What are best practices for using collection letters?

Every collections department should establish policies and procedures that are periodically reviewed. For many businesses, collection or “dunning” letters should be incorporated into collection activities. The letters should be sent via email, fax or regular mail at regular intervals.

Depending on your company's policies, you might send the first collection letter to accounts payable when an account is 30 days past due. The initial letter should be friendly in tone and remind the customer their account is overdue. The second letter, which should be harsher, should be addressed to the accounts payable manager and/or controller. The final or “demand” letter should be sent certified mail or express delivery to record its receipt. It should be sent to the controller or chief financial officer. The director of sales, salesperson responsible for the account and credit manager should also receive copies of the third letter. The letter should note that the account will be turned over to a collection agency or attorney, and reported to credit reporting agencies.

Each letter should summarize the situation and include the invoice number, invoice date, amount owed, due date and balance owed. It's important that every letter clearly state where payments should be sent.

Be sure to include contact information, such as the collector or letter sender’s name, title, email address, as well as phone and fax numbers.

For collection policy manual templates, and customizable sample collection letters, see AR Collection Policy Templates.

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