Keeping your business profitable relies on customers who pay their invoices on time. When you have clients who aren’t meeting their financial obligations even after having received several requests for payment, action must be taken. At this point you may be considering sending one final demand for payment before turning the matter over to a third party for debt collection. Here’s a closer look at common concerns to help you develop a more effective demand letter.

FAQ About Debt Collection Demand Letters

Is a demand letter a threat of legal action?

While a demand letter does precede more serious measures of debt collection, it should not be written in a threatening tone. It can note that nonpayment will lead to legal action, but keep in mind that the goal is to resolve the debt without having to take additional steps. Since taking it further can be more costly and time-consuming for both parties, encouraging the debtor to resolve the debt is in everyone’s best interests.

Do I have to include documentation of the debt?

While your demand letter doesn’t have to include invoices and other proof of the debt, enclosing the documentation can be helpful. Debtors are more likely to pay a debt when they have the proof in hand. Often, including documentation can mean the difference between receiving payment or having to refer the matter to a third-party collection agency.

What should the letter include? 

The letter should be written on company letterhead to give it a professional appearance. Additionally, keep the letter formal and include words of common courtesy, such as “please” and “thank you.” 

The letter should outline the history between the customer and your company so there’s no doubt as to how the debt arose. You should also explain the additional actions you will take if payment is not received, such as referring the matter to a collection agency or filing a civil suit.

Do I need to keep a copy of the letter?

Retain a copy of the letter you send to the debtor as well as keeping copies of the responses you receive. You should also send all correspondence in a way that will require the recipient to sign for the letter. This will provide a record that shows the debtor received the letter. Keeping these records on file will help you prove your case if it does become necessary to file a claim via the courts.

Although a demand for payment letter can be effective, it won’t always work, and you may have to pursue other methods for debt collection. Located in Twinsburg, OH, and serving the East Coast and Midwest, Joseph, Mann & Creed is experienced in collecting debts and can help you recover what is owed to your business. Their friendly customer service staff provides speedy results tailored to your company’s needs. View their credentials on their LinkedIn page. To contact the agency, visit their website or call (216) 831-5626.