Demand Letter for Unpaid Invoice

Gather the signed contract or statement of work, every invoice behind the balance, and every email, message and call note about payment. Then log each contact on its own line: the date, who reached out and how, what was said or promised, and whether it happened.

Take each date from a timestamp, an invoice or a bank record, never from memory. The history paragraph in your letter summarizes this log. If the dispute ever reaches a judge, the log and the papers behind it become your evidence.

While the contract is open, note the payment terms, any late fee or interest clause, and any rule on how notices must be sent. Copy the client's exact legal name as well. California's courts warn that if you don't sue under the proper legal name of the person or business¹, you might not be able to collect if you win.

Start from the invoice amount and subtract every payment and credit. Add interest only if your contract sets a rate or a law provides one, and round nothing in your favor. A clause charging 1.5% a month works out to 18% a year. Charge it as simple interest, on the unpaid amount only, unless the contract clearly provides for compounding.

If the contract names no rate, state law may supply one. New York's statutory rate, for example, is 9% a year², or 2% when an individual is sued over a consumer debt. If a partial payment arrived after the due date, split the calculation at that date. Count the days in each period, and use a 365-day year unless the contract says otherwise.

Your letter will name the step you'll take if the deadline passes, usually a small claims case. Make sure that step is open to you. Limits for businesses can be lower than for individuals, and some small claims courts turn corporations away entirely.

California's courts put the small claims limit at $12,500 for an individual but $6,250 for a business entity³, such as a corporation or LLC. Kestrel Creative, the LLC in the example, is owed $7,315.61, so a California small claims court could award it no more than $6,250. To recover the full amount, it would need a limited civil case, which takes claims up to $35,000 and works very differently:

New York City goes further. Its Civil Court Act bars a corporation, partnership or association from bringing a small claims case⁵. One with its main office in New York State can file a commercial claim⁶ instead, but no more than five in a calendar month⁷. For a claim from a consumer transaction, the business must first send a demand letter by ordinary first-class mail, 10 to 180 days before filing.

If your total is over the limit, decide before you write. A small claims hearing is quicker and cheaper, but it can award you only part of the money. A bigger case can recover all of it, at the cost of more time and usually a lawyer. Your letter should name only the step you've chosen.

The demand comes third, after a friendly reminder and a firmer late payment notice that warned a formal demand would follow. Make it a separate, formal letter rather than a third reminder, and keep it to a page if you can. It needs these parts, in this order:

• A heading: the date, how you're sending it, and the client's legal name and address
• A subject line such as "Formal demand for payment: Invoice 2047"
• The debt summary, line by line, ending in one total
• A short history, three to five sentences, with every date taken from your log
• The demand: the exact total, a deadline set as a calendar date, and how to pay
• What you'll do if the deadline passes, and that contract interest keeps accruing
• An offer to discuss a written payment plan before the deadline

Let the figures do the pressing. A letter that recites dates and amounts calmly reads as more serious than one full of angry words, and a judge may read it later. Set the deadline 10 to 14 days out. Deliver it the way your contract's notice clause requires; if there isn't one, use certified mail with a return receipt plus email, and keep proof of both.

If you'd rather start from your documents than from a blank page, the demand letter generator drafts the letter in River from your contract, invoices and emails. Before the next project, sign a service agreement with a late-payment interest clause, so your next letter has a rate to quote.