow it up by a routine reminder. Mention the amount due in each communication. Refer to the account number and cheque number. To motivate response, appeal to the customers sense of fairness, good intentions or self interest. The collection procedure must be adaptable to the nature of the debtor or customer. So, collection letter various from debtor to debtor. Finally, motivate customer for action by enclosing stamped envelope, by fixing date for payment by stating customers advantage
Letter writing is an art. Writing a dunning letter is something, more than a simple art. Collection of m oney depends on the writing style. The following points are to be considered while writing a dunni ng letter Considering status of the client Use of polite language Clarity Persuasion Specific information Maintaining relationship Origin of debt Date of transaction Amount of money Maintaining secrecy Copyright @ faizullasker 16 Shelter of law
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According to degree of approach collection letter may be of four types. These are as follows.
Reminder letter Discussion letter Ultimatum letter Final letter
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Collection letters are usually written in a series each successive letter stronger in tone than its predecessor, and sent out at intervals varying with the type of credit risk involved. A poor credit risk will be dealt with sooner and more frequently than a good credit risk. A poor credit risk may receive, say four letters over a tow- month period, a good credit risk five or six letters over a six- month span. The typical unpaid account passed through the following stages of collection correspondence. Sending statement of account; Reminders; Enquiry and discussion; Appeal and urgency; Demand and warning;
1. Sending statement of account The actual collection correspondence starts, in fact, from the stage of sending reminders, because sending statement of account is a duty of the creditor. The customer is periodically sent a statement of account showing the amount due from him. It dose not make any request for payment. It is just a notification to the customer of the value of his purchase and he is expected to remit money according to the terms of payment settled beforehand.
Manager Rupali Agency Enayet Bazaar, Chittagong

Sub: payment of an overdue amount.
Our ref: Date:
Dear Sir, As your have always been very prompt in meeting your obligation, it appears that our invoice of July 31, 2007 has either gone astray or been misfiled. A reply to this letter along with a cheque will be appreciated.
Truly yours, Abdul Malek Sales Manager Delta Furnisher Mirpur, Dhaka.
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2. Reminder Stage
Reminder stage At this stage it may be assumed that the customers failure to pay is due to forgetfulness or oversight. Therefore, he is only to be reminded that his account is yet to be settled.
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Your ref:.. Manager Our ref: Rupali Agency Date: 12 Enayet Bazar, Chittagong Sub: payment of an overdue amount. Dear Sir, This letter is just to remind you of account with us. Under the terms of sale, invoice of July 31, 2007 amounting to TK.50, 000 is now overdue for payment. We shall be happy to receive a response from you at your ear list convenience. Truly yours, Abdul Malek Sales Manager Delta Furnisher Mirpur, Dhaka.
Strong reminder stage

Once again refer to the amount due and the time since it has been due; also refer to the reminders already sent. Point out, if necessary, the terms of credit. Request the customer to make a prompt remittance of the amount due. Tell the customer that he owes a definite amount to you and that he ought to pay it promptly.
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Refer to the amount due and the period for which it has been due. Draw the customers attention to the reminders that have already been sent. Mention what you feel to be the reason for delay. Offer assistance to help him get over his difficulties-correction of your mistakes, allowance for wrong goods, extension of credit term, arrangement for installment payment, etc. Insist that the customer should write to you visit your office for explaining his difficulties.
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Manager Our ref: Rupali Agency Date: 12 Enayet Bazaar, Chittagong Sub: payment of an overdue amount. Dear Sir, We have sent a number of reminder of our invoice of July 31 ,2007 but no answer has yet been received by us. As your account appears past overdue, we must insist that the matter of payment have your attention immediately. We shall look forward to receiving your cheque for TK. 50,000 not later than September 15 Yours truly,
Abdul Malek
Sales Manager Delta Furnisher Mirpur, Dhaka.

Draw the attention of the customer to the amount due and the length of time has been overdue. Stress the importance of credit as the foundation of business and refer to the contractual obligations and the need to meet them in time. Incidentally, appeal to his self- interest (sense of self-respect, justice, fairness, cooperation) in business world and how it will be affected by his indifference to his debts.
Manager Our ref: Rupali Agency Date: Enayet Bazaar, Chittagong Sub: payment of an overdue amount. Dear Sir, We have requested the payment of our overdue account quite a few times and have not received any reply so far telling us either why payment has not been made ,or when your cheque may be expected. As it appears that we are not receiving any cooperation , we feel that more drastic measurers have to be taken.
We , therefore , expect you to send the cheque by 15th February 2008.otherwise ,we shall be obliged to take steps to protect our interests .Please help us to avoid drastic action. Faithfully yours, Abdul Malek Sales Manager Delta Furnisher Mirpur, Dhaka.
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The corresponding has now reached the final stage. Now it is more important to collect the money than to retain the customer, because a debtor who has not responded to any letters till now is certainly trying to avoid payment and legal action is the only course left. A definite time should be given and if the debtor dose not pay or reply before that, his case should be passed on to the lawyers.
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Refer to the steps you have taken to make the customer talk. Give a definite time limit within which you demand payment and clearly state that if this time limit is not observed, you will be forced to take legal action. Explain the unfortunate circumstances created by the customer that prompt you to contemplate this unpleasant course of action.
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Manager Our ref: Rupali Agency Date: 12 Enayet Bazaar, Chittagong Sub: payment of an overdue amount. Dear Sir, Since you will neither reply to the several letters that we have not written you, nor remit for your overdue account, there is nothing we can do but refer the matter to our legal adviser. We are instructing him to proceed with the collection of the account in whatever manner may be deemed necessary to protect our interests. Within the next few Days, you will receive legal notice from the legal adviser as to the action that he proposes to take.
Faithfully yours, Abdul Malek Sales Manager Delta Furnisher Mirpur, Dhaka.
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Laughter makes the cheque come faster. That is what some people believe. It has been observed that good- humored, amusing, friendly and sometimes even stunt letters make debtors pay more easily than when they are stiff and strongly worded. In American business this approach has been used with astonishing results. We give below a collection of a few humorous letters.
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Dear Sirs Roses are red, Violets are blue, Send us a cheque And we will love: you. Unless your cheqes is already en route, we will expect one by return mail. Our records show that your balance of TK. 45000 due September 15 remains 35 unpaid. Copyright @ faizullasker
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Collection Letter

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Collection Letter

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Copyright @ faizullasker

Reminder letter Discussion letter Ultimatum letter Final letter

Manager Rupali Agency Enayet Bazaar, Chittagong

Our ref: Date:

Strong reminder stage

Sales Manager Delta Furnisher Mirpur, Dhaka.

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