Collection Letters :
Credit plays as important role in the present day trade and the collection problem is the necessary result. It becomes necessary to convert credit into hard cash in due course, so that a trader may have at his disposal an adequate amount of working capital. Inspite of the many precautions which traders take while choosing parties to whom they might extent credit, circumstances may arise when some accounts accumulate into arrears. Almost every businessman or firm is thus, at one time or the other, faced with the problem of collecting overdue accounts.
The purpose of collection letters is to collect the arrears which have become due. In writing collection letters it must always be remembered that a customer’s cash business may be worth having even though his credit account is delinquent. The guiding principle for the writer of collection letter should be to collect the overdue amount without affecting or straining the business relations with the customer.
The general routine of collection of accounts may be described as follows.
(1) At first the debtor should be sent a copy of the statement of account with a remark below the statement pointing out the date on which the account fell due.
(2) If this brings forth no reply from the customer, statement of account should be sent again with a brief letter suggesting that perhaps the account has been overlooked or it has not reached the customer. At this stage also strong language should not be used.
(3) If the first two letters remain unanswered, a third reminder becomes necessary. In this letter the creditor asks for payment of the debt firmly but politely. He may point out the advisability of prompt payment and also fix a date by which the amount should be paid to him.
(4) If even the third reminder brings no response from the debtor, the situation reaches a point where the creditor makes a final appeal to the debtor to pay his debt or face the consequences of a legal action. This is called the last resort collection letter. In this letter the creditor uses every possible argument to induce the debtor to clear the debt. It may be noted that even in this letter in which firmness is more than justified, rudeness is unpardonable.
The above compaign, to be effective, should be well planned. Most of the delinquent accounts in the ledger will be easily collected it they are handled systematically. The shorter the time between things sold and the sending of the bill for it, the easier the collection. The bill should be followed by collection letters at regular intervals. How many letters should be sent before taking legal action or dropping the efforts depends upon the circumstances of each case. The number of letters will generally not be more where legal action is undesirable than in cases where such a step is unavoidable.
The following points should be taken into account while writing collection letters.
(1) The writing of collection letters requires great tack and skill on the part of the writer. A sharp insinuating letter annoys the debtor and often makes him more determined not to pay the debt. If he does pay, he still keeps a grievance for harsh treatment and decides not to buy anything from him again. The writer should, therefore, be courteous as well as firm. Although the degree of firmness will depend upon the circumstances of each case.
(2) The letter should create an impression in the mind of the debtor that the writer wants to help him out of the difficulty and maintain friendly relations.
(3) Self-interest strongly affects human behaviour. It is always better to tell a customer that it is to his advantage to keep his credit good than to remind him how delinquent he has been.
(4) An appeal to a debtor often produces good results.
(5) Sometimes it is to the advantage of a trader to invite a debtor to express frankly the reason of arrears not cleared and after learning his difficulty to help him to get over it.
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