Clients aren't paying.. what next? Letters of demand

Clients aren't paying you..What do you do next?

Sometimes people can loose track of their finances or emails, so it's important to give your clients the benefit of the doubt by sending a friendly reminder that they need to pay their invoices.

This way it comes across less aggressive and also helps to maintain your business relationship with your clients without accusations. After you have sent your "First" and "Second" reminder letter and you are still being ignored then you can send a letter of demand.

At this stage you have tried 2 times and are unsuccessful in getting your invoice paid. So it is now the right time to take more serious action.

This is the final reminder before taking legal action.

A letter of demand can be written yourself or you can ask a lawyer to write it with their letterhead.

What is in a letter of demand?

  • State how much is owed

  • What is the payment owed for

  • The date in which the invoice needs to be paid

  • May include a warning that you will consider legal action if the debt is not paid by the date.

  • Title the document "LETTER OF DEMAND" to let the debtor know your are serious about getting your money back.

Note : You must find out who owns the business that owes you money as it may not be the person with whom you made the agreement with. You must send the letter of demand to the person who owns the business and this may be found on ASIC .

Sample letter of demand

Letter of demand

[your business name, address and contact details]

[hirer's name and business address]

Dear [name of hirer]

I am writing in relation to the amount of $[amount 'including GST']. According to my records this was due to be paid by you on [date] and remains outstanding. My requests for payment are listed below.

The amount relates to [description of services] provided to you at your request, on [date].

Please find enclosed a dated copy of the invoice and note that it specifies [describe payment terms and instructions]. I have also enclosed the following documents:

1. [name of document]

2. [name of document]

[Documents may include previous requests for payment and list and enclose any other relevant documents that support your claim for the amount owing].

Please be advised that I demand payment of the invoiced amount [plus an amount of ${amount} for late payment interest as agreed in our contract dated {date}] within seven days of the date of this letter.

Late payment interest: The total amount owed may include late payment interest only if your written contract contains a late payment interest clause.

Payment should be made by [describe manner in which you would like to receive payment i.e. bank account for deposit or address for cheque to be posted].

If payment is not received within seven days of the date of this letter I reserve the right to take legal action to recover the monies without further notice to you.

Yours sincerely

[signature]

[your name and title]

[date]

Disclaimer

This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice.

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