A letter of demand is a formal written notice that tells a debtor they owe you a specific amount, why, and when you expect it to be paid. It is not a court document and does not require a lawyer to prepare — but it must be accurate, clear and professional to be effective.
Sending a well-drafted demand is often enough on its own. Many debtors simply need the matter put on a formal footing. When it is not enough, a clean demand strengthens everything that follows.
What is a letter of demand?
A letter of demand is a written notice from a creditor to a debtor setting out that a debt is owed and requesting payment by a specified date. It is typically the last step before formal recovery action — and often the step that makes recovery unnecessary.
It differs from an invoice or a reminder. A demand puts the account on a formal footing: it signals that you are serious, sets a deadline, and creates a documented record that the debtor was notified and given the opportunity to pay.
What must it include?
A letter of demand should contain, at minimum:
- Your full legal name (or your business's legal name) — not just the trading name.
- The debtor's correct legal name — company, trust or individual. An error here weakens the demand.
- The exact amount owed — broken down if multiple invoices are included.
- What the debt is for — invoice numbers, dates and a brief description of goods or services.
- The payment deadline — clear and specific, e.g. "by 5:00 pm on [date]".
- Consequences of non-payment — what you intend to do next (e.g. refer to a recovery agent or commence legal proceedings), provided you actually intend to do it.
- How to pay — bank details, payment methods and who to contact with questions.
How to serve it
Send the letter by a method that creates a record of delivery. Options include:
- Email with read receipt — fast, widely accepted for commercial matters.
- Registered post — creates a signed delivery record; useful for higher-value accounts or where email delivery may be disputed.
- Courier or hand delivery — appropriate where urgency or certainty of service matters.
Keep a copy of everything you send, including the time and method of delivery. If the matter is ever escalated — to a recovery agent, a tribunal or a court — this record is exactly what will be asked for.
After you send it
Give the deadline time to expire before following up. Once it passes without payment or a genuine response, you have three realistic options:
- Contact the debtor directly to understand why payment hasn't been made.
- Refer the account to a recovery agent — the right move when you've already had the conversation and it hasn't resolved.
- Consider legal proceedings — appropriate for larger debts where the account is clearly undisputed but the debtor simply won't pay.
Do not send repeated letters of demand. If the first did not produce payment, a second is unlikely to either — and it signals that the deadline was not serious.
When a third party is better
There are situations where having a third party send the demand is more effective from the outset:
- The relationship has broken down and direct contact is unproductive.
- The debtor has a pattern of ignoring in-house correspondence.
- The amount is large enough that accuracy and presentation matter more than time saved drafting it yourself.
- You have already sent a reminder or informal demand with no result.
A demand from a commercial recovery firm carries different weight than one from the creditor directly — it signals that the matter has been formally escalated and that the next step is real.
This guide is general information only. It does not constitute legal or financial advice. For advice specific to your situation, consult a qualified professional.