A letter of demand is the cheapest, fastest and most often successful step in commercial debt recovery. It costs less than a single court filing fee. It usually produces payment within 14 to 21 days. And if it does not, it becomes the foundation for the proceedings that follow.
But a letter of demand is only as effective as it is drafted. A sharply worded email from a frustrated business owner is not a letter of demand. Here is what one looks like, and when to send it.
When to escalate to a letter of demand
We generally recommend a letter of demand once all of the following are true:
- —The invoice is clearly overdue under its stated terms (often 30 days from issue).
- —You have attempted at least two internal follow-ups, including one in writing.
- —The debtor has either gone silent, made promises and not kept them, or raised a dispute that does not have substance.
- —The amount in dispute is large enough to justify the cost of escalation — usually $1,000+ for business debts.
What a good letter of demand contains
- —Clear identification of the creditor and debtor (correct legal names and entity types).
- —A short statement of the debt — invoice numbers, dates and amounts.
- —The legal basis: a contract, terms of trade, or services rendered.
- —A deadline for payment (typically 14 days from the date of the letter).
- —A clear statement of the consequences of non-payment — proceedings for the debt, interest, and costs.
- —Payment details and a contact name for queries.
What a good letter of demand does NOT contain
- —Threats of criminal action (debt is generally a civil matter — threatening criminal consequences for a civil debt may amount to misconduct).
- —Statements that could harass, intimidate or mislead the debtor.
- —Inflated amounts, fictitious 'collection fees' or other charges with no contractual basis.
- —Deadlines you have no intention of following up on. An empty threat undermines every demand you send afterwards.
What happens if they ignore it?
If the deadline passes without payment or a substantive response, we typically have the following options depending on the debtor and the amount:
- —Commence proceedings in the appropriate Queensland court (Magistrates for ≤$150,000, District for $150,000 to $750,000, Supreme above).
- —For debts against companies of $4,000+, consider issuing a Creditor's Statutory Demand under s 459E of the Corporations Act — a powerful tool but only appropriate for undisputed debts.
- —For debts against individuals of $10,000+ where you already hold a judgment, consider a bankruptcy notice.
