Commercial Correspondence

INTRODUCTION

Correspondence is essential in establishing and confirming transactions in commerce. Typed

or produced on a microporcessor it reflects you or your busniness. Therefore what is written and

how it is expressed is as much a part of a commercial student or businessman’s education as

accountancy and economics.

A. STRUCTURE AND PRESENTATION

1. The sender’s address – in correspondence that does not have a printed letterhead, the

senders’s address is written on the top right-hand side of the page.

2. The date – it is written below the sender’s address, sometimes separated from it by a

space.

3. The receiver’s address – this is written below the sender’s address and on the opposite

side of the page.

4. Order of inside addresses – after the name of the person and/or company receiving the

letter, the order and style of the addresses are: name of house or building, number of

building and name of street or road, name of town and postcode, name of country.

5. Salutations – Dear Sir opens a letter written to a man whose name you do not know.

Dear Sirs is used to address the company. Dear Sir or Madam is used to address a person

of whom you know neither the name nor the sex.

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 6. Complemantary closes – if the letter begins Dear Sir, Dear Sirs, Dear Madam or Dear

Sir or Madam, it will close with Yours faithfully. If the letter begins with a personal

name, Dear Mr James, Dear Mrs Robinson, it will close with Yours sincerely.

7. Signatures – always the typed name will be placed after the handwritten signature.

Example:

Worick House, Worick Street, Forest Hill London

SE 23, 1 JF, UK

Ms B. Kaases

Bredgade 51

Copenhagen K

Denmark

Dear Ms Kaases,

Thenk you for your enquiry which we received today.

I am enclosing our ctalogue and the price list for the equipment you said you were interested in. I
would like to draw your attention to pages 31-38 in the catalogue where you will find full details
of the Omega range.

We would welcome any further enquiries you have, and look forward to hearing from you.

Yours sincerely

p.p. Soundsonic Ltd.

D.Sampson

Sales Manager

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LETTERHEADS

The printed letterhead of a company gives a great deal of information about it.

1. Type of company. The abreviation Ltd. After the company’s name tells that the company

has limited liability, which means that the individuals that own the company or part of it,

i.e. the shareholders, are only responsible for their holding and no more than that if the

company goes bankrupt. The abreviation PLC means Public Limited Company and it is

used to show that the company’s shares can be brought by the public; Ltd continues to be

used for private limited companies whose shares are not available. In the USA the term

Incorporated - Inc. is used.

2. Board of Directors. The name of the Chairman, or, in the USA, the President, who runs

the concern, will be given, as well as the names of the Directors, who decide the overall

policy of the firm.

3. Addresses. In addition to the address of the office from which the letter is being sent, the

letterhead may also give the address of the head office or registred office if different and

the address of any branches or other offices the company owns.

4. Registered number. This usually appears in small print, sometimes with the country or

city in which the company was registered. The VAT number (Value Added Tax) may

also be given.

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REFERENCES

References are quated to indicate what the letter refers to (Your Ref.) and the correspondence

to refer to when replying (Our Ref.)

PER PRO

The term per pro (p.p.) is sometimes used in signatures and means for and on behalf of.

COMPANY POSITION

When signing on behalf of your company, it is useful to indicate your position in the firm in

the signature.

ENCLOSURES

If there are any enclosures, eg. Leaflets, prospectus, etc., with the letter, these may be

mentioned in the body of the letter. But many firms in any case write Encl. or Enc. at the bottom

of the letter, and if there are a number of documents, these are listed.

B. CONTENT AND STYLE

1. The length of the letter depends on the subject of the letter, it may be a simple subject, eg.

thanking a customer for a cheque, or quite complicated, eg. explaining how a group

insurance policy works. The style and the kind of language used can also affect the length.

2. First paragraph. The first paragraph sets the tone of the letter and gives the reader the first

impression, example: “Thank you for your letter dated 8th of July in which you asked

about our range of cosmetics. As you have probably seen in our advertisements in fashion

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 magazines, we appeal to a wide group from the teenage market through to more mature

woman, with our products being retailed in leading stores throughout the world.”

