DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : A.Ram Reddy
Designation : Lecturer
Branch : D.C.C.P.
Institute : SRRS Govt. Polytechnic, Sircilla
Year/Semester : IV Semester
Subject : Business Correspondence
Subject Code : CCP-404
Topic : Collection Letters
Duration : 50 Minutes
Sub Topic : Different Stages in writing Collection Letters
Teaching Aids : PPT and Animations
CCP404.30 1
OBJECTIVES

On completion of this period, you will be able to:

 Explain the different stages in writing collection letters

 Explain the guiding principle for writing collection letters

CCP404.30 2
RECAP
COLLECTION SERIES

 Collection Letters are usually written in a series.

 Each successive letter stronger in tone than its
predecessor
 They are sent out at intervals varying with the type of
credit risk involved.
 A poor credit risk may sooner and more frequently
addressed than a good credit risk.
 Can you say how many stages are there in a collection
letter?
 What are they?
CCP404.30 3
COLLECTION SERIES

 A poor credit risk may receive four letters over a two

months period.

 A good credit risk may receive five or six letters over a

six months span.

CCP404.30 4
Different Stages in writing Collection
Letters

 First Stage (Intimation of due amount.)

 Second Stage (Reminder Stage)
 Third Stage (Inquiry and Discussion Stage)
 Fourth Stage (Appeal and urgency Stage)
 Fifth Stage (Demanding and Warning or Threatening
Stage)

CCP404.30 5
Different stages in writing Collection
Letters
Fourth Stage (Persuasion or Appeal Stage)
 When all the reminders fail to collect the dues, letter at
fourth stage has to be written.
 This letter should attempt to persuade the debtor to state
the reasons for not making the payment.
 This letter is the last chance to collect the dues without
losing the customer.

Cont…

CCP404.30 6
 Different Stages contd.

 Sometimes, sellers offer concessions like installments in

payments or reduction in the due amount or Promise to
give some more time to induce the debtors to make the
payment.

 This stage will come to an end at the threats of legal

action.

CCP404.30 7
 Different Stages contd.

 All the previous correspondence for collection of dues

should be mentioned.
 Debtor should be asked to explain why the payment is
not being made.
 Debtors should be promised as to what concession the
seller is ready to give for payment of dues.
 Debtors should be requested to pay the amount by a
particular date or at least give a reply.

CCP404.30 8
Ex.1

 Sathya Cosmetics (Pvt.) Ltd., Hyderabad have written

three reminders to Kranthi Departmental Stores,
Warangal for payment of Rs.5,000/- due from them,
without evoking any response. As the Manager
(Accounts), in Sathya Cosmetic (Pvt.) Ltd., write to
Kranthi Departmental Stores appealing to their good
sense and asking for a reply.

CCP404.30 9
Answer to Ex.1
Phone:22234564
SATHYA COSMETICS (PVT) LIMITED
First Floor,
Ashoka Complex,
Abid Road,
Hyderabad.
Ref.No.SC/AC/40/08. Date:20-2-2008.
To
The Proprietor,
Kranthi Departmental Stores,
Warangal.
Dear Sir,
Sub:-Dues – Rs.5,000/- -Three reminders not
responded-reply- requested.
………. Cont…
CCP404.30 10
 We are quite surprised to find that you have not
responded to any of our three letters written between 1st
January to 10th February in which we requested you for
payment of the amount of Rs.5,000/- long due from you.
During the last several years we have been having dealings
with you, this is the first time you are withholding dues. We
feel very concerned about your silence. There must be
some strong reasons for non-payment of dues.
We are eager to hear from you as to why you are unable
to pay. Now, it is not the due amount, which of course is
considerable that we want, but we only want to know the
reasons for delay in payment. Please give us a chance to
help you out of the difficulties, which prevent you from
making payment of dues, which as you know is essential in
running business.
Thank you,
Yours faithfully,
for SATHYA COSMETIC (PVT) LTD.,
(AJAY KUMAR)
CCP404.30 Managing Director. 11
Different stages in writing Collection
Letters

Fifth Stage (Demanding and Warning or

Threatening Stage)

 Letters written at this stage are called threatening letters.

 Because when all friendly efforts to collect the dues
without hurting or loosing the customer fail,
 The debtor is threatened that, Legal action will be taken
for non-payment.

CCP404.30 12
Different stages in writing Collection
Letters

Fifth Stage (Demanding and Warning or

Threatening Stage)

 At this stage to show more patience is meaningless.

 Because such a troublesome customer is better to get
rid off than to keep.
 So the customer should be threatened to collect the
dues.

CCP404.30 13
Different stages in writing Collection
Letters
Contents of Fifth Stage (Demanding and
Warning or Threatening Stage) Letters.

 How many letters were written should be stated.

 The debtor should be informed that if the amount is not

paid by a particular date, legal action will be taken
against the customer.

