Writing an Effective Collection Letter

• ‑Clearly display the debtor’s name, address, date of the original invoice and amount outstanding.

• ‑Don’t be wordy. Write like you speak in a conversational tone. Make your paragraphs short and easy to read and understand. This will help present your case in a clear manner.

• ‑Be personal and try to make a connection with the reader. This is a key to getting the results you want – getting paid. People pay people they like. (See pre-emptive collection letter below.)

• ‑Don’t be negative. Especially in the early stages of collection letters. Your job is to “help” the reader rationalize why he should pay.

Remember, the same principles you used to sell this customer on your product or service in the first place can be re-applied when trying to collect payment from a slow paying customer.

Appeal directly to the customer’s self-interest. Point out the fact that prompt payment can avoid any damage to his credit rating or his relationship with your company. The thought of losing the benefits he is enjoying as a result of doing business with you may be enough to make him pay you and play the “slow pay” game elsewhere.

Be proactive

The following is a letter that can help you avoid sending collection letters. Be proactive and use a letter to establish a relationship – before the invoice is due. The key is to disguise this process as a customer service activity.

Let’s suppose the customer makes a purchase and receives an invoice with terms that are Net 30 days. This is the ideal time to begin your collection process – before there’s an issue. And a letter like the one below will go a long way toward starting a relationship with the customer AND setting expectations.

Dear Mr. Customer,

I am writing to follow up with you on your recent purchase of product ABC, and to ensure that you are satisfied with the merchandise.

The customer is most likely to appreciate the attention. In most cases, you will be one of few companies following up in such a professional manner that will be remembered by the customer and form the foundation of a very important relationship.

If there is anything else you need, please give us a call at 800-555-1212.

This is an invitation to the customer that demonstrates you truly want to ensure his total satisfaction and makes it easy for him to contact you with any questions or concerns. More relationship building.

For your convenience, your invoice that is due on June 30 can be paid by cheque, credit card or via internet banking.

Here, you are reminding the client of his obligation and giving him a number of ways in which to pay. Most importantly, you are setting an expectation that you take your receivables very seriously and have a process in place to receive payment. Many companies wait 45 days until they contact a customer and by then, it’s an adversarial relationship.

We look forward to receiving your payment on or before June 30 and look forward to serving you in the future.

You set the expectation and continue to reinforce the fact that you are not a company that floats out invoices with no real control but, in fact, an organization that is organized, on top of its billing system and financial dealings.   This will set you apart and command respect, less collections will go unchecked this way.

Thank you again for choosing our company. We appreciate your patronage and look forward to having you as a valued customer.

Start building a bond with the customer and this will help position your organization as a ”friend”. It’s hard to not keep financial commitments with friends.

This pre-emptive approach won’t help you with any outstanding balance customers you have, but it will go a long way towards preventing slow paying customers to a minimum in the future.