Meaning of Collection Letter
Credit is the soul of business, but the business can be kept working only by recovering the payment after selling the goods on credit. Otherwise, it is liable to perish. Collection letters are written to customers who have purchased on credit and not paid their bill on the due date. The purpose of collection letters twofold: one to get money back and other to retain customer’s goodwill.
Sometimes one single collection letter makes the debtor to pay the debt but sometime the lender has to persuade the debtor to make payment by writing a series of collection letters.
In the opinion of Kitty O. Locker, “Collection letters ask customers to pay for the goods and services they have already received.”
Quibble and others defined, “Collection letters are used by an organization to entice its charge customers to pay an outstanding charge-account balance.”
Features (Nature) of collection Letter: Collection or dunning letters possess some distinct features that differentiate them from other business letters. Some of the features of collection letter are as follows:
1. Parties involved: Buyer who buys on credit and seller are involved in collection letter. Seller writes this letter to the buyer for payment of dues.
2. Series of letter: Collection letters are written in a series. The series includes remainder letter, inquiry letter, appeal and urgency letter and warning letter.
3. Objective: The prime objective of writing collection letter is to realize the dues from the customers.
4. Governing principle: The governing principle of the letter is to collect the dues by retaining the customers with the company.
5. Referring the previous letter: When dunning letters are written in a series, every subsequent letter mentions the reference of immediate earlier letter.
6. Threat for legal action: The last letter of collection letter series warns the customer that the matter has been handed over to the lawyers for taking necessary legal action.
7. Sent through registered post: The seller sends collection letter especially, the lat letter of the series though registered with acknowledgement to avoid unnecessary delay, or missing of the letter or denial from the part of the customer.
8. Language: The letter is written by using friendly, persuasive but straightforward language.