A dunning letter is a reminder sent to the customer stating that an invoice was sent and it is past due. Dunning letters should always include references to the services rendered or product delivered; a copy of the invoice past due and multiple payment options. it should include a phone number in case the customer wants to solve the problem over the phone.
The origin of this word comes from the 17th-century verb “dun” which means to demand payment of a debt. Dunning letters are sent to the clients by following a constant progression. They start with a gentle tone, reminding the customer of the payment terms. Then escalate to a more strict demand of payment if the client isn’t responding to past letters.
There are separate dunning letter templates. We recommend no more than 4 letters corresponding to 30; 45; 60 days past due and a final letter that triggers the legal process.
Now to make sure they have received the initial Dunning letters, you can take a follow up with them either by mail or a phone call. If the reason for non-payment comes out to be the missing invoice, you can settle the matter over the phone.
After 45 days of non-payment, the tone can become more direct and strict and we suggest you stop fulfilling any additional orders.
60 days past due should now include a clear list of actions:
There are various physical forms of dunning letters available. It starts from a normal letter which is sent by regular or registered mail, or overnight because they want to deliver their message as soon as possible to receive the payment in a short period. However, a dunning letter can also be sent to the clients as a fax, e-mail, or the most convenient option would be a simple text message. But these are kept as the last resort since even in this digital age, sending a dunning letter in a more traditional paper-based method is considered to be more effective than any other and you have to maintain this in your accounts receivable collections.
Technology can help and solutions exist that create and send the dunning letters automatically. Here the system is configured in such a manner that it can use a set of template letters that correspond to the collection stages.
The first letter is sent to the client which includes a gentle reminder regarding the missed payment and details about the invoices and the services delivered. This is followed up by a call or text where you will be showing your concern regarding the reason for late payment and provide them other options of payment if it is feasible for them and you. Along with this, make sure you are reminding them about the penalties they could face from delayed payments.
Once the past due date exceeds 45 days, the probability of a successful payment becomes quite low as indicated by the ar automation tools. With this letter, you can start laying out the potential consequences of a late payment (collection fees; legal fees; service interruptions…)
Now that the past due date has exceeded 60 days, you can start explaining that the services will be interrupted and how it can restored
Now that you have tried your best, the final letter should trigger the legal process.Download Free Application