Demand Letter for an Unpaid Invoice: What to Include

What the letter is for

An invoice demand letter has two jobs. The first is to get paid: a clear statement of what is owed, from a business that has obviously organized its records, often produces a check or a call. The second is to set up the claim if payment does not come. In Texas a letter that presents the claim properly starts the clock on attorney's fees, fixes the date from which interest can be shown, and becomes the first exhibit in a suit on the account. The broader question of what to do when a customer owes money, including the collection and court options, is covered in what to do when a customer owes your company money. This article is about the letter itself.

What to include

1. The parties, correctly named. Your legal entity and the customer's, as they appear on the contract or the account application. A letter to "Smith's Shop" when the debtor is an LLC with a different name is a weak start to a sworn account.
2. The agreement. The contract, purchase orders, signed quote, credit application or terms and conditions that govern the account, with the payment terms quoted.
3. Each invoice. Number, date, amount, due date and what it was for. A table is clearest when there are more than two.
4. Payments and credits. Every payment received and every credit allowed, so the customer cannot say the total ignores them. This also matters later: a sworn account affidavit must state that all just and lawful offsets, payments and credits have been allowed.
5. The exact total owed. One number, with the arithmetic visible.
6. Interest. The rate the contract provides, or the statutory rate if none, and the date from which it runs. More on this below.
7. The deadline and the method. A date by which payment must be received and where to send it. Thirty days aligns with the attorney's-fee statute; a shorter period is common when the account is long overdue.
8. What follows. A plain statement that if payment is not received, the company will pursue its remedies, which may include a lawsuit for the balance, interest, attorney's fees and costs. Nothing more dramatic than that.
9. Attachments. The invoices, the agreement and a statement of account.

Presentment: the 30-day clock on attorney's fees

Texas Civil Practice and Remedies Code § 38.001 allows a party to recover reasonable attorney's fees from an individual or organization, in addition to the amount of a valid claim, when the claim is for rendered services, performed labor, furnished material, a sworn account, or an oral or written contract. Section 38.002 adds three conditions: the claimant must be represented by an attorney, the claim must be presented to the opposing party or its authorized agent, and payment of the just amount owed must not have been tendered before the thirtieth day after presentment.

The demand letter is how the claim is presented. It need not use the word "presentment," but it must state the amount and ask for payment. A letter that demands "all amounts due" without a figure gives the customer nothing it can tender and invites an argument later that the claim was never presented. The fee rules in detail are covered in recovering attorney's fees in a Texas contract case.

Interest on the unpaid invoice

If the contract or the invoice terms the customer accepted set an interest rate on late payments, state that rate and the amount accrued. If no rate was agreed, Texas Finance Code § 302.002 allows a creditor to charge legal interest at six percent a year on the principal, beginning on the thirtieth day after the amount is due. State the date each invoice became due and the date interest began.

Two cautions. A rate in your invoice terms binds the customer only if the customer agreed to those terms, which is a question about how the account was opened. And payments on construction projects are governed by the Texas Prompt Payment Act, which sets its own payment deadlines and interest, covered in the Texas Prompt Payment Act for construction payments.

Writing with the sworn account in mind

Texas Rule of Civil Procedure 185 gives a seller a procedural advantage when suing on an open account for goods, services, labor or materials on which a systematic record has been kept. If the petition is supported by an affidavit that the claim is just and true, due, and that all just and lawful offsets, payments and credits have been allowed, the account is taken as prima facie evidence unless the defendant files a written denial under oath. A defendant who does not file a verified denial is not permitted to deny the claim or any item in it.

The demand letter is the dress rehearsal for that affidavit. Writing it from the same systematic record, with the same invoice list and the same credits, means the later pleading is consistent with what the customer already received. Inconsistencies between the letter and the petition are the first thing a defense lawyer looks for.

What to leave out

• Threats of criminal charges or regulatory complaints. A civil debt is a civil matter. Threatening to report the customer to the police or a licensing board to extract payment can expose the sender to claims of its own, covered in the guide on when a demand letter crosses into defamation or extortion.
• Inflated figures. Adding fees, charges or interest the contract does not support undermines the credibility of the real number and can defeat a sworn account.
• Copies to third parties. Sending the letter to the customer's own clients, its bank or its landlord is not collection; it is a reason for the customer to sue you.
• Personal commentary. The history of the relationship, how disappointed you are, what you think of their management. A judge may read this letter.
• Legal conclusions you cannot support. "This is fraud" or "this is theft" because an invoice is late. Keep to the account.

Example

Suppose a Dallas printing company has four unpaid invoices from a marketing agency totaling $27,400, with one partial payment of $5,000 received two months ago. The letter names both entities as they appear on the signed master services agreement, quotes the net-30 payment term, lists the four invoices with numbers, dates and amounts, shows the $5,000 credit, states the balance of $22,400, cites the agreement's one percent monthly late charge with the accrued amount, asks for payment within 30 days to a stated account, and says that otherwise the company will pursue the balance, interest, attorney's fees and costs. It attaches the agreement, the invoices and the statement of account. The agency pays two of the invoices and disputes the others on the ground that proofs were not approved. The company now has a presented claim, a 30-day clock running on the disputed invoices, and a clean record for a sworn account on the balance if the dispute does not resolve.

Who should sign it

A first letter from the business owner or controller is normal for a customer who is merely slow. Once a customer has ignored statements, disputed the account or gone silent, a letter from a litigator changes the conversation and also satisfies the requirement in § 38.002 that the claimant be represented by an attorney when fees are later sought. The trade-offs are covered in whether a letter from a lawyer carries more weight than your own.

After the letter

If the customer pays, document the account as closed. If the customer proposes a payment plan, put it in writing with dates, amounts, a statement that the full balance remains due on default, and no release until the last payment clears. If the customer disputes part of the account, separate the disputed invoices from the rest and ask for payment of the undisputed amount while the dispute is worked out.

If nothing happens, the next step is a lawsuit, usually on a sworn account with a breach of contract claim pleaded alongside it. Texas Civil Practice and Remedies Code § 16.004 gives four years from accrual for an action for debt and for an action on an open account, so there is time, but evidence and collectability both erode while you wait. Tina Wysk represents Dallas businesses in collection and breach of contract disputes, from the first demand through judgment.