How to Write a Collection Letter for Business
It seems a lot of people enter the search term “How to Write a Collection Letter” into Google. When I first became aware of that I was, quite honestly, mildly baffled – or more accurately I wasn’t sure what folks were really asking. So I decided to write a brief answer to every question I thought you might be asking – if you have a different question about How to Write a Collection Letter – please ask it in the comments and I’ll do my best to answer.
Topics covered in this article:
- Is it really time for a collection letter?
- How does the FDCPA apply to my letter?
- How do I format my letter?
- What should I say?
- What shouldn’t I say?
- How about tone, how formal should I be?
- How should I send it?
- What should I do after I send it?
Is it really time for a collection letter?
Perhaps I shouldn’t start with a question I want to answer instead of one you’re asking but it’s important to realize not every late payment is the customer/debtors fault. Before sending a late payment letter be sure you know the details of the situation and that you, as the provider have fulfilled all of your obligations.
Does the FDCPA apply to my letter?
It probably doesn’t. The FDCPA or Fair Debt Collection Practices Act is the Federal Law that governs debt collection practices by debt collection companies. You are probably not a debt collection company, so the FDCPA restrictions do not apply to you. Nevertheless, deceptive or abusive debt collection practices like calling late at night or using abusive language are ineffective at best. We strongly recommend avoiding this sort of thing.
How do I format my letter?
Use a standard business format, left justified, single spaced, double space between paragraphs. Do not use all caps. Include the following in the order given;
- Senders address or letterhead – then 4 blank lines
- Date – then 4 blank lines
- Recipients address
- Contact Name
- Company Name
- Street Address
- City, St. Zip – then 1 blank line
- Salutation – then 1 blank line
- Body Copy – single spaced, left justified, double space between paragraphs – then 1 blank line
- Closing, we think Respectfully is more appropriate for a collection letter than Sincerely – then 4 blank lines
- End letter
- Your Name
- Your Title
- Your Company Name
- Your contact info i.e. address and phone number
For more on business letter format click here https://owl.purdue.edu/owl/subject_specific_writing/professional_technical_writing/basic_business_letters/index.html.
What should I say?
It depends on the situation but generally speaking you’ll want to state the facts of the situation and ask for payment.
Be sure to include the following:
- Invoice number
- Invoice date
- Invoice amount
- The invoice is late
- A statement regarding your previous attempts to collect
- Request payment or an explanation
What shouldn’t I say?
Don’t say anything that isn’t strictly true and avoid assuming anything. It’s best to avoid “you” statements as well. Try to stick to I or we statements. For example, instead of “you haven’t mailed your payment”, “we haven’t received your payment.” Because we don’t really know they didn’t mail it, we only know for sure we haven’t received it.
How about tone, how formal should my letter be?
Again, it depends on your relationship with your client. Don’t be overly formal with a client you know well or overly familiar with one you don’t know at all.
How should I send my letter?
Send your letter every way you can think of. Mail it, email it, fax it and if they continue to ignore you and they’re close enough hand deliver it.
A number of years ago a client refused to pay me with the reasoning “I could have done this myself.” “You could have, I replied, but you didn’t”. I got in my car, drove over and picked up my check. No letter this time around.
What should I do after I send it?
Follow up with a phone call, then send a second demand. Rinse and repeat with a 3rd demand.
If this feels like more work than you want to do, check out our “17 In-House Collection Letter Templates”. We cover 15 common collection scenarios and each letter is provided in an editable Word format so you can easily insert your customers name and address as well as a PDF format for easy reference and an explanation of how and when to use each letter.
Do you have a question about How to Write a Collection Letter that I haven’t answered? Ask me in the comments below, I’ll answer right away, I promise.