From The Legal Beagle Team 22/07/2016

Customers or clients who do not pay can be a nightmare for businesses. Thankfully there are things business owners can do to help them get paid any money owed to them for their products or services. One of these options is called a letter of demand and it can be written by you or you can get your lawyer to write one for you.

What is a letter of demand?

A letter of demand is the first step in the debt recovery process. It tells the person or company who owes you money to pay you and if they don’t, what you will do about it. But before you send out the letter, check out the friendlier options at our blog post about what else you can do when dealing with customers who won’t pay.

If it gets to the point that you need to send them a letter of demand, you should include:

• Who the letter is for
• How much they owe you
• A clearly stated date you want it paid by
• How it is to be paid, such as deposited into a specific bank account
• What will happen if you don’t get all the money paid to you
• Who is asking for the money, so the name of your business
• A copy of the outstanding invoice they owe

What do I do if my letter of demand is ignored?

If the person or business you have sent a letter of demand to does not pay the amount due by the date stated in the letter, it’s time to act. In your letter you should have clearly stated what would happen if you were not paid. You have a couple of options you can choose from to include in your letter of demand. These include:

• Referring the account to a debt collector
• Referring the account to a lawyer
• Referring the account to a debt collector with the instructions to have them default listed

What do I do if my client or customer has disputed my invoice?

Sometimes the invoice you sent with the letter of demand is disputed by your customer. If it is, you cannot do what you said would happen if they did not pay. Instead you need to file a claim with the Disputes Tribunal if the amount they owe you is less than $15,000 (or up to $20,000 if both parties agree), or hire a lawyer to file a claim on your behalf in court if the debt is higher than $15,000.

Create a Letter of Demand online now

Disclaimer (irritating yet important!): The information on this page is general information only and must not be relied on as legal advice. Legal Beagle is not a law firm or a substitute for a law firm. We are unable to provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defences, options, selection of legal documents or strategies.