What is a letter of demand and when do I send it?

What is a letter of demand and when do I send it?

A letter of demand is a letter you have sent to customers who haven’t paid your tax invoice by its due date.

Properly drafted for maximum effect, it will set out not only the amount due, but also the legal basis for that amount being due.

Letters of Demand can be a critical aspect of a business’s overall credit control process. We recommend that it be sent immediately when your tax invoice becomes overdue. Of course, that approach should always be subject to special arrangements with preferred customers. You need to be professional when applying your credit control procedures.

Why do I send a letter of demand?

Generally there is no legal requirement to send a debtor a letter of demand, prior to commencing legal proceedings … once your tax invoice becomes overdue for payment you are entitled to commence legal proceedings.

However, when a letter of demand (LOD) is sent by your lawyers it sends a strong message that you are serious about the recovery of your debt … and our experience is that more often than not this results in the debt being paid. It follows that if you can achieve payment without commencing legal proceedings, you will have achieved a far more cost-effective result.

What additional information is required when sending a letter of demand?

Our experience informs us that a letter of demand will be more successful if the legal basis for the demand set out in the letter is supported by relevant documents. We recommend you provide us with such documents (tax invoices, contracts, terms & conditions) so they may be provided to the debtor with the letter of demand. By providing such documentation in the letter of demand you are clearly indicating to the debtor that if this matter proceeds to Court, you have ‘Exhibit A’ ready to be tendered to the Judge as evidence in support of your claim.

See Also: The Debt Recovery Process in NSW