Meaning of collection letter
Letters written for realizing payments from the debtors 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 payment of dues. 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.
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.”
Collection letters are written in a 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
Collection or dunning letters possess some distinct features that differentiate them from other business letters. Some of the features of the collection letter are as follows:
- Parties involved: Buyer who buys on credit and seller are involved in 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.
- Objective: The prime objective of writing collection letter is to realize the dues from the customers.
- Governing principle: The governing principle of the letter is to collect the dues by retaining the customers with the company.
- Referring the previous letter: When dunning letters are written in a series, every subsequent letter mentions the reference of an immediate earlier letter.
- 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.
- 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.
- Language: The letter is written by using friendly, persuasive but straightforward language.