How To Write A Letter Of Demand



Writing a Letter Of Demand for payment is usually the last step you will take when trying to recover an unpaid debt before taking legal action.

You should only consider writing a letter of demand if all other reminders and friendlier options have been exhausted, and your debt has still not been paid and the debtor is making no effort to arrange payment.

Below I will show you exactly how to write a Letter Of Demand for payment, but first I want to list things you should try before sending a Letter Of Demand so you can try to keep the customer and maintain a good business relationship. (If you are past this point please skip to How To Write A Letter Of Demand)

  1. Phone Call Or Email
    If an account is overdue a simple email or phone cal can sometimes be all that is needed to remind the debtor they have missed the invoice payment date and that they must make arrangements to pay the invoice straight away.This is a friendly reminder, which is very casual and keeps the relationship on good terms.
  2. First Reminder Letter
    Your first reminder letter should be a short, friendly reminder that the account is overdue. At this stage the bill may have slipped the debtors mind again or they may be waiting for some incoming cash flow to pay you account.Simply state at the top of the letter that it is regarding the outstanding amount, when payment was due and include a copy of the account statement.It is best to advise them to pay the account today or contact you to make payment arrangements.
  3. Second Reminder Letter
    If payment still has not been made a second reminder letter should be sent. This letter will be more direct and less cordial, but you must still be friendly and aim to keep a positive business relationship.Remind them of the first letter you recently sent and that the account still remains unpaid. By this stage you will want to demand immediate payment or a phone call to discuss payment options beginning today
  4. Alternative Dispute Resolution (ADR) – optional
    At this stage if you still have not received payment or arranged a payment agreement, then an ADR is an option you may want to consider. Depending on the value of this customer to your company this is a solution that may be able to save the relationship as a last resort before sending a letter of demand or taking legal action.

If none of the above works then it is time to send a Letter Of Demand

How To Write A Letter Of Demand In Australia

Below are the elements you must include in your letter of demand and to ensure you do everything by the book so you are protected and have all necessary documents in case legal action is required.

Include In Your Letter Of Demand:

  • Your business name, address and contact details
  • Debtors name and business address
  • Amount of the debt that is owed
  • The date that the debt was due
  • Date you sent the Letter Of Demand
  • Clearly explain what the debt is owned for
  • Provide clear payment details and terms including the date the debt must be by to avoid any further legal action
  • Include all previous documents and evidence such as invoices, contracts, emails agreeing to work provided or any other written evidence between you and debtor

You can also have a solicitor send a letter of demand on your behalf using their letterhead. This is much more effective and shows the debtor that you are serious about further legal action. See our sample Letter of Demand

The debt collection process can be slow and time consuming for a business owner. Going through all these steps can take months and drain your businesses cash flow, and often when chasing up debts yourself a debtor will not take you seriously until they receive some type of formal document from a solicitor.

Using A Debt Collection Agency

To fast track the debt collection process and save you time and money you can use a reputable debt collection company to handle all your outstanding debts.

At JMA Credit Control we provide low cost, flexible one-off debt collection services, or for a small annual fee we can become your outsourced collection agency. Often the introduction of JMA Credit Control’s name at the start of the collection process is enough to get most debtors to pay immediately or arrange payment.

Our commissions are as low as just 3.5% and we have a No Refund = No Fee policy.

Our in-house solicitors can even draft a Letter Of demand on your behalf and list defaults against the credit ratings of company that do not pay your invoices on time.

If you would like to learn more about our low cost, flexible debt collection services Contact Us.

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