Dunning

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