OACC 6 – BUSINESS REPORT WRITING 1

Credit and Collection Letters

Twin Purposes of Credit and Collection Letters and How They Are Achieved
The twin purposes of credit and collection letters are to maintain goodwill while collecting
what is owed. Identified below are three factors which, according to Bovee and Thill (1989),
should influence decisions directed at achieving the twin purposes:

1. Amount of money owed, the time elapsed, the nature of the credit agreement, and the
creditor’s attitude;
2. Debtor’s values, feelings of self-esteem, and attitudes toward financial responsibility; and
3. Debtor’s ability to solve the problem and withstand external and internal pressures.

Collection letters are generally characterized as firm in tone, yet it should at the same time be
tactful or diplomatic.

Guide to Credit and Collection Letters

The purpose of collection letter is to make the customer pay an overdue bill. The
following are the basic steps in preparing and eventually writing credit and collection letters as
identified by Dugger (1994):

Step 1: Check the spelling of the recipient’s name. Use a gender specific courtesy title only if
you are certain of the recipient’s gender. There is nothing more embarrassing or irritating
than getting a collection letter, which is addressed improperly.

Step 2: The first part of the letter should state the situation, including the concern, the date of
purchase, the amount owed, and the due date.

Step 3: The next part of the letter should indicate the deadline for paying the bill and any
penalties that may result. You may also wish to indicate your company’s policy
concerning late payments, grace periods, penalties, or alternative payment plans.

Step 4: The third of the letter should indicate the consequences of not paying the bill. Initially,
these may be penalties, but as the bill becomes more delinquent, it may include
warnings of ruined credit ratings or involvement of a collection agency.

Step 5: The final part of the letter should encourage the recipient to send full payment or to call
you to arrange a payment schedule. End the letter on a note of good will and a positive
attitude that this situation will be resolved satisfactorily.

Type of Credit and Collection Letters

1. Notification
This letter is to notify the recipient along the following concerns: the amount owed, the
date of purchase, and the dateline of payment, among others.
 OACC 6 – BUSINESS REPORT WRITING 2
Credit and Collection Letters

Letterhead Western Wear

2212 Boot Hill Rd. Cheyenne, WY, 82001

Date August 10, xxxx

(2-3 spaces)

Inside Address Ted Wilson

(2-3 spaces) 515 Ramey Ct.
Laramie, WY 82063

Salutation Dear Mr. Wilson:

State the Concern Thank you for shopping with us. You are a valued customer. We
appreciate your business and know that you want to keep your
account current with us.

State the Situation On May 15, xxxx, you purchased $319.04 of merchandise from our
store in Laramie. Your payment of $100 is now overdue.

Indicate the Deadline In the credit agreement you signed, you agreed to pay off your bill
in three payments. The first payment of $100 was due on June 15,
xxxx. Please send this amount now.

State the Failure to pay on time may affect your ability to charge
consequences merchandise at our store. Thank you for your prompt attention.

Indicate Contact You may call me at 800-555-9875 if you have any questions or
Indicate Goodwill concerns. Your continued patronage is important to us.

Complimentary Close Truly yours,

Signature Mary West

Credit Manager

Additional Information MJWL: cjl

2. Reminder
This letter reminds the reader that the bill is overdue and the payment still has not been
received. A reminder letter should be written under the assumption that some minor
problems occurred, which caused the delayed payment. In other words, the customer has
every intention of paying ad the needs only to be reminded (Bovee and Thill 1989).
 OACC 6 – BUSINESS REPORT WRITING 3
Credit and Collection Letters

Western Wear
2212 Boot Hill Rd. Cheyenne, WY, 82001

August 10, xxxx

Ted Wilson
515 Ramey Ct.
Laramie, WY 82063

Dear Mr. Wilson:

Remind Recipient of We have not yet received your payments. This is to remind you that
the Situation your first and second payments of $100 are now overdue. This $200
plus the balance of $119.04 is due on August 15.

Request Payment and In the credit agreement you signed, you agreed to pay off your bill
indicate the deadline in three payments. The first payment of $100 was due on June 15,
xxxx; the second payment of $100 on July 15, xxx; and the final
payment of $119.04 on August 15, xxxx. Please send the full amount
within 10 days.

Indicate the Failure to pay on time may affect your ability to charge
consequences, merchandise at our store. If you want to discuss your account, call
Alternative and me at 800-555-9875 if you have any questions or concerns. Your
Contact continued patronage is important to us.

Indicate Goodwill Thank you for your immediate attention.

Truly yours,

Mary West
Credit Manager

MJWL: cjl

3. Inquiry
This letter inquires why the bill is not being paid. It assumes that the bill is overdue. It is a
good idea to follow this letter with a personal phone call inquiring about the payment
delay. If another agreement is reached, send a copy of the new payment plan to the
recipient. Continue to follow up letters with phone calls to maintain communication.
 OACC 6 – BUSINESS REPORT WRITING 4
Credit and Collection Letters

Western Wear
2212 Boot Hill Rd. Cheyenne, WY, 82001

September 5, xxxx

Ted Wilson
515 Ramey Ct.
Laramie, WY 82063

Dear Mr. Wilson:

Inquire Is there some reason you have not paid your bill of $319.04?

