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LETTERS
CREDIT AND COLLECTION
LETTER
CREDIT LETTER
IMPORTANCE OF CREDIT:
Credit is the backbone of business. It is the
lifeblood that makes everyday
transactions in a business possible. The
so-called 85% business transaction
everyday is impossible without credit.
Regardless of whether you are a
wholesaler, retailer, or customer, credit
plays an important role in whatever
business transactions that takes place
daily.
Nature of Credit
Credit would mean the sellers
confidence and trust in the
buyers ability to pay for the
goods or services that have been
delivered to him. Generally, a
customer is given 30 days, 60
days, or 90 days to pay depending
on the agreement of both parties.
CREDITOR An individual or
institution that extends or lends
money, merchandise, or
services on credit
DEBTOR is anyone or an
institution that borrows money,
merchandise, or services on
credit.
Kinds of Credit
Principles on Credit
Transactions
1.
2.
.
.
.
.
Principles on Credit
Transactions
3. The creditor may classify debtors into
these steps:
a) Good pay the debtor is known to
always pay on time.
b) Good but slow pay the debtor who
always pays but occasionally needs to be
reminded
c) Poor pay the debtor is difficult to
collect from
4. The creditor must acquaint himself
Example:
1825 Gov. Forbes Street
Sta. Cruz, Manila
September 7, 2016
Mr. Benjamin Pelaez
18 Pebillare Street
Del Monte, Quezon City
Dear Mr. Pelaez:
We appreciate very much if your company will allow to open a
charge account in my
name.
Enclosed are names of business institutions whose credit facilities I
have used for
may years. Please feel free to write or call anyone of them to
determine my
character and my capacity to maintain my good credit standing.
3.
4.
Example:
Dear Sir:
We thank you for your letter of August 30, requesting to open a
charge account with us. We are happy to tell you that we
always welcome new customers and serve them willingly to the
best that we can.
We are sending you the blank application form to facilitate the
opening of your charge account with us.
If you will fill out the form, we can hasten the opening of your
account.
Sincerely yours,
Refusal of Credit
A letter not accepting credit must be courteous,
tactful, and diplomatic. In addition, it must be
polite, friendly, and sympathetic.
It must include the following information:
1.
2.
3.
4.
Example:
58 Malabon Street
Sta. Cruz, Manila
September 7, 2016
Mr. Dario de las Alas
14 De Vera Street
Del Monte , Quezon City
Dear Mr. de las Alas:
We thank you vey much for your order of September 1 to be delivered on
account.
We are sorry to inform you that the merchandise you ordered are sold on
cash basis only.
We assure you through, that your next order will be delivered to you on account.
Sincerely yours,
Ronald Dollison
Collection Letter
The collection system should begin to operate as
soon
as the records indicate that the customer has
failed to meet the payment. The successful
collection
letter writer is not the man who collects the
greatest
number of bills, but rather the one who collects the
highest percentage of accounts receivable with the
Lowest percentage of loss of goodwill.
Collection Letter
Guidelines in writing collection letter:
1. The collection letter should be cheerful, optimistic, and
confident.
2. The writer should be a psychologist. He should use
approaches and appeals that have been prove to be the
strongest in moving the debtor to pay.
3. The collection process involves a series of letters that
progress from reminders to ultimatums.
4. Collection letters must be promptly written. Many people
react favorably to deadlines.
5. Proper tone in the collection letter must be used. The tone
should be friendly but insistent, considerate but
constructive, sympathetic and yet firm. Last resort letter
can use threats to legal actions.
Appeal: Reminders
The writer calls the attention to the overdue account
and asks for payment.
Example:
Dear Miss Estoque:
Last month we called your attention to the overdue balance of your charge
account. We have already allowed you thirty days, an accommodation
which
we gladly extended to you.
We hope that you will send us your check for (Five Thousand Five Hundred
Thirty Four pesos) only within the next ten days.
Sincerely yours,
Appeal to Cooperation
Dear Mrs. Reyes:
You may have a good reason that is unknown to us why
you
have not paid your past due account in the amount of
(Nine
Thousand Eight Hundred Fifty pesos) only.
If so, wont you tell us about it now? If everything is
satisfactory,
send us your check on or before September 10, 2016.
Sincerely yours,
Appeal to Pride
Appeal to pride deals primarily with self-esteem, reputation,
accomplishment, ownership, or prestige.
Example:
Dear Mr. Miranda:
We gladly opened a credit account for you because we believed that a
businessman of your standing would never delay payment.
Your credit investigation showed that you are rated excellent in your credit
rating.
You must be proud of such rating. You can retain this pride by keeping your
account in our preferred file.
All you have to do is send your check (Twenty Seven Thousand Eight Hundred Thirty Five
pesos)
only within 15 days after the receipt of this letter.
Sincerely yours,
Appeal to Fear
The appeal to fear is resorted only when all other appeals
have failed. It is considered as the strongest of the
collection appeals. It is usually a declaration of placing
the collection in the legal division.
Example:
Dear Ms. Reyes:
We have sent you many letters calling your attention to your unpaid balance
amount of (Fifteen Thousand Pesos) only.
All attempts made to settle your accounts convenient for you have failed.
This is the time for us to take the last step to enforce the collection.
If we will not receive you check for (Fifteen Thousand Pesos) within ten days, we
will forward the collection to our legal division.
Truly yours,