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Business Communication

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Lesson 25
Collection Letters
No matter how carefully a company chooses its credit customers, there will be times when a bill goes
unpaid and steps to collect 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 a sarcastic or abusive one. In fact, collection letters should be "you-
oriented"; courteous, considerate, and concerned about the customer's best interest.
The purpose of collection letters is:
1. To get the money.
2. To keep the customer and future business.
3. To build goodwill.
2. The purpose of the collection process is to maintain Goodwill while collecting what is owed
3. Collection is a sensitive issue
4. The following practices may be avoided
1. Falsely implying that a lawsuit has been filed
2. Contact the debtor's employer or relatives about the debt
3. Communication to the other persons that the person is in debt.
4. Harassing the debtor
5. Using abusive or observe language
6. Using defamatory language
7. Intentionally causing mental stress
8. Threatening violence
9. Communicating by postcard (not confidential enough)
10. Misrepresenting the legal status of the debt
11. Communicating in such a way as to make the receiver physically ill
12. Misrepresenting the message as a government or court document
13. Communicating by postcard (not confidential enough)
14. Misrepresenting the legal status of the debt
15. Communicating in such a way as to make the receiver physically ill
16. Misrepresenting the message as a government or court document
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
 Using persuasive / positive appeals effectively
i) Appeal to fairness & justice
ii) Appeal to pride
iii) Appeal to Goodwill
iv) Appeal to sympathy
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
 Present you evidence and stick to the facts
 Persuade the debtors of the benefit he will receive by paying
 State clearly the specific action the debtor must take
Collection Letter 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.
Some companies also like to include a SALES APPEAL, even late in the series, as an extra incentive
for payment.
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.
Statement of Account / Reminder
(The 1st Step)
The monthly statement reminds the customer of outstanding 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 (in
the form of a rubber stamp or sticker) 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 Rs. 4000/- on your account is now past due. Payment is requested.
Our records show that your September payment is more than a week over-due. If you have recently
mailed your cheque for Rs.1548700/- we thank you. If not, please send it in quickly.
Stage 2
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:
Dear Mr. Bilal,
Enclosed is a duplicate list of your credit charges from December ­ 200--. 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 Rs. 224760.Use the postpaid addressed envelope provided for your use.
Yours truly,
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:
Dear Mr. Javed,
We are concerned about your overdue account. Several reminder notices have been mailed to you,
and we expected to receive your Rs. 38400/- 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 certain we can work out a payment arrangement after we know what your
situation is.
Just think how good you will feel, Mr. Javed, when your account with us has been paid in full.
Yours truly,
Appeal(s) for Payment
Step 3
The next collection message is an appeal to the credit customer to pay. This is a stern letter, but calmly
written. Typical appeals are to the customer's pride or sense of fair play.
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
Dear Mr. Naeem,
Your good credit reputation enabled you to purchase a Rs. 15000.00 suit 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 suit, 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?
Dear Mr. Naeem,
We are truly at a loss. We cannot understand why you still have not cleared your balance of Rs.
5000/-, 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. Naeem. Please allow us to keep serving you.
Stage 4
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
Dear Mr. Naeem,
Our Collection Department has informed me of their intention to file suit as you have failed to answer
any of our requests for payment of Rs.5000/-, 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 telephone me, we can devise some means to settle this matter out of
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.
Truly yours,
A customer may, for example, offer an excuse or promise payment; he may make a partial payment or
request special arrangements. At this point, the series would be inappropriate.
For instance, if your customer has owed Rs. 6000/- on account for two months and sends you a
cheque for Rs. 1500/-, you may send a letter such as the following:
Dear Mr. Naeem,
Thank you for your cheque for Rs. 1500/-. The balance remaining on your account is now Rs. 4500/-
Since you have requested an extension, we offer you the following payment plan: Rs. 1500/- by the
15th of the month for the next three months.
If you have another plan in mind, please telephone my office so that we may discuss it. Otherwise, we
will expect your next cheque for Rs. 1500/- on September 15.
Sincerely yours,
First Reminder after Monthly Statement
On February 3, Nursing Home purchases supplies and equipment from Medix. Hospital Supply
Company on thirty-day credit terms. Although the nursing home has been in operation only a short time,
the information concerning the enterprise has been favorable and credit was granted. A regular statement is
mailed on March 10. When no response is received by March 20, a second statement is sent.
First Reminder
Nursing Home
Please send your cheque.
Invoice #
February 6
Wheel Chairs
Hospital garments
Blood Pressure units
Second Reminder
Nursing Home makes no response to the first reminder. Ten days later a second reminder is sent.
Second Reminder
This is a copy of the regular statement on which the following message appears at the bottom:
Mr. Jameel: To date, no payments have been received from you, and we're curious to know why? Perhaps it is merely an
oversight. If there are other reasons we should be aware of, please let us know. Otherwise, may we have your cheque for
Third Reminder
Nursing Home still has not responded to the previous reminders. A third reminder is sent ten days
after the second one went out.