Indicate the Deadline In the credit agreement you signed, you agreed to pay off your bill
Indicate Failure in three payments. Your total bill is now overdue. Please send
$319.04 within 10 days. If you have any questions or concerns
regarding the bill, please contact me at 800-555-9875 by September
10.

Indicate the Failure to send the full amount by September 15 may mean that
consequences your bill will be turned over a collection agency. Your prompt
attention is urgent to protect your credit.

Truly yours,

Mary West
Credit Manager

MJWL: cjl

4. Urgent Notice/ Urgency

This stage according to Bovee and Thill represents a significant escalation. Both
further emphasized that the purpose of this letter is to convey the desire (on the part of the
creditor) to collect the overdue payment immediately. In sum, this letter carries a message,
which communicates a sense of urgency.
 OACC 6 – BUSINESS REPORT WRITING 5
Credit and Collection Letters

Western Wear
2212 Boot Hill Rd. Cheyenne, WY, 82001

November 5, xxxx

Ted Wilson
515 Ramey Ct.
Laramie, WY 82063

Dear Mr. Wilson:

State the situation Your bill of $319.04 is now 60 days overdue. Please send $319.04
Indicate Grace Period within 10 days. If you cannot send the amount, please call me at
(indicate alternative, if 800-555-9875.
agreed)
Failure to respond may mean that your bill will be turned over to a
Indicate probable collection agency. Thank you for your prompt attention.
consequences

Truly yours,

Mary West
Credit Manager

MJWL: cjl

5. Final Notice/Ultimatum

This letter is the final notice the customer receives. It gives the customer an ultimatum: “If
you do not respond, this will happen.” This letter finally encourages the debtors as pointed out
by Bovee and Thill, to reevaluate their priorities and send the payment immediately.
 OACC 6 – BUSINESS REPORT WRITING 6
Credit and Collection Letters

Western Wear
2212 Boot Hill Rd. Cheyenne, WY, 82001

December, xxxx

Ted Wilson
515 Ramey Ct.
Laramie, WY 82063

Dear Mr. Wilson:

State the situation Your bill of $319.04 is now 90 days overdue.

State the Deadline You need to pay the total amount immediately.

Indicate the If your payment in full is not received by December 10, your bill will
consequences be turned over to a collection agency.

Very truly yours,

Mary West
Credit Manager

MJWL: cjl
 OACC 6 – BUSINESS REPORT WRITING 7
Credit and Collection Letters

PROMISSORY NOTE

I promise to pay TRIFT FINANCE CORPORATION the sum of Five Hundred Thousand
Pesos (Php 500,000.00) with an interest rate of sixteen percent (16%) per annum plus service
charges on January 17, 2007.

I further consent that any renewal or extension of this note which may be requested
by any one of us.

Further, in case of failure to settle this obligation, I hereby authorize Trift Finance
Corporation to sell at public or private sale my securities for the purpose of applying their
proceeds to such obligations.

January 2, 2008.

NAKAMURA C. MAPERA

Sample Collection letter templates

Your Business Name

Your Business Address
Your business contacts

Customer’s Name
Customer’s Address
Customer’s Contacts

Re: Account number – account balance

Dear [Debtor]

This is a reminder that the balance of [amount] on your account remains unpaid. It was due to be paid in
full on [date]. Please settle your account as soon as possible.

If your payment has already been submitted, we apologize for the inconvenience and thank you for your
payment.

Sincerely,

[Signature]
 OACC 6 – BUSINESS REPORT WRITING 8
Credit and Collection Letters

Your Business Name

Your Business Address
Your business contacts

Customer’s Name
Customer’s Address
Customer’s Contacts

Re: Account number – account balance

Dear [Debtor]

We understand how busy you are and realize that you may have forgotten to send us your payment. We
have not yet received your payment of [amount] due on [date]. Please pay this account promptly.

If you have already sent your payment, please disregard this letter. Please do not hesitate to contact us
should you need any further information on your account.

Sincerely,

[Signature]
Your Business Name
Your Business Address
Your business contacts

Customer’s Name
Customer’s Address
Customer’s Contacts

Re: Account number – account balance

Dear [Debtor]

We have not yet received your overdue payment of [amount]. We have sent you several payment
requests and have received no response. We value you as a customer, and urge you to safeguard your
good credit by sending us your payment no later than [date]. If payment is not received by this date, we
will have no alternative but to turn over your account to a [lawyer/collection agency/other].

If you have already sent your payment, please disregard this letter.

Thank you for your prompt attention to this matter.

Regards,

[Signature]

Sources:
http://www.smetoolkit.org/smetoolkit/en/content/en/513/Sample-Collection-Letters