Dunning
The process of systematically communicating with customers to collect overdue payments, through a sequence of increasingly urgent reminders.
FAQs
What is smart retry logic in dunning?
Smart retry logic uses machine learning or heuristic rules to optimize when to retry a failed payment — based on failure reason code, day of week, time of day, and customer payment history. For example, NSF (insufficient funds) failures are more likely to succeed later in the pay cycle when customer accounts are replenished. Smart retry can increase recovery rates by 10–20% over fixed-interval retries.
How do you maintain customer relationships during dunning?
Effective dunning is empathetic and assumes positive intent — 'we noticed your payment didn't go through' rather than 'you haven't paid.' Early communications should be soft and solution-focused (card update link, alternative payment method). Escalation tone should increase only after multiple failed contacts. Pausing service rather than canceling immediately gives customers time to resolve issues without triggering churn.
At what point should an overdue invoice be sent to collections?
For B2B invoices, internal dunning should continue for 60–90 days before escalating to a third-party collections agency. At that point, internal resources are rarely cost-effective. Collections agencies typically work on contingency (15–50% of recovered amount). Invoices over 120 days past due have recovery rates below 20%, making write-off and bad debt recognition more appropriate for small balances.
Related Terms
Accounts Receivable
Amounts owed to a business by customers for goods or services delivered but not yet paid for.
Churn Rate
The percentage of customers or revenue lost within a given period due to cancellations or non-renewals.
Days Sales Outstanding
The average number of days a company takes to collect payment after a sale, measuring accounts receivable collection efficiency.
Aging Report
A financial report categorizing outstanding invoices or payables by how long they have been outstanding, used to manage collections and payment prioritization.