Dunning: Key Aspects, Best Practices, and Latest Trends

Dunning is the methodical process of communicating with customers to collect accounts receivable, often through automated letters, emails, or calls, when payments are overdue. It typically starts with polite reminders, escalating to formal notices regarding failed payments, service suspensions, or legal action to ensure payment recovery. 

To recover overdue payments, reduce bad debt, and ensure cash flow for businesses, particularly in subscription-based models.

Key Aspects of the Dunning Process

1. Before Payment Due Date

Send invoice / payment reminders (e.g., 7 days before due date)

Verify payment method is valid

2. On Due Date

Notify customer that payment is due

Offer easy payment options

3. After Payment Failure or Overdue Invoice

1st reminder: Friendly notification

2nd reminder: Stronger reminder with payment link

3rd reminder: Warning of service interruption or late fees

4. Escalation

Suspend service (if applicable)

Transfer to collections team

Engage collection agencies (for severe cases)

5. Resolution

Payment received

Payment plan arranged

Debt written off (if unrecoverable)

Best Practices

Personalized Communication

Instead of generic emails:

• Address customer by name
• Mention invoice number and amount
• Explain consequences clearly
• Offer support if there are issues

Omnichannel Notifications

Use multiple channels:

• Email
• SMS
• WhatsApp
• Mobile app notifications
• Automated phone calls

Smart Retry Logic

For failed card payments:

• Retry at optimal times
• Use card updater services
• Automatically update expired cards

Self-Service Payment Portals

Allow customers to:

• Update payment methods
• Download invoices
• Set up installment plans
• Pay instantly

Latest Trends (2025–2026)

AI-Powered Dunning

AI predicts:

• Which customers are likely to pay
• Best time to send reminders
• Best communication channel
• Probability of churn

Behavioral Segmentation

Different dunning strategies for:

• First-time late payers
• High-value customers
• Chronic late payers
• Enterprise accounts

Predictive Collections

Instead of reacting to missed payments:

• Identify at-risk customers early
• Offer payment plans proactively
• Trigger reminders before failure occurs

Embedded Payments

Customers can pay directly from:

• Email
• SMS
• WhatsApp
• Customer portal - without logging into a separate system.

Customer-Friendly Dunning

Modern companies focus on:

• Retaining customers
• Avoiding aggressive collections
• Preserving brand reputation