Third Reminder
This is a copy of the regular statement on which the following message appears at the bottom:
Mr. Jameel: Is there some reason we have not heard from you? The amount you owe us is now long past due and is
beginning to concern us. Don't you think we are entitled to an explanation? Please let us hear from you at once.
Fourth Reminder-Telephone Call
The Credit Manager at Medix Hospital Supply Company has heard nothing from Nursing Home and,
on April 3, decides to telephone the owner, Mr. Jameel.
The Telephone Call
When the Credit Manager, reaches Mr. Jameel he may start off something like this:
"Hello, Mr. Jameel. I'm Kamran at Hospital Supply Company, and I'm calling to ask about your plans for paying
your account, which, as you know, is now over 30 days past due."
Jameel is given an opportunity to tell his side of the story (he has just been so busy putting the
nursing home in operation that he had to let some of his paperwork slide.) At the end of the conversation,
Jameel promises to send his cheque right away.
Fifth Reminder-Telegram
A week has passed since the credit manager spoke on the telephone with Jameel, and no payment has
been received. She decides that the next step is to send a telegram.
The Telegram
When The Buyer Is At Fault
Dear Mr. Faheem:
Your balance with Murray's Furniture Warehouse is 120 days past due. Our efforts to collect from you
by mail, fax, and telephone have been fruitless. You still owe Rs. 50,000 of the original Rs. 75000 in
purchases you made on June 8. The last check we received from you was on August 8.
If we do not receive a payment within 10 days, your account will be turned over to Collection Agency
for further handling.
When The Buyer Is At Fault
Dear Mr. Rashid,
Despite our numerous attempts by letter, telephone, and numerous onsite visits to your restaurant to
collect your past due balance, you have neglected to make any effort in making payments to Florists. Your
restaurant is now Rs. 5000 in arrears. Having broken a series of promises to pay, we cannot trust your word
any longer and must take more serious action.
We have turned your account over to our collection service. They are authorized to use any and all legal
means deemed appropriate to collect your payment.
Table of Contents:
  1. COMMUNICATION:Definition of Communication, Communication & Global Market
  2. FLOW OF COMMUNICATION:Internal Communication, External Communication
  3. THEORIES OF COMMUNICATION:Electronic Theory, Rhetorical Theory
  6. NON- VERBAL COMMUNICATION:Analysing Nonverbal Communication
  7. NON- VERBAL COMMUNICATION:Environmental Factors
  8. TRAITS OF GOOD COMMUNICATORS:Careful Creation of the Message
  10. CORRECTNESS:Conciseness, Conciseness Checklist, Correct words
  11. CONSIDERATION:Completeness
  13. INTERCULTURAL COMMUNICATION:Education, Law and Regulations, Economics
  14. INDIVIDUAL CULTURAL VARIABLES:Acceptable Dress, Manners
  18. COMMUNICATING THROUGH TECHNOLOGY:Email Etiquette, Electronic Media
  19. BASIC ORGANIZATIONAL PLANS:Writing Goodwill Letters
  20. LETTER WRITING:Direct Requests, Inquiries and General Requests
  21. LETTER WRITING:Replies to Inquiries, Model Letters
  22. LETTER WRITING:Placing Orders, Give the Information in a Clear Format
  23. LETTER WRITING:Claim and Adjustment Requests, Warm, Courteous Close
  24. LETTER WRITING:When The Buyer Is At Fault, Writing Credit Letters
  25. LETTER WRITING:Collection Letters, Collection Letter Series
  26. LETTER WRITING:Sales Letters, Know your Buyer, Prepare a List of Buyers
  27. MEMORANDUM & CIRCULAR:Purpose of Memo, Tone of Memorandums
  28. MINUTES OF THE MEETING:Committee Membersí Roles, Producing the Minutes
  29. BUSINESS REPORTS:A Model Report, Definition, Purpose of report
  30. BUSINESS REPORTS:Main Features of the Report, INTRODUCTION
  31. BUSINESS REPORTS:Prefatory Parts, Place of Title Page Items
  32. MARKET REPORTS:Classification of Markets, Wholesale Market
  33. JOB SEARCH AND EMPLOYMENT:Planning Your Career
  34. RESUME WRITING:The Chronological Resume, The Combination Resume
  35. RESUME & APPLICATION LETTER:Personal Details, Two Types of Job Letters
  36. JOB INQUIRY LETTER AND INTERVIEW:Understanding the Interview Process
  37. PROCESS OF PREPARING THE INTERVIEW:Planning for a Successful Interview
  38. ORAL PRESENTATION:Planning Oral Presentation, To Motivate
  39. ORAL PRESENTATION:Overcoming anxiety, Body Language
  41. NEGOTIATION AND LISTENING:Gather information that helps you
  42. THESIS WRITING AND PRESENTATION:Write down your ideas
  43. THESIS WRITING AND PRESENTATION:Sections of a Thesis (Format)
  44. RESEARCH METHODOLOGY:Studies Primarily Qualitative in Nature
  45. RESEARCH METHODOLOGY:Basic Rules, Basic Form, Basic Format for Books