Make Effective Use of Your Collection Letter Get paid while maintaining a good rapport with customers.

By Michelle Dunn

Opinions expressed by Entrepreneur contributors are their own.

Frank shook his head as he pored over the aged balance printout. Sales just weren't what they were last year. He knew he faced an uncomfortable but necessary task if he wanted to stay in business: He needed to send out collection letters. They had been written by an expert and gave him specific instructions, so he knew just what to do. "Send sooner rather than later," the expert had commanded.

Frank took his pile of past-due invoices and started inputting customer information into the collection letter templates. As Frank worked his way through the pile, his confidence grew with the thought of getting paid what he was owed.

Many business owners never send out collection letters because they don't know how to write one or don't know how to write one that doesn't alienate their customer.

Collection letters should do two things: help you get paid and maintain customer goodwill. You know a letter is working when you send out a batch of letters and your phone rings off the hook or payments start arriving. If you send out a batch of letters and there is no response, you need to write a new letter.

The most effective letters are short, to the point and easy to read. Avoid using long or confusing words and sentences. A direct letter reduces misunderstandings.

Your letter should:

  • explain the reason for the letter in the first sentence
  • explain more about the first sentence in your second sentence
  • suggest a solution
  • thank the recipient

Your letter is a reflection of your business, so keep it professional.

Remember, the purpose of the letter is to persuade someone to send you money. Precise wording and tone are critical, especially if this is a customer you want to continue doing business with. Always assume the customer will pay. Enclosing a pre-addressed envelope for payment is a good idea. If you can include postage on the payment envelope, even better. The easier you make it for the customer to make the payment, the better your chances of getting paid.

Below is a sample of a collection letter:

December 2009

Frank's Plumbing
123 Main Street
Anywhere, NH 05000

Account No./Invoice #: 123

Balance due or past-due balance: $100.00

Dear Jim,

This is a reminder that your account balance of $100.00 was overdue as of November 28, 2009.

Please pay this amount today. I have enclosed an addressed, stamped payment envelope for your convenience.

Thank you for your payment.

Sincerely,

Frank Smith
Frank's Plumbing

Michelle Dunn is an award winning author and columnist and has been called the nation's authority on collecting money. She is the founder and CEO of Michelle Dunn's Credit & Collections Association, one of the top 5 women in collections, and one of the top 50 most influential collection professionals in the industry.

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