Oct 29, 2012
I thought I’d take a break from writing about the 10,000 foot view to address something far more pedestrian – the art of writing a proper demand letter. (I know…how boring is that?)
Demand letters are critical as they often represent the last step between self-help and the court system. Whether you run a medical practice, a construction company, own rental property or sell industrial equipment, your company probably sends out at least a couple during the course of a year.
See how your company’s template measures up.
• It must be typewritten on letterhead and signed by a real person.
• It should be no longer than three paragraphs. (You’re asking for payment, not telling the story of the account.)
• It should set a deadline (not “timely,” not “as soon as possible,” but a real deadline for payment) … and mean it.
• Stay away from outright threats. They have no real effect other than to get someone’s back up.
• You include multiple ways to pay, thereby following Wagonheim Law Rule #1. (“Make it easy for people to do what you want them to do.”)
• You provide a calculation of the further costs of delay, such as interest or attorney’s fees, which your paperwork allows you to charge. (Example: Interest continues to accrue at the rate of $12.36 per day.)
• You reference all invoices, change orders, etc. from which the charges arise by number and include a history bill showing where the charges originated. (It is not necessary to attach copies of every monthly bill just because new finance charges were added.)
• You leave the client a face-saving way to come back to the table. As Sun Tzu is quoted as having written in The Art of War: “When you surround an army, leave an outlet free. Do not press a desperate foe too hard.”
• Call several days before your deadline elapses to see if you can have a real discussion.
• Once your deadline passes, move on to the next phase. Under no circumstances should you continue “begging” for payment once the debtor (and that’s what he is now) thumbed his nose at you.