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Glossary

Dunning

Dunning is the systematic process of sending increasingly firm payment reminders and collection notices to customers with overdue invoices.

Updated 2 min read

Definition

Dunning is the structured, systematic process of communicating with customers to collect overdue payments. It involves a sequence of escalating actions - from polite payment reminders before or at the due date to formal collection notices and, ultimately, legal action for persistently unpaid invoices. The term originates from the 17th-century English verb ‘dun,’ meaning to make persistent demands for payment. In modern accounts receivable management, dunning is a defined workflow with specific triggers, timing, communication templates, and escalation rules.

In the Indian business context, dunning must balance firmness with relationship sensitivity. Indian B2B commerce relies heavily on trust-based relationships, and overly aggressive early-stage dunning can damage commercial partnerships. Effective dunning in India typically starts with a courtesy reminder 3-5 days before the due date, followed by increasingly formal communications at defined intervals. For MSME suppliers, the dunning process may reference specific legal provisions - the MSMED Act, 2006 entitles micro and small enterprises to compound interest (three times the bank rate) on delayed payments, and the MSME Samadhaan portal provides a formal grievance mechanism.

Modern AR platforms automate the dunning process, sending reminders via email, SMS, or WhatsApp based on configurable rules. Automation ensures consistency - every overdue invoice triggers the appropriate follow-up without relying on individual collectors to remember. Dunning workflows can be customised by customer segment (strategic vs. transactional), invoice value (high-value invoices may require phone calls), and payment history (first-time late payers receive gentler reminders than chronic defaulters). The combination of automated digital reminders and targeted human intervention at escalation points delivers the best results.

Key Points

  • A structured sequence of payment reminders that escalates from courtesy to formal collection actions

  • Effective Indian dunning balances collection firmness with commercial relationship preservation

  • Typical sequence: pre-due reminder, due-date confirmation, 7-day follow-up, 15-day escalation, 30-day formal notice

  • MSME suppliers can reference the MSMED Act and MSME Samadhaan portal in dunning communications

  • Automated dunning ensures every overdue invoice is followed up consistently without manual tracking

  • Customise dunning intensity by customer segment, invoice value, and historical payment behaviour

  • Phone calls combined with email follow-ups are most effective for Indian B2B collections at the escalation stage

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