Is sending collection letters a challenge in your small business? You're not alone. Many business owners don’t know how to write an effective collection letter or have a sample they can use as a reference.
Collection letters should do two things: 1) retain customer goodwill, and 2) help you get paid.
A collection letter works when it results in payment or payment arrangements from your clients. If you send out collection letters and there is no response, it’s time to rework your collection letter template.
In order to understand the best practices of letter creation, a sample collection letter is available below.
When to Use a Collection Letter
Collection starts when you send the invoice, which should have a due date for payment. When that date passes, it's time to start thinking about following up with a collection letter. Don't wait too long. It's better to send a reminder notice sooner rather than later. Remember, this is money owed to you. The longer you put off collecting it, the more strain it can put on your business.
If you're not sure what to write, use the sample template below.
Sample Collection Letter
Jan. 8, 2021
123 Main Street
Anywhere, NH 05000
Account# or Invoice #:123
Balance due or Past Due Balance: $100.00
This is a reminder that your account balance of $100.00 was overdue as of Nov. 28, 2020.
Please pay this amount today, I have enclosed a stamped payment envelope for your convenience.
Thank you for your payment.
As you can see from the sample collection letter above, the most effective collection letters are short, to the point and easy to read. Try to avoid long or confusing words and sentences. The more direct letter leads to fewer misunderstandings.
Collection Letter Tips
Your collection letter should:
- Tell the reason for your letter in the first sentence
- Explain more about the first sentence in your second sentence
- Suggest a solution
- Thank the recipient
Your collection letter is a reflection of your business, so keep it professional and be sure to sign each letter personally. Remember that your letter is to persuade someone to send you money. Your wording and tone are critical, especially if this is a customer you want to continue to do business with. Always assume the customer will pay.
Enclosing an envelope for payment is also a good idea. If you can include postage on the payment envelope, that is better. The easier you make it for the customer to make the payment, the better your chances are of getting paid.
Michelle Dunn helps companies encourage customers to pay on time or early. She works with companies that are struggling with customers that pay late or not at all. Michelle has over 21 years experience in credit and debt collection and is the author of “Become the Squeaky Wheel: A Credit & Collections Guide for Everyone” and many other books, She possesses a depth of knowledge and a toolkit of products and services that can make a difference for your company.
Edited by Alyssa Gregory