What is a Letter of Collection? Also explain what is its Three-Fold Purpose?

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What is a Letter of Collection? Also explain what is its Three-Fold Purpose?

Letter of Collection

A letter, which is written to customer to collect overdue amount is called collection letter or dunning letter.

Explanation :

We cannot deny the reality that now a days the most of the business is done on cred i t. ll creates problems regarding the collection of money. People do not clear the outstanding balance, which causes problems. In these circumstances, it becomes t he need of hour to Write and remind the customer about the payment. A collection letter consists of series of letters, reminding the customer to pay his overdue amount. A good businessman should be careful in writing a Collection Letter to the customer. A Single mistake in this regard can annoy the reader. A good collection letter contains three-fold purpose.

Three-Fold Purpose

Collecting the Money
Retaining the Customer
Building Goodwill

1 ) . Collection the Money

The procedure of collection of money is considered to be the most difficult task in the business world: It requires power of patience and practical experience to collect the money from the customer. If the letter is handled carelessly it may lose the money as well as the man. Business organizations adopt various money collecting method s, like notices, letters, telephone, Cells, telegram, fax, emails etc. courtesy can play a vital role in this matter. tt is much very easy to collect money through courteous and tactful manner

2 ). Retaining the Customer

A good collection letter not only recovers the money but it also retains the customers. As old saying goes; “Collect the amount but keep tire customer intact. ” The defaulting customer must be given a chance to explain the reason of delay in payment. A courteous letter can achieve its purpose successfully. On the other hand, discourteous collection letter not only loses the money but it also loses the customer.

3 ). Building Goodwill

A collection letter must be written very carefully. A letter written in a bad manner may destroy the goodwill of a company. Therefore, one must be careful in choosing t he words. One should use soft and pleasant words which may win the heart of the reader. Do not use such words in the beginning that annoy the reader. Try to win the sympathy of the reader and explain your point of view clearly and tactfully.