Ask an ordinary businessman what aspects of his business operations he dreads most and chances are the collection of account receivables will surely be in the short list of his immediate concerns. In fact, it is the main cash flow issue for small business operators. At the heart of this major business concern is the use of well-crafted letters (collection) that can effectively improve the account receivables outlook of the business. Among all business letters, those used for collection of account receivables usually require the highest degree of attention and preparation.
In order for your business to grow and succeed, you must be able to learn how to compose collection letters and use them in order to keep your account receivables at manageable levels. A major part of your responsibility is to develop the skills needed to ensure that your clients toe the line and pay their accounts on time. In order to achieve this, you must determine which type of collection letters is appropriate for specific accounts.
Collection-Letter of Inquiry
These are the initial collection letters that you send to clients who fail to make payments within the agreed payment terms. The primary objective of this type of collection letters is to remind clients of their overdue accounts and to inquire in a most courteous manner the circumstances that are preventing them from settling their account payables. The tone of these business letters should manifest the feeling of being concerned and sensitivity to the problems of your clients. Such approach can foster goodwill and positive response from your customers, and this will significantly help you collect payments and maintain a good relationship with them.
When your collecting letters create an impression of your willingness to help them out in resolving the collection issue, then your clients will definitely respond in a positive manner in order to settle their accountability with your company. The last thing that you want to happen is to alienate them by taking a belligerent stand in the settlement of their accountability. This is also the type of collection letters where you can offer special accommodations like extended payment terms and partial payments. Sometimes it is better to go for extended payment terms than insisting on a lump sum payment and not getting payment at all.
Collection-Letter of Appeal
This is the second type, which you must send to clients who are not able to respond in the desired manner after sending them reminder letters(collection). The tone of this type of business letters is more aggressive than the letter of inquiry. You must carefully assess the circumstances of each of the accounts that fall under this category. You have to decide whether you are going to use the positive appeal or the negative appeal. When you opt to focus on the positive appeal, you will approach the business communication by appealing to their sense of fairness, pride and desire to keep a good credit standing. On the other hand, if you feel that you won’t be getting a positive response from your client, then you may have to use negative appeal by focusing on the dire consequences of their failure to settle their accountability.
Collection-Letter of Ultimatum
This is you final letter to your client. This type of letters informs clients of their final chance to settle the account before legal actions are undertaken. The tone of this type of collection letter is direct and firm.
