Debt Collection Letter
Telephone calls can sometimes prove more effective than sending out a debt collection letter. If, after chasing your client for the money, you are still given the run-around, it is worth considering putting it in writing.
When there is late payment of overdue invoices, it is worth ensuring that you have followed credit control procedures before taking further. Credit control includes sending out a statement of account, letter, or email and will provide a clear record of your attempts to recover your debt.
If payment is still outstanding, send a debt collection letter clearly showing the company details, phone number, amount outstanding, and that court proceedings might be taken.
If the customer is an individual or self-employed, you must follow the Pre-Action protocol. The information below is for business to business.
Customer Statement
The first course of action would be to send out a customer statement at the end of each month. The statement will show all the outstanding invoices due for payment. The total outstanding and a breakdown month by month.
The easiest way to send customer statements is by using online accounting software. You can set statements to automatically send, as well as reminder letters.
Some of the best accounting software for debtors are Xero, QuickBooks and FreshBooks.
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After sending out a statement, follow it up with a phone call to confirm they have all the invoices.
It may sometimes prove challenging to telephone all of the customers who owe you payments if you have many companies or people to chase. Standard formatted debt collection letters can be an effective method in any credit control procedure.
14-Day Collection Letter
The debt collection letter is now called a letter before the claim.
Before drafting and sending a debt collection letter, it’s crucial to ensure that all possible measures to recover the debt have been exhausted. This includes making multiple attempts to contact the debtor, offering payment plans or negotiations, and clearly documenting all communications and attempts made to collect the debt. Only after these steps have been thoroughly undertaken should a debt collection letter be considered as the next course of action..
Debt collection has evolved significantly, in the past, businesses would typically allow a seven-day period for customers to settle their outstanding dues after receiving a collection letter. However, the rules have undergone a considerable change. Currently, it is mandatory to extend at least a 14-day notice period to customers who have failed to clear their accounts within the agreed-upon credit terms. This adjustment gives customers additional time to organise their finances, ensuring that businesses adhere to fair practices while managing their receivables.
Before sending a payment reminder, ensure that you have taken all the steps available in credit control to try and collect the money. It includes telephone calls and sending out customer statements and letters.
You should only ever send out one final chase reminder that stipulates the course of action to take if payment is not received within a deadline set out in the letter. Sending a 14-day letter should always be a last resort.
It is worth considering if this is the right course of action, especially if you wish to continue business with this customer. You must also be prepared to take legal action if the balance remains unpaid after 14 days. Remember that taking legal action for late payment will affect their credit rating.
If you need to start legal action, go to Money Claim Online if the amount is below £100,000. It is a simple process, but it will still take time for the customer to pay you. You will have to pay the court fees, but that is part of the claim that your customer will pay if you are successful with the claim.
Debt Collection Letter Wording
Below is the wording we used in our letter before the action template to collect outstanding monies. You may wish to change it.
Your account is now seriously in arrears. Despite previous requests, we still have not received your payment of (Enter amount).
If payment of (Enter amount) is not received in the next fourteen days, we will have no alternative but to take legal action, which will incur both legal costs and interest to you.
If payment has been made in the last few days, please disregard this reminder.
Debt Collection Letter Instructions
- Download the debt collection letter using the link at the end of this page
- Open the letter in Word or an alternative word-processing program that you use
- Enable editing of the document
- Enter the company name and address at the top.
- At the bottom, enter your name, title and company name.
- Save this as a template to use for further letters
- The date is automatically updated
- Enter Customer details
- Complete the reference details and include as much information as possible
- Enter the amount that you are claiming
- Save the letter as a separate file
- Print, sign and send the debt collection letter with a statement of account listing the outstanding invoices to the customer
Debt Collection Agency
There are debt collection agencies that can send a debt collection letter for you and take legal action. When they collect the money, you will have to pay them a percentage of the amount recovered. It can take all the stress out of chasing clients for money, but you will have less money in the end.
If they can’t collect the debt, they can proceed with court action, which will have additional court costs to add.
Download our free Debt Collection Letter Template UK
Download our free debt collection letter. By downloading this letter, you agree to our licence agreement.
Further information on small claims can be found on the money claim online website.
Letter Before Claim Template Conclusion
Before sending a letter before claiming, ensure you have sent statements, emails and made phone calls. Once you send out a letter of claim, you will not give them any further notice before passing it to the courts.
The debt collection letter used to be a 7-day notice. This has been changed to 14 days.
Only send a 14-day letter if you are prepared to take proceedings against the customer.
Ensure that any communication is recorded with details of dates and details.
If needed, use the services of a debt collection agency.
Return from Debt Collection Letter to Credit Control page.
