What it means
A firm may send a gentle reminder shortly after an invoice is due, then a clearer notice if no payment or response arrives. Later steps may involve a call, account hold, formal demand or specialist collection, subject to contract and law.
A good process distinguishes customers who forgot to pay from those who dispute a charge or are struggling financially, because sending repeated threats to every customer can damage trust without increasing recovery. Start with accurate data.
Match invoices to payments, credits and agreed terms, and confirm that the invoice went to the right person and that the customer has enough detail to approve it. A bank payment may be unallocated, or a credit may sit in another account, so pause the automated sequence when a genuine dispute is logged and give someone ownership of resolving it, otherwise the system can keep chasing an amount that is not due.
Timing and channel should be documented. The business might define a first reminder five days after due date and a phone call after two weeks, but there is no universal schedule, and large strategic customers may need account-manager involvement while small balances may not justify costly calls.
Respect restrictions on who can be contacted, the frequency of contact and disclosure of debts, because legal collection rules differ by jurisdiction and debtor type and should be checked before escalation. Track outcomes beyond the number of emails sent.
Useful measures include days sales outstanding, ageing by bucket, collection effectiveness and the share of disputed invoices resolved, and promised payment dates should be recorded along with whether they were kept. A low collection rate may reflect unclear contracts or billing errors upstream, not an insufficiently forceful reminder, so recurring issues should be fed back to sales and invoicing teams.
Technology can send notices and log responses, but it needs guardrails. Suppress accounts with active disputes, recent payments or special arrangements, review templates for accurate tone and facts, and allow staff to override them when context demands.
Verify that bank details in messages are current and established, since a customer should not be pushed to a new account based on an unverified reminder, and protect customer information in every channel. For owners, assign responsibility for each overdue account and set escalation criteria, and offer a clear way to ask questions or provide payment proof.
Reconcile the ledger before any formal action and seek professional advice for material legal claims. Dunning is effective when it reduces avoidable delay and uncovers root causes, not when it simply sends more messages.
In practice
Real-world examples.
Example
A company reminds a customer about one overdue invoice with a clear reference and balance. The message names the invoice number, the due date and the amount outstanding, and says how to pay. The customer settles within two days because nothing needs to be looked up.
Example
An automated notice is paused after the customer submits proof of payment. The accounts team traces the transfer and allocates it to the invoice before the next reminder would have been sent. The customer receives a short thank-you instead of a second chase.
Example
A collector logs a promised payment date and follows up if it passes. The note records who made the promise and the amount agreed. When the date is missed, the follow-up refers to that promise and escalates only if there is no response.
Formula
Calculation
Illustrative overdue balance = Valid invoiced amount due - Applied payments and credits, adjusted for agreed disputes and corrections
Worked example. A fictional account shows $12,000 invoiced, $7,000 paid and a $2,000 approved credit.
- The reconciled overdue balance is $12,000 - $7,000 - $2,000 = $3,000 if all of it is past due.
- A reminder for $5,000 would be wrong because it ignores the credit.
- If the customer also disputes a $1,000 line within the $3,000, the amount to chase is held at $2,000 until the dispute is resolved.
Check due dates and payment allocation before sending anything.Case study
Seen in the real world.
This illustrative and entirely fictional example follows Elm Supply, an invented office vendor. Its dunning system sent three reminders to a long-time customer for a $6,000 invoice. The customer had paid, but the transfer arrived without an invoice reference and was placed in suspense. The accounts team matched the remittance using bank data, allocated it and apologised for the mistaken reminders.
It added a review for recent unallocated receipts before future automated notices. The team also provided a route for customers to report discrepancies. The invented change improved collection accuracy without increasing the volume of messages. The case shows why ledger quality matters as much as reminder cadence.
In the following quarter, the fictional team found that most of its remaining overdue items were genuine disputes about delivery dates. It passed those to the sales owners and kept the automated sequence only for undisputed balances. Collections improved because effort moved to the real causes of delay.
Watch out
Common mistakes.
- Sending notices without reconciling recent payments and credits.
- Continuing automated reminders during an active dispute.
- Measuring success by emails sent instead of valid cash collected and errors fixed.
Questions
People also ask.
Is dunning the same as a lawsuit?
No. It is a collection follow-up process that may precede formal steps.
Should every overdue customer receive the same message?
No. Amount, relationship, dispute and applicable rules affect the approach.
Can software run the whole process?
It can automate routine steps, but people must check exceptions and accuracy.
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