Collection letters are written in a series. If the dues are not paid by the customer, then every stage is required to be covered. Collection letter stages or methods are discussed below
The following are the five (5) collection stages:
Collection letter stages
1. Sending statement of Account
Here the customer is given a periodical statement of account showing the amount due from him. It is just a notification of the value of his purchase and he is expected to remit money according to the terms of payment.
Many customers pay promptly, but some others may fail. After the due date, it is assumed that the debtor has failed because of overlooking or forgetting the statement sent to him.
Therefore, he is only to be reminded that his account is still to be settled. Depending on the situation, a company may send more than one reminder before moving to the next stages.
After sending the normal number of reminders without any success, the creditor takes the help of different courses to “break the ice”. He writes to the customer to ask him why the payment is being unsettled or withheld.
The valid reason for the delay is expected to be replied to by the debtor so that he (Customer) may be offered necessary assistance to overcome his difficulties, the tone of such a letter would be one of understanding and helpfulness.
An appeal letter comes into the picture when an inquiry letter fails to bring any positive response from the delinquent customer.
The letter must be persuasive and appeal to a sense of self-respect, duty, justice, fairness cooperation, and self-interest. And therefore many appeals may be used for this purpose.
5. Warning or ultimatum
It is the final stage in the collection series, now it is more important to collect the money rather than retain the customer because a debtor who has not responded to any letters is obviously trying to avoid payment and therefore legal action is the only course left.
A definite time is given to the debtors to pay the dues and if the debtor fails to pay within the given time, his case should be passed on to the lawyers. Such a warning is placed through a warning letter.
Characteristics of collection letter
It is the last step of the collection letter and bears the following characteristics:
1. Mentioning Reference: The references for the previous dunning letter should be mentioned in this letter.
2. Negligence: The earlier letters were not honored properly, which is beyond courtesy, and therefore it should be mentioned clearly in this letter.
3. Unfortunate circumstances: There is an explanation that the unfortunate circumstances have been created by the customer that prompts the seller to concentrate on an unpleasant course of action.
4. Definite Time: Give a definite time within which the seller demands payment and clearly state if the time is over, the seller will be bound to take legal action.
5. Expressing sorry: The seller has been forced to take legal action as there was no option left for him should be communicated to the customer.
6. Scope of settlement: If the due amount is paid instantly, then there would be a cancellation of litigation, such assurance should be communicated to the customer.
The above features indicate that there is very little scope of remaining any further business relation.
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