3. Middle paragraph. This is the main part of the letter and it concerns with the points that

need to be made. In the middle paragraph of the letter, the planning is most important.

4. Final paragraph. When closing the letter, you should thank the person for writing and

encourage further enquiries or correspondence. You may also wish to restate one or two of

the most important of the points you have made in the main part of the letter, examples:

“We are sure that you have made the right choice in choosing this particular line as it is

proving to be a leading seller. If there is any advice or further information you want, we

shall be happy to supply it, and look forward to hearing from you.”

5. Simplicity. Commercial correspondence often suffers from an old-fashioned style of

English which complicates the message and gives the reader the feeling that he is reading

a language he does not understand.

6. Abbreviations. These are useful, but both parties need to know what the abbreviations

stand for: c.i.f. means cost, insurance and freight, f.o.b. means free on board, o.n.o. means

or nearest offer. Some international organizations, eg. NATO, are known in all countries

by the same set of initials, but many are not, eg. EEC (European Economic Community)

and UNO (United Nations Organization).

7. Figures. Numerical expressions can also cause confusion. For, example, the decimal point

in British and US usage is a full point rather than a comma as used in most continental

European countries.

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 C. ENQUIRIES

An enquiry can be made by telephone, telegram, telex or postcard. If you need to give more

information about ypurself or ask the suplier for more information, you will need to write a

letter. The contents of this will depend on three things: how well you know your supplier,

whether your supplier is at home or abroad, and the type of goods you are enquiring about.

1. Opening. Tell your supplier what sort of firm you are. How did you hear about the firm

you are writing to.

2. Asking for catalogues, price-lists and prospectuses. It is not necessary to give a lot of

information about yourself, the enquiry can be done by postcard.

3. Asking for details. You must be specific and state exactly what you want.

4. Asking for samples, patterns, demonstrations. Most suppliers are willing to provide

samples or patterns so that you can make a selection.

5. Suggesting terms, methods of payment, discounts. Although it is true that once a supplier

has quoted a price and stated terms, he may be unwilling to change them, by suggesting

your terms you would be indicating that certain conditions may persuade you to place an

order.

6. Asking for goods on approval or on sale or return. In either case the supplier would have

to know the customer well, or would want trade references. He would also place a time

limit on when the goods must be returned or paid for.

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 7. Closing. Usually a simple “thank you” is sufficient to close an enquiry. You may also

mention that a prompt reply would be appreciated. You can also indicate further business

or other lines you would be interested in if you think they could be supplied.

Example of a short enquiry:

Dear Sir,

Please would you send me your Spring catalogue and price-list quoting c.i.f. prices, Bombay?

Thank you.

Yours faithfully,

D. REPLIES AND QUOTATIONS

1. Replies to letters of enquiry

a. Opening. Mention your prospective customer’s name. Thank the writer for his

enquiry, mention the date of his letter and quote any other references that appear.

b. Confirming that you can help. Let the writer know as soon as possible if you have the

product or can provide the service he is enquiring about.

c. Selling your product. A simple answer that you have the goods in stock is not enough.

Mention one or two selling pointsof your product, including any guarantees you offer.

d. Suggesting the alternatives. If you do not have what the enquirer has asked for, but

have an alternative, offer it to him.

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 e. Referring the customer elsewhere. Your correspondent may be asking about a product

you do not make or a service you do not give. If this is so, tell him and if possible

refer him elsewhere.

f. Catalogues, price-lists, prospectuses, samples. Make sure that you enclose current

catalogues and price-lists if you are sending them.

g. Closing. Always thank the customer for writing to you. You should also encourage

further enquiries.

2. Quotations

a. Prices. When a manufacturer, wholesaler or retailer quotes a price, he may or may not

include other costs and charges such as transport, insurance, taxes. Prices which

include these extra costs are known as gross prices, those which include them are

known as net prices.

b. Transport and insurance costs. The following list includes the abreviations that

explain which price is being quoted to the customer.

