11.

THE LETTER OF COLLECTION

- A collection letter is a step in the credit process. (p. 191)
- Its purpose is to collect payments from debtors who forget, overlook, or ignore their
accounts.
- However, in collecting, the company has to be careful that the debtor’s goodwill is not
diminished.
- Actually, what makes writing collection letters a challenging task is the writer’s ability to
meet both objectives –
o To collect payments and
o To retain the debtor’s goodwill*.

*goodwill
1. friendly disposition: friendly disposition toward somebody or something (often used
before a noun)
a goodwill gesture
2. willingness: cheerful willingness to do something
3. accounting nontangible value of business: the value of a business over and above its
tangible assets
4. charity shop: a shop that sells donated goods in order to raise money for charity

- Since there are various types of debtors like:

1. Poor risk debtors who are slow in paying accounts
2. Good risk debtors who have enough capital, capacity, and fair reputation for prompt
payment
3. Very good risk debtors who have sufficient capital, and are usually prompt in paying

the credit collection manager must employ psychology or the You attitude in writing the
collection letter to avoid offending these kinds of debtors.
- To attain success in the collection of process is to adopt a systematic procedure of collecting
and following up.
- These steps are:

1. Remind the debtors of their overdue accounts gently by sending them “impersonal
and mild” reminders that are not offensive to the feelings of the debtors.
▪ These gentle reminders are sent 30 days after regular billing.
2. Send them a persuasive kind of letter that will reprimand or scold the debtor for the
delay of payment.
▪ This will be sent 60 days after regular billing, if the gentle reminder fails to
elicit favorable response.
3. If the persuasive collecting letter does not produce or get results, send letters that
appeal to the sense of fairness, self-interest, pride, self-respect, and fear of the
debtor 75 days after regular billing.
▪ In this stage, the collection manager finds psychology or wide
understanding of human behavior very useful.
▪ If he understands human nature, he will know exactly what approach to use
to elicit a positive response.

Page 1 of 4
 ▪ The last collection letter is one that poses a threat to the debtor who
continuously ignores any more of the company’s efforts to collect payments
from him.
• This time, the company mentions his intention to file a case against
the delinquent debtor.
• The company may do this 100 days after the regular billing.
- Aside from friendly reminders in the form of notices, form letters and appeals, the collection
system also uses telegrams, telephone calls, and personal visits.
- Whatever kind of collection letter it is, the letter should use the right tone.
o Tone refers to the “emotional and intellectual appeal of the message.”
o Its tone must be firm but friendly; considerate, but constructive; personal, and
liberal if the situation calls for it.
o Likewise, if the letter makes a demand for immediate payment, its tone must be
severe and insistent.
o In all these collection and follow-up steps, the collection manager must always
endeavor to build goodwill.

VOCABULARY (p. 189)

Know the meaning of the underlined expressions frequently used in a letter of collection.
1. The credit letter reminds the manager of his experience in collecting payments from Mr. Hizon.
2. The creditor is similar to a bank that never runs out of money.
3. Has the debtor paid the amount to Mr. Castro?
4. Mr. Gomez has incurred these arrears since five years ago.
5. I can’t lend you that big amount if you don’t have enough capital.
6. Don’t worry, he has the capacity to pay what he borrowed from you.

MODEL PRESENTATION (p. 189)

What is a collection letter? How does it differ from other kinds of letter? How is it written?
Examine these sample letters of collection:

1. Gentle Reminder

MILA’S PET SHOP

23 GALATIAN STREET
NOVA, QUEZON CITY

Roces, Myrna L.
204 Bayan, Street
Marikina, Rizal

Total Amount Due ……………………………………………………………(P4,000.00)

Dear Miss Roces:

You failed to respond to our first reminder of your overdue account; however, we are
certain you will pay us the amount of four thousand pesos, (P4,000.00) soon.

Page 2 of 4
 Thank you for attending to this matter immediately.

Very truly yours,

2. More Persuasive Letter

Dear Miss Roces:

You haven’t overlooked something, have you? Three months ago, we sent you a
reminder about the P4,000.00 balance you haven’t paid yet.

We believe this is just a result of an oversight and that soon you will send in your
check.

Very truly yours,

3. Appeal

Dear Miss Roces:

Again, we are bringing your attention to your overdue account of P4,000.00. Despite
our sending you several notices, we failed to hear from you.

We said yes to your credit application thinking that both of us would benefit from this
transaction. Our company offered you all the privileges for which you will pay in return.
Indeed, we have done our part, so to be fair, we believe you should do your part, too, which
is to pay your accounts.

Hence, send your check for P4,000.00 right away.

Very truly yours,

Page 3 of 4
 4. Ultimatum Letter

Dear Miss Roces:

What’s the right way to persuade you to pay your overdue account of P4,000.00? We
have tried all the means to help you settle your account, but you refused to cooperate with
us.

We are presently seeking the help of a lawyer in filing a suit against you. We believe
going to court is very inconvenient for both of us, but, despite this, we will push through with
the legal action if your check does not reach us by the end of the month of June 2007.

We look forward to your check.

Very truly yours,

THINK OF THESE (p. 191)

What is a letter of collection?
Why do you write this letter?
Why is there a series of collection letters?
How can you make an effective collection letter?

Reference

Baraceros, E. L. (2013). Business correspondence (2nd ed.). Manila: Rex Bookstore.

Page 4 of 4