QS Study

Meaning of Collection Letter

Letters written for realizing payments from the debtors are known as collection letters. This letters means order from exporter or seller instructing the collecting and remitting banks on interest charges, demurrage charges, case of need, protest, and other points. The need for writing collection letters arises from credit sales. Selling on credit is a traditional business policy that enhances volume of sales. Under the credit sales policy, the sellers allow the customers a definite period for payment of dues. However, sometimes the buyers make unexpected delay in paying their dues. Even, some customers show reluctance to settle their outstanding accounts. Under these circumstances, the sellers write letters reminding and requesting the customers to pay the due bills. Instead of sending one letter or repeated copies of the same letter, credit departments send a series of letters.

In the opinion of Kitty O. Locker, “Collection letters ask customers to pay for the goods and services they have already received.”

Quible and others defined, “Collection letters are used by an organization to entice its charge customers to pay an outstanding charge-account balance.”

Collection letters are written in a series. When collection letters are written in a series beginning with a simple reminder, and ends with a warning letter indicating legal action are termed as dunning letter. The prime objective of writing collection letter is to collect the dues promptly by retaining the customers with the company.

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