It used to be the case that record labels didn't expect to hear professional recording quality on demos.
The idea was that a great song shines through in the simplest presentation.
That's all changed. Present the best work you can!
Everything about your presentation counts.
Sure, it costs $$$, but the amount of time, effort, money spent can pay off. First you have to get in front of the correct people to be screened and make the cut. Follow the rules on the website of the company you are submitting your demos to.
However, if your song's words, lyrics, melody, flow, chorus, bridge, hook, style, genre, etc. fail to grab the screener's attention, it's curtains.
It's in your best interest to put your best foot forward by presenting a professionally mixed and mastered demo with the proper instrumentation. :)
Need help? Ask the forum. Need help personally, p.m. me.
Agree that getting your song well-recorded is important - the good news is that it's never been easier to make a decent recording. Assuming you have a computer already, a few hundred pounds will get a reasonable mic and soundcard, and free or cheap software such as Garageband for Mac, Reaper, or cut-down versions of Studio One or Cubase will get you a long way.
There are other options as well - I run a recording service for Christian songwriters at www.worshipsongrecording.com which is reasonably priced and (I like to think anyway!) decent quality. Do check it out if you're a songwriter, the site has full details and demos of the work we do, or email me email@example.com with your enquiry.