How to write a letter of demand for outstanding debt

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    How to write a letter of demand for outstanding debt

    Is there anything worse than having a client who just won’t pay? You do all this work for them and then… nothing! Doing a job costs you money and you have your own obligations to meet. We don’t need to tell you why not getting paid is stressful!

    Fortunately, the debt collection process gives you options. There is action and when you need to, you should take it.

    If you’ve had enough of chasing up a bad debtor, you’ve come to the right place. This article will explain how to write a successful letter of demand.

    What is a formal letter of demand?

    What exactly is a demand letter? It’s when you present someone with a written request to pay the debt they owe you. Anyone can send a demand letter, so if someone owes you money, you have the right to ask for that payment without involving a lawyer (at least, not at first).

    However, many businesses choose to have formal correspondence written up by their legal representative. It is generally perceived that letters written by professionals carry more weight. And, a letter of demand is a way of proving that you are serious and willing to take the matter further if necessary.

    How it works

    You should only send a formal letter of demand once you have already sent multiple requests and reminders in writing. The letter of demand comes after you have made every effort to reach the other party.

    Once the debtor receives the demand letter, they have twenty-one days to make the payment or contact you to negotiate a payment arrangement. If you don’t receive a response, that’s when you’re likely to need legal advice on the best way forward.

    You could seek mediation, or if you really have to, you could take the matter to a small claims court. That should only be an absolute last resort though.

    How to write a letter of demand

    Writing a letter of demand is a tricky business, but as long as it contains the correct information it will count. There are also no specifics on how the letter should be sent, which means you can send it as an email if you find that appropriate to your situation.

    Here are some of the details a letter of demand needs to include:

    • Your information and the debtors’ information (contact details, address etc.)
    • The date when the debt began and the amount owed
    • Details and dates of any disputes relating to this payment
    • Description of the nature of the agreement and breach of contract
    • Outline previous payment reminders and attempts to collect the payment
    • The final due date for when the sum is to be settled by
    • Instructions on how to pay (such as your banking details)
    • The consequences should payment not be made (intended legal action)
    • Your personal signature
    • You should also attach copies of relevant documents (such as the invoice in question)


    In a letter of demand, you should state the facts with a professional tone. Now is not the time to vent frustrations, get personal or emotional.

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    You certainly don’t want to sound threatening. Should you end up in court, a poorly prepared demand letter could seriously hinder your case and your reputation.

    However, when the situation is handled right, you may even come out of it with no hard feelings once the matter has been resolved.

    Is it a good idea to write a letter of demand email? There is no rule saying you can’t send your demand letter as an email. Most formal documents are hand-delivered or sent by registered post so that there’s no doubt they’ve reached the right person. No matter how you choose to send it, you want to ensure that it will be read and taken seriously.

    Sample letter of demand

    When it comes to demand letters, less is more. You want to keep the content as short as possible, only including what is absolutely necessary. Remember, your letter will be passed around and read by more than one person, especially if the matter does end up in court. And, a well-written professional tone will make a good impression on a small claims court judge.

    Writing a demand letter is never easy. Don’t rush it, make sure you think it through. While you don’t want your letter to include unnecessary details, you must make sure you haven’t left anything out.

    Here is a sample letter that you can adjust to fit your own situation:

    [Your business contact details]

    [The debtor’s contact details]


    Dear [include the debtor’s name]

    RE: Outstanding payment due on invoice [include invoice number]

    We have tried to reach you regarding the payment due to us. As you will remember, the terms of our agreement were [that we provide X and you pay Y]. However, by non-payment, you have failed to uphold your side of the contract.

    You will find a copy of the original invoice along with the signed work agreement enclosed herein.

    Reminders were sent to you [on these dates]. Additionally [include name] tried to visit you in person to discuss a payment arrangement [on this date, at this time] but did not find you available. Unfortunately, as we have not received acknowledgement from your side, and we are still expecting our payment we have no choice but to take this matter further.

    The original invoiced amount was: [include amount]
    Accumulated interest (according to the agreed-upon terms) comes to: [include amount]
    The total amount outstanding is: [include amount]

    You can settle your debt to us by making an EFT deposit to our bank account [provide banking details].

    Please be advised that if you do not settle the outstanding amount by [date], we will pursue legal action against your company.

    We would appreciate your due attention in this regard.

    Yours sincerely,
    [Your signature, name and designation]

    Writing a demand letter is never easy. Don’t rush it, make sure you think it through. While you don’t want your letter to include unnecessary details, you must make sure you haven’t left anything out.

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    What happens next

    You might be prepared for battle, but you never know how your letter might be received. Once you’ve sent your letter of demand there are three possible outcomes.

    1. Your demand is accepted - This is the best-case scenario where the debtor comes to the party and meets your demands.
    2. A counteroffer - The debtor acknowledges your demands but doesn’t accept all of them and negotiation begins.
    3. Refusal - The worst-case scenario happens when the terms of your letter are refused and you have to follow through with legal action.

    Needless to say, chasing bad payers is quite a process. You can take on the effort yourself, but you might find it more effective to involve the skills of a professional. That way you don’t have to stress about all the fussy legal details and creating your own properly worded letter.

    Although there is another option, you could choose to outsource your credit control. That way all your payment reminders, follow-ups, and even demand letters are taken care of right from the get-go.

    Outstanding debt

    Getting paid is a top priority. You need your cash flow and there’s nothing worse than losing sleep because of outstanding funds. You’ve worked hard to establish your company and you’re absolutely entitled to receive the money due to you.

    Sending out a letter of demand might not be pleasant but it could mean saving your company.

    If you need help collecting your outstanding payments, Chaser has all the credit control resources you need. So you can stop worrying about your bad payers and start focussing on the good ones!

    You can test us out with a zero obligation free trial here.


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