A letter of demand is the technical term lawyers use for letters chasing unpaid invoices. When you run a business, chasing money eventually becomes a fact of life. For that reason, it’s a good idea to think about how to deal with late-paying customers. In most cases, a gentle reminder by phone or email does the trick. Late payments are, as often as not, down to simple oversights rather than wilful intent. However, if the subtle, friendly approach doesn’t yield results, it’s time to get more formal.
For most businesses, debt collection letters fall into one of three categories, depending on the stage they’ve reached in the process.
In this initial letter, set out the amount overdue, the original due date and the latest date you now want the bill paid by. Enclose a copy of the original invoice and invite the customer to call you if they have any queries about the invoice itself or the sale or services it relates to.If you don’t receive payment by the date you specified, send another reminder letter. This time, state that you wish to avoid ‘further costs’ and set a new date by when you insist on receiving payment.
More formal than the reminders, a final demand sets out what action you’ll take if the bill remains unpaid by your final deadline – and what additional costs the client will incur as a result of that action. Restate the amount overdue, adding any late payment costs and interest payments that your contract allows for. Give the client seven days to pay and say you’ll commence with your stated action if the invoice is still unpaid after that time.
This is a short factual letter advising the client that you’ve instigated action and that they’ll receive future correspondence from the organisation you’ve passed the case to. This could be a debt collection agency, your lawyer or the court. You can, of course, remind the client that settling the outstanding balance is still an option and that you’ll stop proceedings if you receive payment in time.
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