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A dunning letter is a written notice sent by a creditor to a debtor to request payment for an outstanding invoice. It is a formal step in the credit management process, intended to encourage the debtor to settle the overdue amount within a specified period.
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A dunning letter is sent when previous payment reminders have failed to result in payment. This typically occurs after one or two reminders have already been issued. By this stage, the customer has had sufficient time to settle the invoice. The dunning letter is usually the third step in the follow-up process for an unpaid invoice and represents a more formal approach.
A commonly used structure is as follows:
Important: In the case of consumers, the final dunning letter must meet specific legal requirements (such as providing a 14-day payment period and clearly stating any applicable collection charges). For business clients, the process tends to be more flexible, but still requires a clear and well-structured approach.
A dunning letter is not the initial step, but a crucial escalation before taking further action.
When dealing with a non-paying consumer, you are legally obliged to send a final dunning letter before applying any collection charges. Failure to comply may result in a court rejecting your claim for recovery costs.
The final dunning letter must meet the following criteria:
When drafting a dunning letter, it is important to maintain an empathetic yet professional tone. Below are examples of both an initial dunning letter and a final dunning letter.
[Your Company Name]
[Address]
[Postcode and Town/City]
[Email Address]
[Town/City], [Date]
Subject: Dunning letter regarding invoice [Invoice Number]
Dear [Customer Name],
According to our records, invoice [Invoice Number] for the amount of €[Amount] was due on [Due Date] and remains unpaid. It is possible that this invoice was overlooked.
We kindly request that you transfer the outstanding amount within 14 days of receiving this letter to [Bank Account Number], in the name of [Your Company Name], quoting the invoice number as reference.
If you have already settled the payment or have any questions regarding this invoice, please do not hesitate to contact us via [Telephone Number] or [Email Address].
Yours sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Signature]
[Your Company Name]
[Address]
[Postcode and Town/City]
[Email Address]
[Town/City], [Date]
Subject: Final dunning letter regarding invoice [Invoice Number]
Dear [Mr/Ms] [Last Name],
According to our records, invoice [Invoice Number], dated [Invoice Date], in the amount of €[Amount], remains unpaid. The original due date was [Due Date].
We kindly urge you to transfer the outstanding amount within 14 days of the date of this letter to [IBAN], in the name of [Company Name], referencing the invoice number.
If payment is not received within this period, we will be obliged to charge statutory collection fees. These charges start at €40 and may increase depending on the total amount outstanding.
If you have already made the payment, please disregard this letter. Should you have any questions or be experiencing difficulties with payment, feel free to get in touch with us via [Email Address/Telephone Number].
Yours sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Signature]
Before applying collection charges or initiating legal action, you are legally required to send a final dunning letter to consumers. This letter allows a final 14-day period for payment without additional costs and clearly sets out the possible consequences. It is a vital step that strengthens your legal position.
If payment is still not received, you may choose to pass the claim to a professional debt collection agency. The agency will take over communication with the debtor and attempt to recover the outstanding amount through letters, telephone calls, and potentially a settlement agreement. A reputable agency adheres to industry standards and protects your business reputation.
Before pursuing legal proceedings, offering a payment plan can be a sensible approach—particularly in the case of long-term customer relationships. With software such as Payt, you can automate payment arrangements and manage all related communication in one central platform.
If all out-of-court measures have failed, legal action may be required. This usually begins with a formal summons issued by a bailiff. If the court grants a judgement in your favour, you may proceed with enforcement actions such as wage attachment or asset seizure. Keep in mind that legal proceedings take time and incur costs, so proper documentation is essential.
With Payt, you are prepared for every phase of the dunning process. Our software ensures that reminders and dunning letters are sent on time, while keeping all communication well-organised. Whether you choose an amicable resolution or legal enforcement, you remain in control.
Curious how Payt can support your dunning process? Book a free demo and discover the power of automated credit management.
Payt is your trusted partner in credit management. Our software automates the process of sending reminders, dunning letters, and notices of default, giving you more time to focus on what truly matters: growing your business.
Get in touch with us today and discover how we can help you maintain financial stability and receive payments more efficiently.
A dunning system is a structured process used by businesses to follow up on unpaid invoices. It automates the sending of reminders, dunning letters, and final notices to help ensure timely payment from customers. A dunning system helps maintain consistent communication, improves cash flow, and reduces manual workload. With solutions like Payt, the entire dunning process can be fully automated and personalised.
It is common practice to send one or two friendly payment reminders before escalating to a formal dunning letter. These initial reminders provide the customer with an opportunity to pay without added pressure. If payment is still not received, a dunning letter represents the next, more formal step. It often includes the potential for additional costs or legal consequences.
A payment reminder is an informal and courteous message reminding the customer of an overdue invoice. A dunning letter, by contrast, is a formal communication that typically follows one or more reminders. It sets a firm deadline for payment and may include a warning about possible collection charges or legal action if the invoice remains unpaid.
A dunning letter encourages the debtor to pay and may include a warning about possible consequences. A notice of default is a more serious legal step — it formally states that the debtor has failed to meet their payment obligation and that legal proceedings may now follow. In many jurisdictions, including the United Kingdom and the Netherlands, a notice of default is often required before initiating legal action.
A dunning system is a structured process used by businesses to follow up on unpaid invoices. It automates the sending of reminders, dunning letters, and final notices to help ensure timely payment from customers. A dunning system helps maintain consistent communication, improves cash flow, and reduces manual workload. With solutions like Payt, the entire dunning process can be fully automated and personalised.
It is common practice to send one or two friendly payment reminders before escalating to a formal dunning letter. These initial reminders provide the customer with an opportunity to pay without added pressure. If payment is still not received, a dunning letter represents the next, more formal step. It often includes the potential for additional costs or legal consequences.
A payment reminder is an informal and courteous message reminding the customer of an overdue invoice. A dunning letter, by contrast, is a formal communication that typically follows one or more reminders. It sets a firm deadline for payment and may include a warning about possible collection charges or legal action if the invoice remains unpaid.
A dunning letter encourages the debtor to pay and may include a warning about possible consequences. A notice of default is a more serious legal step — it formally states that the debtor has failed to meet their payment obligation and that legal proceedings may now follow. In many jurisdictions, including the United Kingdom and the Netherlands, a notice of default is often required before initiating legal action.
