Starting legal proceedings: If your customer’s debt goes unpaid for long enough, you may need to initiate legal proceedings to retrieve it.That said, be sure that any repayment plan you agree to is as fair for you as it is for the debtor. This way, the debtor doesn’t have to scramble to get you $10,000 at once, for example instead, you can arrange a 10-month repayment plan of monthly $1,000 installments. Establishing a payment process: If it does turn out that your debtor is struggling with cash flow, then you can offer a payment plan in your debt collection letter.They might have simply forgotten about your debt or currently lack cash flow but still intend to pay.

At most, you should gently hint that legal action could happen down the line, because perhaps the debtor doesn’t intend to stonewall you.

Informing debtors that they owe you money: If this is your goal, your letter should simply remind the client of their debt’s existence and the initial due date.

What is the purpose of a debt collection letter?Ī debt collection letter may serve one, some or all of the following purposes: However, as you send additional debt collection letters, you may need to escalate the language to include warnings of impending legal action.Ī debt collection letter reminds a nonpaying client of their debt to you or warns of near-future legal action.

The first couple of debt collection letters you send to a debtor can be relatively friendly and sympathetic. It’s estimated that about 70 million Americans have a debt in collections each year, according to the Consumer Financial Protection Bureau, so the problem is more common than you might think. You can send a debt collection letter to a B2B client (another business) or an individual consumer. What is a debt collection letter?Ī debt collection letter is a formal debt reminder that you send (or hire a collection agency to send) to a nonpaying client. Learn more about debt collection letters and the debt collection process below.Įditor’s note: Looking for the right collection agency for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs. After you send enough letters, you can transfer the client’s debt to collections, though you may want to exhaust all other options before doing so. If your typical communication channels aren’t succeeding in retrieving your clients’ unpaid debt, you may need to take more formal action.ĭebt collection letters should be the first step in your action plan. It’s one thing if a client pays your most recent invoice a week or two after it’s due it’s another if you’ve gone months without payment, especially if the invoice is large. This article is for business owners and freelancers who are looking to formally pursue debts from nonpaying clients.A debt collection letter should include the total debt owed, the initial due date, and any necessary warnings of impending legal action.You can use a debt collection letter to set up a repayment plan or warn of impending legal proceedings.A debt collection letter reminds a debtor that they owe you money.

Open invoice collection letter