How to write a Letter of Demand

Issuing a letter of demand to a customer for payment is usually sent when you have exhausted all efforts to no avail to getting your invoices paid prior to launching legal action.

Before we show you how to effectively write a letter of demand, we feel it’s necessary to outline what a demand letter is and more specifically what is in a letter of demand so that you’re aware of what’s involved and allow you to assess if you’re at the right stage of the process to issuing one to your debtor.

 

Letter of Demand

A Letter of Demand is a formal document required to make a final demand to a person or business who owes you money to pay an outstanding debt and avoid legal action. Issuing a Letter of Demand is the first official step when you decide to use the legal system to settle a debt in Australia.

Prior to writing a letter of demand, it’s important to make sure that you have already sent first and second reminder letters, or depending on the value of the customer, tried resolution through an external agent such as a debt collector or solicitor as this could be a viable option to save the business relationship before issuing a demand letter.

 

What are the advantages of issuing a Letter of Demand?

Benefits of using a Letter of Demand;

• Provides a very clear indication of your intention to proceed with legal action if the debt isn’t paid.
• Offers the debtor the ability to pay the debt one last time.
• Evidence that you have exhausted all avenues to collect payment in a professional manner
• Can be used as evidence should you proceed to court to recover the money owed.

 

How to write a Letter Of Demand 

Below we have outlined the essential components that should be included when writing a Letter of Demand. By making sure you have provided the information outlined, your business will be protected and have all the required documentation as evidence should you take legal action.

 

What should be in a Demand Letter?

• Date
• Your name or business name
• Postal Address
• Contact information eg: Telephone, Fax or Email
• The amount of debt owed to you and the date it was originally due
• A clear description on the specific product or services provided that the debt is for
• Outline specific payment details and terms of payment.
• Provide all relevant documentation relating to the debt such as invoices, emails and terms of trade contracts.
• Legal action may be started if the debt isn’t settled under the specific terms of payment
• Debtor may be liable to incur the costs associated with recovery and interest on the debt

 

Whilst issuing your own Letter of Demand is a cost-effective step in the collection process, it may be more effective to have an agent such as a debt collector send a Letter of Demand using their own letterhead on your behalf – as it clearly emphasises your intentions about taking further action.

No matter where you are at in the debt recovery process, it always involves a significant amount of your time when you should be focusing on other areas of your business. The more time you invest chasing outstanding payments, the more your business suffers, so it’s important to make sure that you have the right processes in place to prevent the need to having to send out a Letter of Demand in the first place.

Whilst we have outlined what should go into a formal Letter of Demand, you may like to download our FREE Letter of Demand Template to speed up the process and save you time and unnecessary costs.

 

Engaging Debt Collection Specialists

Hiring a professional debt collection agency can not only save you time, but money also. A good debt collection company has the ability to speed up the debt recovery process so that you can concentrate on running your business.

At Marshall Freeman, we are a results driven collection agency whereby our dedicated recovery specialists know what it takes to get your debt paid fast. We are able to quickly identify a capacity and desire to pay, then apply the right amount of pressure to make your overdue a priority – and this is why we are considered the leading debt collection agency in Australia.

If you would like to know more about how we can quickly reduce your debt and improve cash flow, get in touch today!