CCP404.30 14
Ex.2

 Write a letter to Man Mohan and Company, Hyderabad

asking them to settle their account within 10 days.
Failing which the matter will be referred to Company’s
Solicitors. Inform that the balance of Rs,4,000/- is due
since four months and they have not responded to four
reminders sent previously.

CCP404.30 15
Answer to Ex.2
Phone:2213435
VIKRAM IRON WORKS (PVT) LIMITED
Station Road,
Medak.
Lr.No.VI/ACT14/08. Date:15-12-2008.
To
Mr. Man Mohan,
Managing Partner,
M/s. Man Mohan and Company,
Hyderabad.
Dear Sir,
Sub:-Dues – RS.4,000/- due from four months – Four
reminders unheeded – Final request – Reg.
…….
CCP404.30 16
 Pleased look into your books. You will find that you due
us Rs.4,000/- for more than four months. This we have been
trying to remind you through four letters written by us in the
last four months.
If not payment we asked you for a reply, which would not
cost you anything. But you did not even give a reply.
Having failed to get due amount, we are forced to follow
the procedure of our seeking our solicitors help. However, we
do not want to displease you. So, for the last time, we request
for payment by 20-12-2008 after which we will but be follow to
give green signal to our lawyer’s.
Yours faithfully,
for VIKRAM IRON WORKS (P) LTD.,

(V.VIKRAM)
Managing Director.
CCP404.30 17
Specimen Sentences for writing
Collection Letters

 We enclose a statement of your account for the month

of------------.
 We trust you will see your way clear to send a cheque by
return of mail.
 Perhaps, you have overlooked the fact that your account
for Rs.---------in respect of goods purchased on-------has
not yet been settled.
 We should appreciate your sending us a cheque for this
amount by return of post, as it is not overdue.

CCP404.30 18
Specimen Sentences for writing
Collection Letters

 We have not been favored with any order from you for
the past few weeks.
 We have slashed the prices of our products from 5 to 15
per cent recently.
 We enclose our latest prices sheet for your information
and hope you will take advantage of this huge reduction
in prices.
 We also take the liberty of enclosing a statement of your
account.

CCP404.30 19
Specimen Sentences for writing
Collection Letters

 You have apparently overlooked this item, and we trust

you will excuse our asking for a cheque at this time.
 Collection of small amounts entails considerably
expense. May we, therefore, ask you to remit this
amount promptly.
 We wish to help our customers as far as possible in the
matter of credit, but you must admit that your account is
rather overdue.

CCP404.30 20
Specimen Sentences for writing
Collection Letters

 Please excuse our reminding you again that you have

not yet settled for the goods we shipped you last……
 You have probably overlooked your account for Rs…….
which was dye three months ago.
 May we again remind you the amount due on your
account.
 We have carried your account for three months, which is
considerably longer than we are willing to do.

CCP404.30 21
Specimen Sentences for writing
Collection Letters

 How long must we wait for a settlement of your account.

 Our auditors have called our attention to the credit you
are taking. We cannot see our way to allowing it any
longer.
 Unless we here from you within two days, we shall be
reluctantly compelled to give your account to our
solicitors for collection.

CCP404.30 22
Guiding Principle for writing
Collection Letters

 The purpose of Collection Letters is to collect accounts

when they are due.
 Undue pressure or indirect letter demanding payment
will often irritate or alienate, desirable customers.

CCP404.30 23
Guiding Principle for writing
Collection Letters

 In writing Collection Letters, always be remember that a

customer’s cash business worth his credit account is
delinquent.
 Such being the case, the guiding principle for the writer
of Collection Letters should be ---
 “Collect the account but keep the Customer”.

CCP404.30 24
SUMMARY
So far we have discussed about :

 The Different stages of writing Collection Letters

(Collection Series).
 1. First stage 2. Second stage 3.Third stage 4.
Fourth stage and 5. Fifth stage.

 Some Specimen Sentences in writing Collection Letters.

 The Guiding Principle for writing Collection Letters.

 The guiding principle is “collect the amount but keep
customer”.
CCP404.30 25
QUIZ

A. The Fourth Stage Collection Letters are written:

2. To ask the customer for payment within a stipulated date.

3. To offer some concession to the Customer if the
payment is made within a particular time.
4. To promise the customer to give discount in account if
the payment is made within the time specified by the
seller.
5. All of the above.

CCP404.30 26
B. The Fifth Stage Collection Letters are written:

2. To request the customer to pay the amount.

3. To offer some concession to the Customer if the
payment is made within a particular time.
4. To threaten the customer if the payment is not made
immediately.
5. All of the above.

CCP404.30 27
Assignment

1. Write a letter to your customer demanding for other

payment which is long ove due.

3. A customer who has long over dues did not respond to

your previous letters. Threaten him that if the payment
is not received, you will take legal action.

CCP404.30 28