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.”
Nature of Collection Letter/Features 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.
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