Whether you loaned money to someone you know or provided supplies to a customer on consignment, collecting the money owed can be a challenge. Some borrowers may purposely attempt to avoid paying the debt while others simply forget. Before you take the extreme step of filing a small claims case to attempt to retrieve your funds, try writing a simple letter to collect your money first.

Address your collection letter to the exact individual who owes the money. Do not simply address it to a company. If a business that owes the debt, address to the business owner or accounts payable department. If an individual include his full first and last name as well as his most updated address.

Identify the reason for the letter, which is an unpaid debt. List the current amount due, original amount before late fees, account number if applicable and the date the debt was due.

Write the number of days that the debt is now overdue as of the date of this letter. Include information about the history or reason for the debt so that the borrower or customer can recall the situation. For instance, if the company owes money from an invoice for the sale of computer parts, provide a full description of the items shipped, date the order was fulfilled and shipment tracking number. Enclose proof of delivery in this case.

Ask for payment of the current amount due by a certain date. If this is the final “ultimatum” collection letter, explain that this is your final communication before escalating the matter or adding additional late fees.

Provide specific directions on how the company or individual can pay the balance owed -- for instance, by credit card over the phone or by sending a check directly to your address. Date and sign the letter with your full name and company name, if applicable. Send the letter via certified mail and keep a copy for your own records to prove that you tried to contact the person directly for payment.

Tip

If you must resort to filing a case in small claims court, you usually must do so in the county where the other party resides or does business.