Late payments

When a debtor needs to write explaining difficulties in paying an account by the due date, with a
request to defer payment, the following plan is useful:

1. Refer to the account that cannot be paid immediately.
2. Apologise for inability to pay and give reasons.
3. Suggest an extension of period for payment.
4. Hope that the suggestion will be accepted.

Customer explains inability to pay

Dear Sirs
We have received your invoice number 527 dated 20 July for £10,516, which is due for payment at the end of this month.
Unfortunately, a fire broke out in our Despatch Department last week and destroyed a large part of a valuable consignment due for delivery to a cash customer. Our claim is now with the insurance company, but it is unlikely to be met for another three or four weeks. Until then we are faced with a difficult financial problem.
I am hoping you will allow us to defer payment of your invoice until the end of September.
As you are aware, our accounts with you have always been settled promptly, and we hope you will be able to agree to this extension.
If you have any questions please give me a call.
Yours faithfully

Customer explains late payment

Dear
I am sorry for the late payment of your invoice number W563, and am now enclosing our cheque for £1,182.57 in full settlement.
The delay was due to my absence from the office through illness, and I did not leave instructions for your account to be paid. I only discovered the oversight when I returned to the office yesterday.
My apologies once again for this delay.
Yours sincerely

Collection letters

The preliminary steps in debt collection are:

1. A first end-of-month statement of account.
2. A second end-of-month statement of account with added comment.
3. A first collection letter worded formally.
4. Second and third collection letters.
5. A final letter notifying that legal action will be taken unless the amount is paid within a stipulated period of time.

First applications for payment

A printed collection letter

A first collection letter may be printed as a ‘form letter’ as in this example where the individual details are merged appropriately, personalising the letter.

Dear Sir/Madam
ACCOUNT NUMBER ______________
According to our records you have not settled this account, despite several reminders. The enclosed statement shows the amount owing to be £_________.
We hope to receive an early settlement of this account.
Yours faithfully

Personalised collection letters

To a regular payee

Dear Mr Farrelly
ACCOUNT NUMBER 6251
As you are usually very prompt in settling your accounts, we wonder whether there is any special reason why we have not received payment of this account, which is already two months overdue.
We are attaching another statement of account dated 31 May showing a balance owing of £1,505.67.
We hope to receive prompt payment.
Yours sincerely

To a new customer

Dear Mrs Yap
ACCOUNT NUMBER 5768
Unfortunately, we have not received payment of the balance of £560.55 due on our statement for December. A copy is enclosed.
We must remind you that unusually low prices were quoted to you on the understanding that you would make early settlement.
I’m sure this is an oversight, and hope to receive your payment within the next few days.
Yours faithfully

oversight: an unintentional failure to notice or do something.

To a customer who has sent a part payment

Dear
Thank you for your letter of 8 March enclosing a cheque for £500 in part payment of the balance due on our February statement.
Your payment leaves an unpaid balance of £825.62. As our policy is to work on small profit margins, we are unable to grant long-term credit facilities.
We are sure you will understand if we ask for immediate payment of this balance.
Yours sincerely

Reminder to customer who has already paid

The need for a cautious approach is always necessary since the customer may not be at fault, as where the payment has gone missing or where the supplier has received it but has not recorded it.

Request for payment

Dear
ACCOUNT NUMBER S542
According to our records, our account for cutlery supplied to you on 21 October has not been paid.
We enclose a detailed statement showing the amount owing to be £2,310.62, and hope to receive prompt payment.
Yours faithfully

Customer’s reply

Dear
YOUR ACCOUNT NUMBER S542
I was surprised to receive your letter of 8 December stating that you had not received payment of this account.
Our cheque (RBS, number 065821) for £2,310.62 was mailed to you on 3 November. As you have obviously not received this, I have instructed our bank to cancel this cheque. A replacement cheque for the same amount is enclosed.
Yours sincerely

Second application letters

If a reply to the first application is not received, a second letter should be sent after about 10 days. This should be firmer in tone but still polite. Co-operation and good relations will not be achieved by annoying the customer.
Such letters should be addressed to a senior official and planned as follows:

1. Refer to previous letter.
2. Assume that something unusual accounts for the delay in payment.
3. Suggest tactfully that an explanation would be welcome.
4. Ask for payment to be sent.

