Meaning of collection letter
Letters written for realizing payments from the debtors to original creditor are known as collection letters. The need for writing collection letters arises from credit sales. Selling on credit is a traditional business policy that enhances volume of sales. Under the credit sales policy, the sellers allow the customers a definite period for overdue payment. However, sometimes the buyers make unexpected delay in paying their dues. Even, some custom stances, the sellers write letters reminding and requesting the customers to pay the due bills. Instead of sending one letter or repeated copies of the same letter, credit departments send a series of letters at a period of time.
In the opinion of Kitty O. Locker, “Collection letters ask customers to pay for the goods and services they have already received.”
Quibble and others defined, “Collection letters are used by an organization to entice its charge customers to pay an outstanding charge-account balance.”
It is business letter written in series. When collection letters are written in a series beginning with a simple reminder and end with a warning letter indication legal action the dues promptly by retaining the customers with the company.
Features of collection or dunning letter
- Parties involved: Buyer who buys on credit and seller is involved in a collection letter. Seller writes this letter to the buyer for payment of dues.
- Series of letter: Collection letters are written in a series. The series includes a remainder letter, inquiry letter, appeal and urgency letter, and warning letter regarding late payments.
- Objective: The prime objective of writing collection letter is to realize the dues from the customers. The debt collection process is therefore designed to help business owners reach their goal.
- Governing principle: The governing principle of the letter is debt collection that doesn’t interfere with retaining the customers with the company for continued business.
- Referring the previous letter: When dunning letters are written in a series, every subsequent letter mentions the reference of an immediate earlier letter. This is to have a clear and good understanding of the debt in question.
- Threat for legal action: The last letter of collection letter series warns the customer that the matter has been handed over to the lawyers for taking necessary legal action. Once the statute of limitations runs out, debt in business is handed over to debt lawyers to handle all debt matter issue.
- Sent through registered post: The seller sends collection letter especially, the last letter of the series though registered with acknowledgment to avoid unnecessary delay, or missing of the letter or denial from the part of the customer. This is of sensitive nature and provides formal notice prior handing over to aggressive debt collector. It makes debt valid and keeps customers unavoidably notified.
- Language: The letter is written by using friendly, persuasive but straightforward language. This is to ensure collection of debt appears for better customer communications. The choice of language must be an assertive reminder to business debtors.
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