Debt Collection Letters And Templates

It’s not unusual for a client to fall behind on an invoice from time to time. But because receivables management is key to your business’s cash flow , avoiding non-payment from customers is critical. When a non-payment happens, correctly communicating with clients about their past-due invoices is imperative.

Because you want to receive payment and maintain a positive business relationship with your clients, your communications about past-due invoices must be handled professionally and with care. First, before you contact a client about a past-due invoice, check your records to be sure you haven’t made a mistake or received payment. Then, if you have a true past-due invoice, it’s time to reach out to your client.

Experts agree that communicating about past-due invoices should happen early in the process (just 14 days past the payment due date). To make this process easier, make sure you have a specific invoice reminder plan in place, which would begin with a phone call or email once the invoice is 14 days past due. In that phone call or email, give your customer the benefit of the doubt. Use a friendly and helpful tone and ask to be sure the customer has received the invoice.

If a phone call or email does not receive a response, it will be time to use an established library of debt collection letter templates that you can easily customize and mail. Read further for letter templates you can use.

How Do You Write an Effective Debt Collection Letter?

You want your debt collection letters to accomplish two goals: get payment and maintain good customer relations. With those goals in mind, any accounts receivable collection letter you send should be respectful, concise and specific. While follow-up letters to a debtor requesting payment will gradually be firmer in tone, each should contain the following information.

• Paragraph 1: In one sentence, explain that you are writing about a past-due invoice.
• Paragraph 2: In bullet points, summarize the details of the past-due invoice, including invoice tracking number, the principal amount, any interest or fees and a description of what the original balance is for—including dates and locations.
• Paragraph 3: In one sentence, thank the recipient for swift payment or a call to discuss terms.
• Signature: Add your signature.
• Letterhead: Write the letter on your company letterhead and be sure all contact information is evident.

For help with debt collection letters, explore our library of accounts receivable collection letter templates. 

Debt Collection Letter Templates

Our debt collection letter templates can be easily downloaded and customized for your use. You will find the library of templates meets needs for letters you should send for each stage of past-due status. For all debt collection letters, it is important that you send them via certified mail with return receipt. This will allow you to prove your letters were received. This proof will be important if you have to take legal action to collect.

Letter 1: Sent 14 Days After Your Initial Reminder Call or Email

If your phone call or email about a past-due invoice does not receive a response, or if you do not receive payment within 14 days of having spoken to your client, you should then send your first debt collection letter. Like your email or call, this letter should be friendly and helpful and assume that the invoice has simply been overlooked. You will see that the template has space for you to include the specific information about the invoice, as outlined in the section above.

Letter 2: Sent 14 Days After Letter 1

If your first letter does not receive a response within two weeks, you should then send your second debt collection letter. Similar to the first letter, you will include the details about the invoice. The tone of this letter is firm and professional and references who signed for the first letter and on what date.

Letter 3: Sent 14 Days After Letter 2

If your customer has not made any arrangements for payment for the past-due invoice two weeks after letter 2 was received, you should send the third debt collection letter. This letter summarizes your previous attempts to communicate with the client. This letter also informs the customer that the unpaid invoice will be referred to a collection agency after a specific date.

Letter 4: Sent 14 Days After Letter 3

If your customer has not made any arrangements for payment for the past-due invoice two weeks after letter 3 was received, it is time to send letter 4. This letter summarizes your previous attempts to communicate with the client and informs the client that the debt will be referred to a collection agency or that legal action will be taken to repossess unpaid property.

Debt Collection Solutions from Euler Hermes

Bad debts can happen in any company. That’s why having debt collection letter templates handy is an important part of accounts receivable management. Euler Hermes can help keep your cash flow positive with Trade Credit Insurance. Trade Credit Insurance protects your accounts receivables against loss and guarantees compensation even in the event of non-payment.

Learn more about Euler Hermes Debt Collection Solutions.