Recovering Debt with a Letter of Demand


Running a business would be bliss if everything ran like clockwork with happy employees, fulfilling work and clients who paid on time every time. However, in reality, this may not be true all of the time. 

The phrase money makes the world go round is true in running a business. Invoices paid within their term ensures that you can then pay your overheads, suppliers, employees and yourself. What is the next course of action when overdue payment notices, phone calls, and follow-up emails remain unheeded? 

Letter of Demand

After you have exhausted all avenues of recovering debt internally, the first step in the debt recovery process is to issue a Letter of Demand. You can prepare this yourself, or it is often an inexpensive service many commercial law firms provide as the first step to debt recovery. A well-drafted letter prepared by a debt recovery lawyer is enough to resolve debt issues in most cases.

A letter of demand is used for debts owed for goods and services within a six-year time limit in NSW. This clear and concise letter will contain the following:

  • State the amount of debt
  • Refer to invoices and statements provided that refer to the owed debt
  • Any terms and conditions that applied to outstanding invoices
  • Clearly state the date the payment was due and the length of time it is outstanding
  • Mention any previous commitment by the debtor to repay the debt
  • Give the date the payment is to be received
  • Detail how payment can be made
  • Indicate next steps if the debt remains unpaid, including any legal proceedings to recover the debt

Drafting your Letter of Demand

You can draft a Letter of Demand by following guidelines from or Law Access NSW. Both have simple sample letters to use as a basis for your letter. However, it is prudent to consider hiring a commercial litigation lawyer to prepare the letter, as it is a prerequisite before any legal action can be taken. 

Receiving a letter from a lawyer also demonstrates that you are serious about recovering debt and prepared to take action on its recovery.  

Sending your Letter of Demand

To ensure that the debtor receives your letter, it is best to send it by mail and email. Sending these by registered post and requesting a read receipt is proof that the letter has been received. The receipt of the letter can be used as proof in case the matter proceeds to court. 

At TY Lawyers, we have a high success rate, with over 80% of debtors responding to Letters of Demand we have prepared. Our debt recovery lawyers can also assist in reviewing your contracts, terms of credit, or debt, preparing Letters of Demand, enforcing orders, and commencing litigation proceedings if necessary.

Business debt adversely affects the cash flow in your business operations. Our goal is to eliminate all owed debts to improve, improve cash flow and allow you to focus on the operational priorities of running your business. 








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