If you work with accounts receivables, the dunning process is an inevitable part of your workflow. In an ideal world, every customer would pay on time without needing reminders. But, anyone who has worked on an accounting team knows this, unfortunately, isn’t the case.

However, dunning doesn’t have to be the most time-consuming part of your day. There are plenty of strategies to put in place to make your dunning process less of a headache.

What is dunning?

Dunning is the process of communicating with customers to get them to provide outstanding payment for the goods or services they received from you. Dunning efforts tend to increase in intensity over time if payment still hasn’t been received. 

Examples of dunning-related communications include:

  • Emails
  • Phone calls
  • Mailed letters
  • In-person conversations
  • Third-party collection agencies communicating on your behalf

Dunning usually falls within the accounts receivable department, but this responsibility may be shared by an accounting team or by an operator in smaller accounting teams or businesses.

Dunning Process best practices

Dunning is an important, inevitable part of AR. If your current dunning process is quite manual and time-consuming, there are ways you could be better at setting yourself up for success. In this section, we’ll walk through key best practices to improve your dunning process.

P.S. Have unpaid invoices right now? Here are 5 email templates for following up on unpaid invoices

Establish a positive relationship before and during the dunning process

One of the best ways to set yourself up for success is to establish a positive relationship with your customers before needing to engage in dunning-related communications. 

You don’t want the first conversation you ever have with an important customer being you asking them for money. While it’s fair to do so if they owe you money, it’s better to set the tone of your working relationship with positive conversations first.

When first working with a new customer, make a point of fostering goodwill and a personal connection. Not only will this make people more inclined to treat you with mutual respect (and hopefully pay on time!), it’ll make it less awkward to reach out and ask for payment if they are pastdue.

Understand why customers may not be paying on time

If a customer is overdue on their payment, it’s important to understand why. 

If this is the first time a customer hasn’t paid on time, there’s a chance they may have just lost the invoice or someone made an honest mistake and it slipped between the cracks. A simple call to check in with a genuine interest in what’s happened can often reveal an easy solution. For example, the customer may just need another copy of the invoice. 

If a customer is repeatedly missing payments, it’s even more important to understand why. Say a customer has outstanding payments and you email them and find out they are having cash flow issues. Changing them over to credit card payments instead of cheques could help relieve some of that pressure on their cash flow, making both your lives easier. Additionally, switching them over to a digital payment method would allow you to schedule a pull payment on an agreed-upon date, so they don’t have to worry about paying you late and you get paid on time. Win-win! 

Here are some other ideas for how to encourage your customers to pay on time.

Send payment reminders before payment is due

One of the best ways to streamline your dunning process is to actually try to avoid having to do dunning communications at all! Sending payment reminders at n15 and n30, prior to when your net terms are complete, will help keep your invoice top of mind for your customers. 

Accounting teams and business owners tend to have a lot going on and their attention is pulled in many different directions every day. So, sending reminders before the payment is due will likely be an appreciated way to help hold them accountable. 

Standardize and automate your dunning communications

We’ve mentioned before that dunning is a necessary part of accounts receivables. However, doing it manually isn’t. 

Automating your dunning communications can take a significant amount of manual work off your plate and free you up to focus on more important things.

Using accounts receivable automation technology can assist with:

  • Invoice generation
  • Payment reminders
  • Payment processing
  • Past-due reminders
  • Credit card expiry reminders

Software like Notch automatically integrates with your current accounting software, making accounts receivable about as hands-off as it can get.