What is a collection letter?

A collection letter reminds people or other companies about past–due payments. You typically send such letters after a client doesn’t make agreed-upon payments on time. The letter notifies the customer of their payment status, requests payment by a specific date and provides instructions for completing the transaction.

Why use a collection letter template?

Using a collection letter template can help your business maintain steady cash flow while preserving client relationships. A clear, professional letter reminds customers that they’ve missed a payment unintentionally, along with steps to resolve the issue. Templates also streamline your collections process, making it easier to send timely, consistent messages.

Collecting balances owed to you supports your ability to pay employees and vendors on time and helps encourage timely payments.

What to include in a collection letter

Collection letters generally state your company’s deadline for receiving full or partial payments, while maintaining a positive connection with clients.

You might include these elements in your collection letter:

• Invoice or account reference number: Mention details such as account numbers, customer names, order dates and purchase order (PO) numbers to help clients verify the amount due. When customers can easily double-check the bill and find it accurate, they may be more likely to pay the amount due.
• Payment due date and outstanding amount: Break down the amount still due in simple terms, including the original invoice number and date, when it was due and how much is owed.
• Clear request for payment: Politely request payment. If customers need to mail their payments, your deadline can account for potential shipping delays. For example, you might list a date that’s 15 days from the day you mail the letter.
• Consequence for nonpayment: Mention late fees, service interruptions or further collection activity that may take place if payment isn’t made. You might choose not to include this in your first collection letter and add it in a second letter, depending on your billing processes and client relationship.
• Instructions for payment: Let the client know how they can complete their payment. For example, you may offer an online payment system, a mailing address or a phone number for collecting card information. Including multiple options may help increase the chance you’ll receive payment.
• Contact information: Include the name, phone number and email address of someone who can answer questions about the collection letter and related bill, such as an account manager, a collections specialist or a collection agent.
• Regulatory language: Always pass collection letter templates through compliance or legal professionals, such as a compliance officer or manager, to find out if you need to add regulatory language.

Best practices for writing a collection letter

Depending on the number of collection letters you typically send, your collection letter may differ. Consider these tips for writing collection letters:

Keep your letter professional

Ensure your letter sounds calm and positive. This tone helps your business maintain professionalism and may result in quicker payments or an improved or continued business relationship.

Remain compassionate and understanding

Demonstrating empathy and understanding in your letter may help clients feel more comfortable communicating their reasons for not paying and working with you to set up a payment plan. Remaining patient and compassionate can help you build a stronger relationship with customers, who might be dealing with personal, financial or professional issues that kept them from remitting payment quickly.

For example, a member from their accounts payable department may have left the company, resulting in overlooked invoices.

Review your records periodically

Audit your accounts receivable records and ensure you only send collection letters out after all payments have been posted. Ensuring your books are accurate helps you confidently send collection letters. It can also help prevent follow-ups regarding inaccurate or nonexistent balances.

Work with a collection agency

If you send a few collection letters and don’t receive any response, consider hiring a collection agency. A debt collection agency reaches out to clients through phone calls, emails or mailings to inform them they’re late on payments and set up payment plans.

Outside collection agencies charge a fee, typically a certain percentage of what they collect. However, they can help you collect payments, working on older balances as you move forward with customer-facing efforts. Due to a debt collection agency’s legal expertise, customers may be more willing to listen to a debt collector.

Collection letter sample template

Use this sample template to help you craft your own collection letter:

[Current date]

Dear [Client Name],

We’re sending you this letter as a friendly reminder that your balance in the amount of [amount] is past due. Your invoice was due on [date]. This payment is now [# of days] past due. We’ve attached the invoice for your reference.

Please make payment by [date]. We’ve included a self-addressed envelope for your convenience if you’d like to mail a check made payable to [Business Name]. You can also pay us by debit or credit card over the phone by calling [phone number].

If you can’t make a payment by the date requested, please give us a call to discuss payment arrangements.

We appreciate your business.

Sincerely,

[Your Name]

When your company notices overdue payments, consider writing a collection letter. These documents can help other clients and businesses cross-reference their records and complete necessary transactions.

Letters of collection templates for PDF & Word

Download these collection templates to help you remain in good financial standing with clients while maintaining your professional relationship.