Dunning
The process of reminding customers, in escalating steps, to pay invoices that are due or overdue.
In short
- It usually runs as a sequence: a friendly reminder, then firmer notices, then a call, then collection action.
- Most late payments are caused by lost invoices and forgotten due dates, not refusal.
- Tone and timing matter: the goal is to get paid and keep the customer.
Dunning is the structured follow-up of unpaid invoices. The word is old, but the practice is simple: remind customers before and after the due date, and increase the pressure the longer an invoice goes unpaid.
A typical sequence
- Before due: a courtesy reminder a few days ahead, with the invoice attached.
- Just overdue: a polite note that the invoice is past due, often with a payment link.
- 30 days overdue: a firmer notice, and a phone call to the accounts payable contact.
- 60 days overdue: a statement of account, notice of late fees if the terms allow them, and a credit hold on new orders.
- 90 days or more: a final demand, then referral to a collection agency or legal action.
Doing it well
Most invoices paid late were not refused. They were sent to the wrong person, held for a missing purchase order number or simply forgotten. Early reminders fix most of those at no cost to the relationship. Reminders work best when they include the invoice and an easy way to pay, and when they stop the moment a payment is applied. A customer who has paid is not chased.
For subscriptions, dunning also means retrying failed card payments and asking customers to update expired cards before the account is suspended.
Worked example
A sequence that works
A B2B software company sends a reminder three days before each invoice is due, another on day 3 past due and a third on day 14, then a call on day 21. Over two quarters, the share of invoices paid on time rises from 61% to 78%, and very few accounts reach the 60-day stage at all.