Collection Letter
What is a collection letter?
A collection letter is a written notice asking a customer to pay an overdue invoice. It is usually the third step in a staged follow-up after a friendly reminder and a firmer notice. A clear, factual letter often gets payment without damaging the relationship. It also builds a record if the account later needs escalation.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that flags overdue invoices as they age and keeps a dated log of each notice sent, so follow-up is consistent and documented.
What to include
- Customer name, invoice number, invoice date, and original due date
- The amount due and the number of days overdue
- How to pay, with a link or payment instructions
- A specific payment deadline, such as seven days
- The next step if payment is not received, stated factually
A staged timeline
The timeline below is illustrative. Adjust it to your payment terms.
- Days 1 to 7 after the due date: friendly reminder, often called a dunning letter
- Day 30: firm notice with payment deadline
- Day 60: collection letter stating the final deadline
- Day 90: escalate, pause work, or review the balance for write-off
Track every balance on your invoice aging report and review accounts monthly. Balances that will not be collected belong in bad debt expense.
Legal and practical points
Third-party collection agencies are regulated, and state rules differ on tone, fees, and threats. Keep letters factual and avoid language that threatens actions you do not intend to take. Charge late fees only if the agreement provides for them. Have counsel review the template and any final demand.
Frequently asked questions
When should a business send a collection letter?
Send it after the friendly reminder and firm notice have gone unanswered, often 45 to 60 days past due depending on terms. Sending earlier can harm a good client relationship, while waiting too long makes recovery less likely. Match timing to your payment terms and customer history.
Can I charge a late fee on an overdue invoice?
Only if your contract or terms allow it, and some states limit the amount. State the fee in the engagement terms and on the invoice before it applies. Applying a fee that was never agreed to can create disputes and hurt collection.