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How to Write an Effective Debt Collection Letter

A debt collection letter is a key tool to recover money owed to you. How well you communicate with customers that owe you money is important. We do believe that communication should begin with a customer application that gives you information you may need later, and also at least a basic contract that outlines your policies regarding payment and non-payment.

However, even with the best of planning, some of your customers are going to be late paying you. It is very important that you develop a process to follow up on your delinquent customers, and a critical part of your arsenal will be a well worded collection letter. Have a template letter ready and you will use it again and again.


Here are some tips to help you:

1. Timely – Your letter should be sent as soon as the account becomes delinquent. You must appear to your customers to be on top of your receivables.

2. Stated amount due and detail – Make certain to include the amount of the debt in your subject. Also include invoice number and/or brief description, due date of payment.

3. Past due statement – Your first sentence must clearly indicate that the stated amount is past due. You can also include details of your contract, such as, “per the terms our customer agreement, we are now applying a fee of $5.00 for each month this balance remains unpaid”, or “our payment terms require full payment within 30 days”.

4. Little bit of guilt – Remind customer that they asked for service/product and your it is not free. “Our services were provided to you in good faith at your request with our expectation that you would pay for them.”

5. Demand for payment – how to pay and timeline for payment.  Be specific in the methods of payment you will accept. List specific due date – “within 5 days from the date of this letter” or even better, “Friday, June 30, close of business day.”

6. Consequences for non-payment – Discontinue service? Refer to outside collection? Make certain to state specifically that the consequences will follow if payment not made by due date.

7. Leave door open – Always give the customer someone they can go to discuss any issues or to set up a payment plan.

One option you may want to consider is to offer a small discount if the balance is paid by the due date. However, if you do this you must make certain to specify that it is a limited time offer and that full amount will be due and owing if not made in the specified offer period.

You may want to use a series of two or three letters of increasing urgency. Your letters should always be professional but very to the point. Describe the consequences and the sense of urgency without threatening.

Consider sending the debt collection letter using certified mail.

Most importantly, once you have sent these letter, it is critical to do what you say you are going to do. If you do not get paid in 14 days, send the file to your collection agency, without delay.

Here is a sample of a debt collection letter you may find useful. Sample Final Notice

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