How to Build a Dunning Process: From Reminder to Legal

A dunning process is the defined sequence of actions a company runs from before the due date to formal escalation. Without one, collections follow whoever has time: the big account gets called, the small one gets forgotten, and the order of work is set by memory rather than by risk.

The principle: recovery decays with time

Recovery rates fall sharply as an account ages. Balances worked in the first 15 days are collected in large majority; past 180 days, recovery is usually a small fraction. That defines the shape of the process: most of the effort belongs at the front, where return per contact is highest.

Structure by days past due

Timing varies with your business cycle. The design does not: preventive, active, formal, negotiated, escalated.

The contact before the due date

The highest-return stage is not collection — it is the reminder. In B2B, a large share of lateness comes from the customer's own administrative failures: a lost invoice, a purchase order mismatch, an internal approval sitting in someone's queue. A reminder clears that before it becomes past due, with no relationship cost. More in preventive collections.

The first active contact

The goal in the first days is to find the cause, not to apply pressure. Causes fall into three groups, each with different handling:

• Administrative (invoice never arrived, PO mismatch) — fix it the same day
• Temporary cash (tight month) — negotiate a date, keep the relationship
• Structural (real distress) — trigger risk review and cut the limit now

Treating all three the same is the most common error: pressure applied to someone with an invoice problem, leniency granted to a company that is failing.

Holding new orders

The hold belongs in the process, with an objective threshold and a defined release authority. Two practical rules:

1. Automatic hold past the threshold in policy
2. Release only on payment, a signed agreement, or logged approval from a higher authority

A hold that can be negotiated without criteria becomes a monthly argument with sales — and stops being a control.

Who collects at each stage

• Automation — reminders and notices
• Finance — contacts from 1 to 30 days
• Sales — support on relationship-critical accounts
• Credit — decisions on holds and limits
• Agency or counsel — past the defined threshold

Leaving all collections to the rep destroys the commercial relationship; removing the rep entirely loses the most effective contact channel in B2B. The balance is for sales to participate without owning the process.

Documentation

Log the date, channel, who you spoke to, what was said and what was promised. That history supports the next negotiation, backs any legal action, and feeds the customer's risk analysis.

Process metrics

• Recovery by aging bucket
• Time from due date to first contact
• Promise-to-pay kept rate
• Share of accounts reaching formal escalation
• Collection cost per dollar recovered

What to take from this

Build the sequence with defined stages, timing and owners, concentrate effort in the first 30 days, and always ask the cause. Holds need objective criteria and a release path — and every contact needs to be logged.