• Ex-works. The buyer will have to pay all the costs once the goods have left

the factory, mill or warehouse.

• F.o.r. (free on rail). The price quoted covers the costto the nearest railway

station.

• F.a.s (free alongside ship). There are no extra charges up to taking the goods

to the side of the ship.

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 • F.o.b. (free on board). Loading on to the ship is included in the price quoted.

• C&f. (cost and freight). The price includes cost and shipping to the

destination mentioned.

• C.i.f. (cost, insurance and freight). The price includes all the costs up to the

named destination.

• Ex-ship. The price includes delivery to the port named.

• Franco quay. The price incldes all the costs up to the importer’s deockside.

• Carriage paid. Charges will be paid by the sender.

• Carriage forward. The transport charges are paid by the receiver.

c. Methods of payment. These methods may be letter of credit, bill of exchange, etc.

d. Fixed terms and negotiable terms. The terms are quoted in two ways: by stating your

price and discounts without leaving room for negotiation, or by implying that the

customer could write again and discuss them.

E. ORDERS

1. Placing an order. Orders are usually written on a company’s official order form which

has a date and a reference number that should be quoted in any correspondence which

refers to the order.

a. Opening. Explain there is an order accompanying the letter.

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 b. Payment. Confirm the terms of payment.

c. Delivery. Confirm the delivery dates.

d. Methods of delivery. Many firms use forwarding agents.

e. Closing. Encourage further orders.

2. Advice of despatch. When the supplier has made up the order and arranged shipment, the

customer is informed of this in an advice.

F. PAYMENT

1. Invoices. Invoices are requests for payment and also records of transactions which give

both the buyer and the seller information about what has been bought or sold, the terms

of the sale and details of the transaction.

2. Statements of account. A supplier may grant his customer credit in the form of the open

account facilities for an agreed period of time. The statement includes the balance on the

account, which is brought forward from the previous period and listed as Account

Rendered. Invoices and debit notes are added while payments and credit notes are

deducted.

3. Settlements of accounts. Methods of payment: home trade.

a. Postal order. It is used for small amounts and sent to the supplier direct.

b. Stamps. It is unusual in business.

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c. Giro. It allows customers to send payments to anyone whether they have a Giro account

or not.

d. C.O.D (cash on delivery). The goods are delivered and the payment is accepted in behalf

of the supplier.

e. Cheque. You must have a current account or certain types of saving accounts to pay by

cheque.

f. Bank transfer. Banks tranfer money by order from one account to another.

g. Credit transfer. The payer fills out a Bank Giro slip and hands it to a bank with a cheque,

the bank transfers then the money to the payee.

h. Bank draft. The payer buys a cheque from the bank for the amount he wants to pay and

sends it to the payee.

i. Bill of exchange. The seller draws a bill on the buyer. The bill states that the buyer will

pay the seller an amount within a stated time.

j. Letter of credit. This mothod of payment can be used internally, but it is more common in

overseas transactions.

4. Settlement of accounts. Methods of payment: foreign trade.

a. Cheque. It is possible to pay an overseas supplier by cheque, but it takes a long time

before the supplier gets the money.

b. International Giro. It replaces Money Orders. Giros are charged at a flat rate.

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c. International Money Orders. They can be cashed or credited to the recipient’s account.

d. Bank transfer. Payment can be made by ordering a home bank to transfer money to an

averseas account.

e. International bankers draft. This is a banker’s cheque which the bank draws on itself and

sells to the customer, who then sends it to his supplier as he would an ordinary inland

cheque.

f. Promissory notes. It is a method of payment but simply a written promise from a debtor

to a credit that the former will pay the stipulated amount either on demand or after a

certain date.

g. Bill of exchange. The procedure is the same as for the home trade, but shipping

documents usually accompany bills when the bank acts as an intermediary in overseas

transactions.

h. Documentary credit. The term is used to distinguish the normal letter of credit, used in

businessm from the circular letter of credit, formerly used by foreign travellers and now

largely replaced by Eurocheques, traveller’s cheques and cash cheque credits.

