What is Dunning?
The process of systematically reminding and pressing customers to pay their overdue invoices.
Definition
Dunning is the structured sequence of communications a company sends to customers with past-due balances, escalating from gentle reminders to firmer demands as invoices age. The goal is to accelerate collections and reduce bad debt while preserving the customer relationship. A typical dunning process uses defined intervals and message tiers tied to how overdue an invoice is, and may add late fees or eventually refer accounts to collections. Effective dunning directly improves cash flow and lowers days sales outstanding.
How Dunning Works in ERP
An ERP automates dunning by monitoring the AR aging and triggering reminder emails or letters at configured stages, with escalating templates as invoices pass each threshold. It can group multiple overdue invoices into a single statement, apply late fees, and track which customers have received which notices. Collections staff see prioritised work queues and a full communication history per account, making follow-up consistent and measurable.
ERP Vendors with Strong Dunning
Oracle NetSuite
The original cloud ERP — built for fast-growing companies
Sage Intacct
Best-in-class cloud financials for services and nonprofits
SAP S/4HANA Public Cloud
Standardised cloud ERP with quarterly auto-upgrades and low TCO
Microsoft Dynamics 365
Modular ERP + CRM tightly integrated with Microsoft 365
Frequently Asked Questions
What is a dunning level or dunning sequence?
A dunning level is a stage in the escalation process, each tied to how overdue an invoice is and carrying a progressively firmer message. For example, level one might be a polite reminder at 7 days past due, level two a firmer notice at 30 days, and level three a final demand at 60 days. The ERP advances accounts through these levels automatically based on aging. This consistency ensures no overdue account is overlooked.
Does automated dunning hurt customer relationships?
When configured thoughtfully, it generally helps, because customers receive timely, professional reminders rather than sporadic or aggressive chasing. The tone and timing of each level can be tailored, and key accounts can be exempted for manual handling. Automation also ensures reminders are accurate and reference the right invoices. The result is usually faster payment with less friction than ad hoc, manual collections.