What’s in an Effective Final Demand Letter, by Michael C. Dennis, CBF

Final Demand
Final Demand

I recently received a final demand notice from a Supplier.  After I read it, I sent it to our A/P Manager.  Whenever I receive something from another credit department, I try to see what I can learn from them.  In this case, there was essentially nothing to learn.  The final demand letter was too long, and it took more than a paragraph to get to the point.  Add in the fact that it was addressed to the “Credit Manager” rather than to our A/P Manager, or the Controller or CFO, and it was even more of a mess.

Our basic demand letter says this:  “As of today, there is a balance past due of $x.  I hoped this matter could be resolved amicably, but I am almost out of time.  If payment in full is not received within ten days, your account will be placed with a third party for immediate collection or legal action.”

More broadly, I think the keys to generating effective correspondence include:
  • Making certain your message is clear and concise;
  • Not repeating yourself;
  • Avoiding the use of jargon;
  • Sending correspondence directly to an individual – never to a job title;
  • Indicating the action you need the recipient to take, and the deadline for completing it;
  • Not being overly formal;
  • Trying to appeal to the reader’s needs;
  • Keeping your message brief and professional;
  • Using templates for routine correspondence.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What is yours? How about sharing the highlights of your Final Demand letter in the Comments section?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.


7 Replies to “What’s in an Effective Final Demand Letter, by Michael C. Dennis, CBF”

  1. Normac, Inc.

    3449 Longview Drive
    Sacramento, CA 95821
    (916) 482-2924

    January 22, 2013

    ABC and XYZ Company
    1234 Main Street
    Sacramento, CA 95833


    Dear Customer,

    We have repeatedly requested payment on your overdue account. For some reason, you have chosen to ignore our request for payment. Total amount now due is $1000.00 It is our desire to avoid legal action, unfortunately we see no alternative.

    Accordingly, we shall take this account to legal status within the next ten days. Enforced action to collect this obligation will result in additional legal costs to you.
    Please also know if pertains we will pursue our legal rights with the additional personal guarantee signed by you on behalf of the corporation.

    A lawsuit over an uncollectable account becomes a part of your permanent credit record and will be a reflection of your ability to pay your debts as they become due. Should you desire to avoid litigation, you should contact this office immediately and arrange to pay your debt



    Renee Toralez
    Credit Manager

  2. I agree on the characteristics of an effective demand letter. The letter you received invites speculation on the business culture of the Supplier, and consider how a job applicant, banker, or investor might see-through the natural ‘spin’ the company might put on itself.

  3. March 22, 2013

    ABC Company
    1234 Main Street Sent via:
    Los Angeles, CA 90000



    All previous and repeated contact with your firm attempting to bring your receivables current has been unsatisfactory. According to our records, as yet undisputed, the uncollected amount owing is:

    We have extended every courtesy possible and have been amenable to discussing re-payment options, again without success. With no meaningful cooperation from your side, we have no choice but to demand full payment of the entire balance.

    If complete payment is not received by / / we will seek remedy through a collection agency and/or the courts at our discretion.

    Once the account is forwarded out of this office, we can have no further contact with you. Therefore, we urge you to take immediate steps to rectify this problem.

    With regard to this collection matter whenever appropriate, we will also notify the industry credit associations to which we belong as well as the independent credit reporting agencies. This will likely impair your credit rating.

    Very truly yours,

    1. I very rarely reach the need for a Final Demand (with “DEMAND” being the operative word). It is our goal to maintain our customer base as much as is possible.

      With that in mind – I have a pre-final-demand letter which I call the “on the fence” letter. It generally pushes them to one side or the other. Those who are working in good faith and want to resolve the debt will make contact and work out a resolution – those that are working in bad faith will ignore it and will get that final demand.

      Dear Customer:

      We value our customers and strive to provide top quality products at a reasonable price. In order to do this, it is necessary for us to receive payment of our invoices in a timely manner. We pride ourselves on our customers’ satisfaction with our products and our services because that is of the utmost importance to us, so if the delay in payment is due to a discrepancy of any kind, please notify me immediately and I will be happy to help you resolve any issue(s) you may have.

      At present your account is being reviewed for possible collection and/or legal action. However, before we take such a drastic action, which will affect your company’s credit and ability to meet its long term goals, we would like to afford you this opportunity to cure the account, or to make payment arrangements. We are willing to work with folks when times are tight, but we must have communication and some assurance that the account will be paid.

      In that regard, we are sending this note to see if we can come to some agreement with regard to the payment of our invoices. A copy of your account statement is enclosed for your convenience.

      Please call us so we can discuss your situation and your options. We can be reached, toll-free, at (800)____________ . If we do not hear from you by end of business on ____________ 20_____ we will assume that you are not interested in resolving this matter with us and we will act accordingly.

      We thank you, in advance, for your prompt attention to this matter.

  4. Mine is short and to the point.

    BALANCE DUE $1000.00 after (date) collection charges will be added to your outstanding balance.
    You are being allowed this FINAL OPPORTUNITY to clear your account before it is assigned to our attorney for collections.
    To prevent further action, FULL PAYMENT must reach me by (date).

  5. All great comments. Thank you. Let’s hope it never comes to the point where you have to issue a final demand.

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