How to Write Effective Collection Letters

The prompt collection of accounts receivable is vital to keeping your business running, but many customers are taking longer and longer to pay their invoices. When late-paying customers don’t respond to your phone calls or emails requesting payment, you may need to send a collection letter. When that time comes, you should take great care in drafting the letter.

If your letter sounds too threatening, you’ll risk losing whatever goodwill may remain with the client. But if you’re not serious enough, the client may disregard your letter and go on ignoring your collection efforts.

Finding the right tone in your collection letters is a balancing act. You must communicate the urgent need for payment while trying not to alienate the customer. Try to be positive and nonthreatening, especially with your initial letters, because your customer may have simply misplaced your invoice or overlooked payment for some other reason. Become progressively more firm in tone in each subsequent letter.

At what point should you send a collection letter? Each circumstance is different, but here’s one example of how you might proceed.

If you’ve gotten no response to two or three phone calls in the first two weeks an account is past due, send a past-due invoice along with a firm but friendly letter on day 45 (past the initial invoice). It could read something like this: “Because I haven’t been able to reach you by phone to discuss your outstanding invoice, I’m following up in writing to make you aware of the past-due status of your account. Please remit payment at once or feel free to contact me if you have any questions about the invoice.”

If you get no response by the 60-day or 75-day mark, consider sending a second letter with a sterner tone. For example: “This is my second attempt to reach you in writing with regard to your outstanding invoice. According to the terms of your credit with our company, your payment was due within 30 days of the invoice date, which was December 1, 2010. Please remit payment at once, or your account will be turned over to a collection agency.”

Here are a few more factors to consider when it comes to collection letters.

• Write ahead of time. Prepare several collection letters in advance and run them past an attorney so you’ve got them on the shelf and ready to send. For example, you could prepare three letters for distribution at three different past-due intervals (say, 45, 60, and 75 days). Conclude the last one with a final payment deadline and state the consequences if payment is not made by that date.
• Gather supporting documentation. Assemble all relevant paperwork and review all of the details of the account carefully before you start writing. For example, what the item is and when it was purchased, the amount owed, payment terms, original payment due date, etc. This is important information to have should you need to escalate by going to small claims court.
• Be brief. Stick to the facts. Don’t get emotional. Keep your letter concise and to the point, using short sentences and direct language. Address the client by name and sign the letter personally.
• Send via e-mail, fax, and/or certified mail. In addition to regular mail, you might also send your letters via e-mail or fax. Consider sending second or third letters via certified mail or courier to increase the sense of urgency.
• Make payment hassle-free. Be sure the customer has all the details needed to cut a check. This includes your mailing address, e-mail address, telephone and fax numbers, and invoice reference numbers. A postage-paid return envelope may also help expedite payment.