(Hopefully) receive payments on overdue invoicesĪfter this, you should start receiving payments on overdue invoices. Once you’re happy with everything, then you can go ahead and send out your dunning letters-either by sorting postal letters into regional or national piles or by individually emailing each customer with their respective letter. Review your repository of customer emails and postal addresses and check the letters against their account information. Prior to sending your dunning letters, you’ll likely need a senior member of the collections team to review and vet them. This could delay the collections process even more. And if you rely on paper-based invoicing, you might be required to send your customer a second invoice in the mail if they are unable to locate the first. Note that once you start sending these dunning letters, the conversations themselves will often be fairly one-sided. Once you’ve set up your templates and have identified–and prioritized–your list of overdue accounts, the traditional dunning process does become more organized-but it’s still quite manual. Here are some examples of typical dunning letters or past-due invoice email templates. This is where the dunning letter or past-due invoice email comes in. One way or another you need to collect on those unpaid invoices.
Regardless of your approach, your purpose remains the same. You might choose to focus on the accounts most overdue versus focusing on the accounts with the highest outstanding balances. How you choose to work against this list might vary. The AR aging report is your basis for following up with late payers. Create a repository of delinquent accounts Many of these reports can also filter for delinquent accounts beyond 30 days and will include all accounts past-due within 30-60 days, 60-90 days, and those beyond 90 days. This report can cover any period from the date the invoice was due, up until 30 days after its due date. The collections team will run an AR aging report to see which invoices are still open, the balances of those unpaid invoices, and how long they’ve been outstanding. So, many follow a traditional, tried-and-true collections process-or dunning process-that looks something like this. What does the traditional dunning process look like?Įvery collections team wants to keep track of their payments and capture more revenue. In all of the scenarios above, a more streamlined collections process is the solution. This can result in them paying later than you’d expect.
In some cases, your manual, paper-based invoicing process might be delaying when customers are receiving their invoices. Other times, your customer might be having cash flow issues, they might have made an honest mistake in missing one or more email reminders, or they might purposely be avoiding settling their account. Sometimes, late payments are due to poorly communicated payment terms, unclear invoices, or the fact that invoices are being paid within customers’ own peculiar billing cycles. There are many reasons why customers might pay suppliers late. Typically, collections teams categorize delinquent accounts into 30, 60, 90, and 120 days late. What is a delinquent account?Ī delinquent account refers to a customer that has not made a payment within their allotted 30-day payment window. Equally as important, dunning letters help you manage your days sales outstanding (DSO) so that you can keep that ever-important financial metric-and your cash flow-in a good place. A dunning letter is a collection notice sent to a customer explaining that a payment they owe is overdue.ĭunning letters are a key tool for collections teams because they help with staying on top of and preventing delinquent accounts.
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