G. COMPLAINTS AND ADJUSTMENTS

1. Writing general complaints.

a. Opening. Complaints should be done as soon as you realize a mistake has been done.

b. Explaining the problem. If you know how the mistake was made, you may politely point

it out to your supplier.

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 c. Suggesting a solution. If you think you know the mistake can be corrected, let the

supplier know.

2. Replying to letters of complaint.

a. Opening. Acknowledge that you have received the complaint and thank your customer

for informing you.

b. Getting time to investigate the complaint. Do not leave your customer waiting, but tell

him what you are doing.

c. Explaining the mistake. If the complaint is justified, explain how the mistake occurred,

but do not blame your staff.

d. Solving the problem. Having acknowledged your responsibility and explained what went

wrong, you must put matters right.

e. Rejecting a complaint. If you think the complaint is unjustified, you can be firm but

polite in your answer. You should always try o give an explanation of the problem.

f. Closing. It is useful to mention that this mistake, error or fault is an exception, and you

should apologize for the inconvenience your customer experienced.

H. CREDIT

FORMS OF CREDIT

Credit arrangements between trading firms take two forms:

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BILL OF EXCHANGE, or DRAFTS = the seller gives credit to the buyer for the period

specified on the bill.

OPEN ACCOUNT FACILITIES = the buyer is allowed to pay for his goods against monthly or

quarterly statements.

REQUIREMENTS FOR GRANTING CREDIT

Credit facilities will be granted by a supplier, only if the customer can satisfy one of the certain

requirements:

a. Reputation

b. Long-term trading association

c. References

ASKING FOR CREDIT

1. Opening. In the opening paragraph f a letter asking for credit facilities it is best to go to

the point and specify what form of credit you are looking for.

2. Convincing your supplier. Your supplier will only grant credit if he is convinced that you

will not default. So mention your previous dealings with the supplier. Mention your

reputatuion and other references.

3. Closing. “We hope you will consider our request favourably and look forward to your

reply.”

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REPLYING TO REQUESTS FOR CREDIT

1. Agreeing to credit.

A. If the supplier does not think it necessary to take up references, he may grant credit

immediately: “As we have been trading for over a year, references will not be

necessary and you may clear your accounts by 30-day bill of exchange which will be

sent to Burnley’s Bank with shipping documents for your acceptance.”

B. If references are considered necessary, the supplier will acknowledge the request and

then reply in full when references have been received: “We have now received the

necessary references and are pleased to say that from your next order payment can

be mede on a quarter basis against statements.”

2. Refusing credit.

In this case, the writer must explain why he is turning the request down. Whatever the

reason, the reply must worded carefully so as not to offens the customer: “We regret that

we are unable to offer open account terms to customers as our products are

competitively priced and with small profit margins it is uneconomical to allow credit

facilities.”

3. Negotiating.

Sometimes a supplier will not offer as musch credit as the customer wants but will

negotiate a compromise: “Though we do not usually offer credit facilities, we would be

prepared to consider partial credit. In this case you would pay half your invoices on a

cash basis, and the rest by 30-day bill of exchange.”

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ASKING ABOUT CREDIT RATING

1. Opening. Say who you are and why you want the information.

2. Details. Say exactly what you want to know. If the amount of credit is known, it is

usually mentioned.

3. Closing. Thank the firm in advance for giving you the information and tell them you will

reciprocate if the opportunity arises. Also let them know that whatever they say in their

letter will be treated in the stricted confidence.

I. BANKING

BANKS IN UK

These can be divided into two groups:

a. Merchant banks = tens to encourage larger organizations to use their services, and while

the facilities they offer are similar to those of the commercial benks, the former specialize

in ares of international trade and finance, discounting bills, confirming credit status of

overseas customers through confirming houses, acting in the issue market, and in the

bullion and Eurobond market.

b. Commercial banks = offer similar services but are particularly interested in private

customer’s accounts, encouraging them to use their current account, deposit accounts,

savings account and credit facilities. They will lend money, against securities, in the

forms of overdrafts and loans, pay accounts regularly by standing orders, and transfer

credits through the bank Giro system.

