Demand for Payment Letter Template

What do you do if someone who owes you money won’t pay? Many people would pursue legal action. But before that, there’s one more step to take: sending a demand for payment letter.

What a Demand for Payment Letter Is

When someone owes you money, the first step toward recovering payment is usually sending an invoice. But some clients simply refuse to pay.

When this happens, it may seem like taking legal action is your only option if you want to get paid. Sending a demand letter is the final step before filing a lawsuit.

Why Send a Demand Letter?

A demand letter tells the client this is their last chance to pay before litigation begins. Demand letters often convince people to finally take action, so sending one is likely to help you avoid the stress and cost that come with lawsuits.

What to Include in the Letter

Demand letters usually include the following:

• A summary of events leading up to sending the letter
• The number associated with the past-due invoice or account
• What you want the recipient to do (pay immediately, set up a payment plan, etc.)
• How the recipient may make the payment
• What you’ll do next if the demand isn’t met

It’s especially important to include a deadline in your letter. The client has dragged out the process already, so imposing a clear time limit might encourage them to act.

How to Write a Demand Letter

When writing a demand letter, keep these best practices in mind:

• Be polite and use phrases like “I request.”
• Include a copy of the past-due invoice.
• Indicate how much is due and how it must be paid.
• Don’t use threats (but do clearly explain consequences of non-payment).

There’s nothing wrong with writing a letter yourself. But if you want to streamline the process, consider using a demand letter template instead.

When and How to Send It

Only send a demand letter after informal efforts (like payment reminders) have failed. Always send it via certified mail with a return receipt. That way, you will have proof of when the client received it. If you end up going through litigation, this will be very important.

What Happens After You Send It?

Ideally, sending a demand letter should either lead to prompt payment or open up the process of negotiation. Either way, the goal is to resolve the debt without going to court.

If the client pays in full (or works out a payment arrangement if you allow it), you can consider the issue resolved. If the deadline passes and you hear nothing, you can proceed with legal action. A repair shop or towing company that still holds the customer's vehicle may have another option: a vehicle and garage keeper's lien, which can let the business sell the vehicle after giving proper notice.