If you’re a business owner or finance manager, you understand the pains of trying to ask a customer to pay a late invoice.

Sometimes there has been no payment simply because the customer has forgotten — but in some cases, this situation occurs because a customer is deliberately trying to avoid paying you for products purchased or services rendered.

How should you send a letter of demand to ask for immediate payment?

What Is a Letter of Demand for Payment?

Assuming that you’ve already sent a few notices or issued automated reminders for payment, you need to move on to more concrete legal action.

Your first step in resolving a client’s lack of payment, at this point, should be writing a letter of demand.

This is a document written by a business owner asking the customer to pay what he or she owes the business.

When people receive this letter, they understand that the situation is serious. The time for prompt payment has passed, and there is a delinquent charge on the account.

What Situations Call for a Letter of Demand?

This obviously shouldn’t be a business owner’s first solution to receiving payment. Consider resorting to a letter in the following situations:

• You have tried several times to contact a client for payment (including contacting the owners of the business directly) but it seems like they’re disappeared or are screening your calls.
• You lend trade credit to other businesses and need to settle several delinquent accounts before moving forward.
• You do not have another solution to the issue and want to set the stage for a potential legal dispute.

5 Tips for Writing an Authoritative Letter of Demand

Now that you’ve decided that a letter is your only option to settle your customer’s account, it’s time to take action. Use the following tips to write a concise but authoritative letter to your customer.

1. Reference Only What Happened

Your customer may have many outstanding accounts or debts, or they may contract with many other businesses aside from yours.

There’s a small chance that they simply forgot to pay you, so do your best to tell the narrative of what happened to help jog their memory.

If your customer owes you $3,000 for the goods they purchased for their coffee shop, let them know the date of the purchase, the purchased items, and the date you invoiced them (you may attach a copy for their reference).

Then, detail the steps that you have since taken to reconcile their account. Have you sent them multiple invoices?

Perhaps you’ve spoken to the owner on the phone or emailed your contact person at their office. Don’t leave anything out, but be sure not to elaborate, either. Stick to the facts.

2. Be Polite

Always keep your business correspondence polite and courteous. After all, you are documenting not only what happened but your reaction to what happened.

Resist the urge to act out of anger, insult your customer with the delinquent account, or ruin what’s left of your relationship with this person or entity.

In the event that the missed payment was a misunderstanding, you may gain the payment but lose the customer’s respect and business in the future.

3. State Your Demand for Payment Clearly

It may sound trivial, but it’s important to clearly define what you are asking for in this letter of demand. If your customer still owes you that $3,000 for coffee shop supplies, it’s important to say whether this is an attempt to collect the entire debt.

If you wish to provide the option of a payment plan, this is your chance to introduce that option to your customer.

If your writing is not clear or there’s a chance your customer may not grasp what you want from him or her, you may find that your debt continues to go unsettled.

Have an attorney, a staff member, or a professional editor take a look at your writing to ensure its clarity before you send it.

4. Save Copies of All Previous Correspondance With the Customer

At this point, you should have already contacted the business multiple times with a request for payment. Save all of your emails, invoices, contracts, or any other documents that you’ve used to ask for payment.

Make sure that you save or print out copies that have dates on them before bringing them to the attention of legal counsel.

The more you document, the better off you will be. You are essentially telling your customer that if you do not receive the payment, then you will address this matter in small claims court.

Providing evidence of their failure to pay may convince them that you have what you need to bring the lawsuit and are serious about doing so.

5. Prevent a Letter of Demand Situation in the Future

Prevent the need for future demand letters by thoroughly assessing potential customers for creditworthiness before you even consider onboarding them.

If you find that your current system is no longer working — with many customers avoiding payment or simply disappearing on you — it’s time to consider a change in the software that you use to manage outstanding customer debts.

PencilPay has risen to prominence in the Australian trade credit industry by offering a groundbreaking platform that provides business owners with a centralized portal in which to check credit, assess risk, and reconcile customer debt quickly and efficiently.

Using automated software to help you check on customers can prevent poor business deals and strained relationships when collecting payments.

Use PencilPay’s Guides for Expert Advice for Writing a Letter of Demand and More

Have you finished your letter of demand? To avoid needing to write another one, learn more about what PencilPay’s unique software can do for you and your company, and use our guides to direct your choices when it comes to a customer’s creditworthiness.

Reach out to us to book a demo at your earliest convenience. We look forward to helping your enterprise grow and thrive with these added security and financial measures!