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INTERNATIONAL BANKING

1. Bills of exchange = it is an order sent by the drawer (the person asking for the money) to

the drawee (the person paying) stating that the drawee will pay on demand or at a specific

time the amount shown on the bill. Such bills are said to be domiciled with the bank

holding them.

2. Documentary credits = it is a more binding method of payment. There are two types of

documentary credit: revocable (those that can be canceled) and irrevocable (those that

can not be cancelled). The stages in an irrevocable documentary credit transactions are as

follows:

a. The impoter agreed to pay by documentary credit, and tells his bank that he will do so by

completing an application form.

b. The importer’s bank will then select a bank in the expoerter’s country to act as its agent,

and will notify them that the credit has been opened.

c. The agent bank will notify the exporter that a credit has been opened and they may add

their own confirmation.

d. The exporter ships the goods before the credit expires and sends the shipping documents

to the agent bank who check the documents against the conditions and pay him.

e. The agent bank will then send the documents and debit the importer’s bank with the costs

and charges.

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f. The importer’s bank then checks the documents, pays the agent bank and sends the

documents to the importer so that he can claim the goods.

J. TRANSPORTATION AND SHIPPING

1. Road transport. It tens to be comparatively cheaper and more direct than rail.

2. Rail transport. It is faster than road. There is a link between road and rail through

companies such as Freightliners.

3. Air transport. It has the advantage of saving time..

4. Documentation. Road and rail use consignment notes and air transport waybills. These

documents are receipts and not documents of title as a bill of lading might be (the

ownership of the consignment note/waybill does not give ownership to the goods). They

are obtained by the consignor filling out an instructions for despatch form and paying the

freight charges.

5. Shipping. Shipping documentation.

a. A freight account = is an invoice sent by the shipping company to the exporter stating

their charges.

b. A bill of lading = it is a document of title, it gives ownership of the goods to the person

named on it.

c. A shipped bill of lading = it means that the goods have been loaded on to the ship. This

statement protects the shipping company from claims that they were responsible for the

damage or bad condition of the consignment.

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K. INSURANCE

1. Insurance procedures. Companies and individuals protect themselves against loss,

damage or injury by taking out insurance policies. The usual process of insuring a

business or oneself is as follows:

a. A proposal form is completed by the firm or person who wants insurance cover.

Underwriters, who will pay compensation in the case of claim, will work out the

premium (the price of insurance).

b. Once the policy is sent it will tell the client that he is indemnified against loss,

damage or injury under the conditions of policy. Indemnification means that the

insurance company will compensate the client to restore him to his original position

before the loss or damage. The insurance company will also have the right of

subrogation, which means they can now claim the wrecked vehicle and sell it for any

price they can get.

2. Fire and accidents insurance.

a. Fire insurance. There are three main types of insurance policy:

• Insurance of home and business premises and their contents.

• “special perils” policies, which protect the insured person against loss or

damage due to special factors (flooding or earthquakes).

• Consequential loss insurance, which insures against loss of profit in the period

after a fire (while a factory is being rebuilt).

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b. Accident insurance. It covers four areas:

• Insurance of liability = it covers employers’ liabilities for industrial accidents,

accidents to people attending functions on company business, and motor

insurance.

• Property insurance = it is part of the service fire offices provide, but also

includes a wide range of protection against riots, terrorism, gas explosions.

• Personal accident insurance = it offers compensation in the form of benefit

payments to people injured or killed in outings, playing games (ice hockey,

aircraft)

• Insurance of interest = it protects firms against making costly mistakes.

c. Claims. Companies and individuals make claims for loss, damage or accident, by

filling in a claims form, which tells the insurance company what has happpened. If

the insurers accept the claim, often after an investigation, they will pay compensation

as it was required.

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