Specimen second application letters

Second letter, following letter in moss green text:

Dear Mr Farrelly
ACCOUNT NUMBER 6251
We have not received a reply to our letter of 5 July requesting settlement of this account. The amount still owing is £1,505.67.
No doubt there is some special reason for the delay in payment, and we should welcome an explanation together with your immediate payment.
Yours sincerely

Second letter, following letter in vivid red text:

Dear Mrs Yap
We wrote to you on 18 February to remind you that a total of £560.55 was outstanding and due for payment by 31 January.
This account is now more than two months overdue, so we must ask you either to send us your payment within the next few days or at least to offer an explanation for the delay in payment.
I look forward to your prompt reply.
Yours faithfully

Second letter, following letter in dark blue text:

Dear
We have not heard from you since we wrote on 10 March about your unpaid balance of £825.62. In view of your past good record, we have not previously pressed for a settlement.
To regular customers like you, our terms of payment are 3% one month. We hope you will not withhold payment any longer, otherwise it will be necessary for us to revise these terms.
We look forward to receiving your cheque for the outstanding amount within the next few days.
Yours sincerely

Third application letters

If payment is still not made and if no explanation has been received, a third letter becomes necessary.
Such a letter should show that steps will be taken to enforce payment if necessary, such steps
depending on individual circumstances. Third letters should follow this plan:

1. Review earlier efforts to collect payment.
2. Give a final opportunity to pay by stating a reasonable deadline date.
3. State that you wish to be fair and reasonable.
4. State action to be taken if this third request is ignored.

Specimen third application letters

Third letter, following letter in moss green text:

Dear Mr Farrelly
ACCOUNT NUMBER 6251
We do not appear to have received replies to our two previous requests of 5 and 16 July for payment of £1,505.67 still owing on this account.
We have no wish to be unreasonable, but at this stage we feel we must insist on immediate payment. If we do not receive payment by 7 August, we will have no choice but to take other steps to recover this amount.
We sincerely hope this will not become necessary.
Yours sincerely

Third letter, following letter in vivid red text:

Third letter, following letter in dark blue text:

Dear
We are disappointed not to have heard from you since our two letters of 10 and 23 March reminding you of the balance of £825.62 still owing on our February statement.
This is all the more disappointing because of our past good relationship over many years.
In the circumstances, unless we hear from you within 10 days we shall have to consider seriously the further steps we could take to obtain payment.
Yours sincerely

Final collection letters

Specimen final collection letters

Final letter, following letter

Dear Mr Farrelly
We are surprised that we have received no reply to the further letter we sent to you on 28 July regarding the long overdue payment of £1,505.67.
Our relations in the past have always been good. Even so, we cannot allow this amount to remain unpaid
indefinitely. Unless the amount due is paid or a satisfactory explanation received by the end of this month, we shall be reluctantly compelled to put this matter in the hands of our solicitors.
Yours sincerely

Final letter, following letter in vivid red text:

Dear Mrs Yap
We are disappointed not to have received any response from you in answer to our letter of 16 March concerning non-payment of the balance of £560.55 outstanding on our December statement.
We are now making a final request for payment in the hope that it will not be necessary to hand the matter over to an agent for collection.
We have decided to defer this step for 7 days to give you the opportunity either to pay or at least to send us an explanation.
Yours faithfully

Final letter, following letter in dark blue text:

Dear
We are unable to understand why we have received no reply to our letter of 7 April, our third attempt to secure payment of the balance of £825.62 still owing on your account with us.
We feel that we have shown reasonable patience and treated you with every consideration. However, we must now take steps to recover payment at law, and the matter will be placed in the hands of our solicitors.
Yours sincerely