Over 50% of B2B invoiced sales in the US are paid late, impacting the cash flow of businesses of all scales. A demand letter for payment is a simple way to resolve these kinds of payment despites and get the money you are owed.
This article will break down what a legal demand letter for payment is, what a request for payment letter should contain, and how to write a demand letter for payment.The included template, put together by Chaser’s credit control experts, makes writing a strong demand letter for payment quick and easy.
What is a demand letter for payment?
A demand letter for payment serves as a crucial tool in the process of debt collection. It is a formal, written correspondence that acts as a final attempt to resolve an outstanding invoice or debt without resorting to legal action.
The purpose of a demand letter is to clearly communicate the debtor's obligation to pay the outstanding amount and to emphasize the seriousness of the situation.
A demand letter typically includes specific details about the debt, such as the invoice number, the amount owed, and the due date. It also provides a deadline for payment, which is usually a short period, such as 10 or 14 days.
The letter often outlines the consequences of non-payment, including the possibility of legal action, additional fees, and potential damage to the debtor's credit rating.
When do you need a formal demand of payment letter?
A demand for payment letter is issued when someone owes you business payment for goods or services rendered. There are a few situations where you might make use of Chaser’s editable sample letter to debtor requesting payment, including:
- When a payment becomes overdue: The most common situation in which you would issue a demand letter for payment is when an invoice ages over its due date. Once an invoice is overdue, sending a demand for payment letter is an effective step towards recovering an unpaid debt.
- In instances of breach of contract: If you have entered into a contract where a security deposit or part payment is required before services or goods can be rendered, and the client has not made that payment, then sending a demand letter is an excellent encouragement to pay.
What the first demand letter for payment references will depend on your specific situation, which is why the Chaser letter of demand for outstanding payment pdf template is fully editable.
Free customizable demand letter for payment template
One of the main roadblocks to issuing a demand for payment letter is not knowing how to draft one. Chaser’s demand for payment letter template gives you a comprehensive template to work from and is fully editable to suit your needs.
Created by Chaser’s credit control experts, this payment demand letter template empowers you to be proactive in chasing unpaid invoices and securing your businesses’ cash flow.
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Here is a sample free demand letter that you can adjust to fit your own situation: [The debtor's contact details] [Date] Dear [include the debtor's name]
RE: Outstanding payment due on invoice [include invoice number]
We have tried to reach a settlement with 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 proof of 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 to collect our payment we have no choice but to take this matter further. The original invoiced amount owed 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 respond and 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] |
What should a request for payment letter include?
A request for payment letter should include the following:
- The invoice number and date
- The outstanding balance
- The due date in business days
- The name and address of the debtor
- The name and address of the creditor
- A clear statement of the goods or services provided
- A statement of the terms of payment
- A late payment fee, if applicable
- A statement of the consequences of non-payment, such as legal action or damage to the debtor's credit rating
- A deadline for payment, which is usually a short period, such as 10 or 14 days
- A contact person for the debtor to reach out to with any questions or disputes
Making sure that you have all the correct and relevant details listed in your formal demand letter streamlines the payment chasing process and reduces the chances of any disputes arising.
How to write a demand letter for payment in 5 steps
How to write a demand letter for money owed is often one of the most confusing steps in chasing an overdue payment.
The step by step process below will guide you through using the Chaser sample letter threatening legal action for non-payment to produce an effective demand letter.
Step 1: Gather the necessary information
Before you start writing your demand letter, you need to gather all the necessary information, listed above. As mentioned, it's always a good idea to double check all your data is correct before sending, to reduce any chances of confusion or disputes.
Step 2: Write a clear and concise letter
Your demand letter should be clear, concise, and professional. It should be easy for the debtor to understand what you are asking for and why. Using the Chaser demand letter sample for payment is a great way to get straight to the point.
Step 3: Be firm but fair
Your demand letter should be firm but fair. You should make it clear that you expect the debtor to pay the outstanding amount. However, you should also make it clear that you are willing to work with them to resolve the debt by offering extended payment terms or payment plans.
Step 4: Include a deadline for payment
Your demand letter should include a firm deadline for payment, which is usually a short period, such as 10 or 14 days. This deadline should be reasonable and give the debtor enough time to make payment.
Step 5: Send your demand letter with recorded delivery
Once you have written your demand letter, you should send it to the debtor via recorded delivery, making sure to request a delivery return receipt. Keep track of these details in case the recipient claims not to have received your request for payment letter.
As you can see, by making use of the Chaser letter of demand for outstanding payment pdf template, creating and sending your own letter of demand is quick and easy.
FAQs
To make sure you have all the information you need to write your first demand letter for payment, Chaser’s credit control experts have answered the most commonly asked questions around writing a formal request for payment.
Can you write a demand letter without a lawyer?
Yes! You do not need legal counsel or legal advice to draft your demand letter for payment. All you need is Chaser’s sample letter to a debtor requesting payment and the details listed above to write your own.
How serious is a demand letter for payment?
A demand for payment letter is a serious step in recovering an outstanding payment. It shows that you are not willing to just write the payment off as bad debt and is a great way to encourage a debtor to clear their account.
How long should the demand letter be?
A demand letter should be succinct and to the point, but should be long enough to include all of the details listed above. You need to set out your case for payment and then provide enough data to back it up.
How to structure an outstanding payment demand letter for payment?
The best and easiest way to structure a demand for payment letter is to use a template. Chaser’s demand for payment letter template structures the letter for you, but is fully editable to suit your specific needs.
What happens after a demand to pay letter is sent?
Your payment letter should include a due date, indicating when you expect the payment to be made. Hopefully, the demand for payment letter will be enough to elicit a payment from the debtor. If this doesn’t happen, it might be time to consider other options, like professional debt collection agency or legal remedies
What happens when the recipient does not respond to a request for payment letter?
A demand for payment letter isn’t the only tool in your payment chasing toolbox. If a timely payment isn't made in response to your demand for payment letter, you can also send reminders via email, SMS, make a phone call, or contact a professional debt collection service to handle the case for you.
How to write a strong demand letter for payment?
A strong demand letter for payment should be short, to the point, and supported by relevant data. By following the step by step process laid out above, you can quickly draft your own strongly worded, yet professional, demand for payment letter.
What should you NOT say in a demand to pay letter?
Regardless of the pressures of the situation, a demand for payment letter should always retain a professional tone. When it comes to how to ask for payment professionally in a message, never become aggressive or insulting and avoid emotional language. Remember that the letter is representative of your brand image.
How long after sending a letter demanding payment should you expect a settlement?
One of the more important pieces of information to include in your demand for payment letter is a due date for payment. This sets out exactly when you expect the settlement to be made. Remember, once the payment has been made, always follow up with thank you for your payment message. It’s a simple and easy way to get your customer relationship back on track.
Can a demand letter backfire?
No. As long as you remain professional and include all the relevant details to support your demand for payment, there should be no negative implications for chasing monies you are owed.
Send demand letters to your debtors automatically
Did you know you can automate letters of demand to your debtors, both via email or post? Chaser lets you automate your accounts receivables tasks end-to-end. Try it out for free for 10 days or speak to an expert.
