Do's and Don'ts of a good collection letter

In an ideal world all your customers will have a good payment history and continue to pay their invoices on time. However, it is entirely possible that in the duration of your business lifecycle you may encounter customers who are late to pay their invoice for one reason or another.

For some people, making a phone call to collect payment from an overdue account is uncomfortable and a task many SME owners dread. A collection letter is a great first step alternative that can effectively request payment without the need of having that awkward conversation with your customer over the phone.

However, you should be careful when writing a letter requesting payment and remember that one is the key to success for your letter. For payments that have just become overdue your letter should serve simply as a friendly reminder in order to maintain a good relationship with your customer. However, for invoices that haven't been paid it is recommended to use a more serious tone to highlight the importance of the payment.

Early collection letters

In some instances customers may have a reason for not making payment in time. Therefore, the early collection letter should be a friendly and polite. By remaining polite you ensure you maintain an amicable relationship with your customer and keep the door open for future business.

Do:

  • explain the situation briefly by highlighting the total amount due, the date of the purchase/service and any invoice or product numbers
  • use language that is polite but firm
  • be concise and clear
  • politely note that payment is required now before further action is taken.

Don't:

  • make threats
  • write a letter longer than one page.

Later collection letters

In the instance where a first collection letter is ignored, the next collection letter should serve to strictly define a timeframe and the implications of not making payment. This letter should be firm but shouldn't act as an opportunity to make false threats. False threats are risky practice as they leave you exposed when a customer still refuses to make payment.

Do:

  • remain professional and use a similar tone to your previous early collection letter
  • make note of your previous attempt to collect the overdue money
  • include a strict deadline for when payment must be received
  • outline the implications of not paying.

Don't:

  • make threats you don't plan to follow through on.

Writing a collection letter can be just as tricky as making a collection phone call. The most important aspect is using a tone that is strict but also professional to ensure you maintain a healthy relationship with your customer.

It is essential that you have confidence in your letter and don't send forward anything that can damage your chance of receiving payment. If after writing your letter you remain unsure of the tone, it is recommended to call in the experts in order to maintain your own amicable relationship with your customers.

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