Automate your dunning letter process steps

Implementing an automated dunning letter process involves several key steps that can transform your collections management. From selecting the right software to setting up customizable templates and scheduling reminders, each step plays a crucial role in ensuring that your dunning process is efficient and effective. In this article, we'll outline the critical steps you need to take to automate your dunning letters, helping you achieve better results with less effort.

The practice of dunning involves organisations attempting to retrieve money that their clients owe them. In the English language of the 17th century, it came from the verb "dun," which meant "to demand payment of a debt."

In the modern day, there is a prescribed process that must be followed when contacting a customer who is in default to collect payment. We will try to cover the same as well how automating the process helps in a much for efficient system.

SO, WHAT IS A DUNNING LETTER?

When an invoice is not paid on time, a debtor receives a written payment demand known as a "dunning letter." It serves to inform the debtor that legal action will be taken if the payment is not made by a certain date and that the payment is past due.

You may send the debtor up to three such letters as a business. After you submit the first dunning letter, you have the option to decide to start legal dunning procedures right away.

WHEN IS A DUNNING LETTER SENT?

An organisation is entitled to send the first Dunning Letter as soon as the payment deadline is missed for an invoice but in B2B where the buyer-seller relationship is usually long term, the sellers don’t initiate the 1st letter immediately after the due date

HOW TO DRAFT A DUNNING LETTER?

While it’s advisable to draft the dunning letter by someone who’s legally competent,  it can be done by anyone till the time they keep in mind the details that the Dunning Letter needs to contain to ensure that subsequent legal proceedings can be taken against the defaulting party. You can also automate your Accounts Receivable Process and use platforms like Inebura that comes pre-loaded with Legally Validated Dunning Letter Templates.

WHAT DETAILS ARE TO BE INCLUDED IN A DUNNING LETTER?

At the very least, the letter should include the following fundamental information:

  • The title "Dunning Letter"
  • Invoice Number
  • Notification of Payment Delay
  • Original Payment Deadline
  • New Due Date Deadline
  • Dunning and Late fees (optional).
  • Outstanding Balance (including the whole amount as well as any fees and interest)
  • Contact Person Details from the Buyer Side

Automating the Dunning Communication can significantly improve efficiency and recovery rates.

STEP-BY-STEP GUIDE TO AUTOMATING THIS PROCESS:

1. Choose the Right Software

2. Segment Customers

Classify customers based on their payment history and overdue periods (e.g., 30, 60, 90 days overdue). This allows for tailored communication strategies.

3. Design Dunning Campaigns

Create the timeline strategy for the 3 letters that are to be sent i.e. decide at what interval the 3 letters are to be sent in case of nonpayment after delivery of each letter. Else you can also use the pre-loaded strategy if your automation tool allows the same.

Original Source: https://inebura.com/blog/How-Can-You-Automate-Your-Dunning-Letter-Process 



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