A SaaS nonpayment demand letter is a formal request for payment sent to customers who have failed to pay for software subscriptions or services. Unlike traditional product companies, SaaS businesses often extend service before receiving payment, creating unique collection challenges. A well-crafted demand letter documents the debt, outlines consequences, and often recovers payment without litigation.
SaaS companies have unique leverage: the ability to suspend or terminate service, withhold data exports, and report to credit bureaus. Your demand letter should reference these consequences. However, be careful about data hostage tactics—they can backfire legally. The best approach is a firm but professional letter that gives the customer a face-saving way to resolve the debt before escalation.
After automated payment reminders fail (typically 15-30 days past due), a formal demand letter signals escalation. For B2B SaaS, send demand letters before terminating accounts—it often triggers payment from accounts payable departments that ignored automated emails. For consumer SaaS, demand letters are typically sent after 60-90 days and before referring to collections.