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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, meant 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 not led to payment. This usually happens after you’ve already sent one or two reminders. At this point, the customer has had sufficient time to pay. The dunning letter is typically the third step in the follow-up process for an unpaid invoice, and it marks a more formal approach.
A commonly used structure looks like this:
Important: In the case of consumers, the final dunning letter must meet specific legal requirements (such as offering a 14-day payment period and stating the applicable collection costs). For business clients, the process is more flexible, but still requires a clear, structured approach.
A dunning letter is not the first step but a crucial escalation before considering further action.
When dealing with a non-paying consumer, you’re legally required to send a final dunning letter before charging any collection fees. Failure to comply may result in a court rejecting your claim for collection costs.
The final dunning letter must meet the following criteria:
When writing a dunning letter, it’s important to use an empathetic and professional tone. Below are examples of both a first dunning letter and a final dunning letter.
[Your Company Name]
[Address]
[ZIP code and City]
[Email Address]
[Customer Name]
[Customer Address]
[ZIP code and City]
[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’s possible the 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], referencing the invoice number.
If you have already made the payment or have questions about this invoice, please don’t hesitate to contact us at [Phone Number] or [Email Address].
Sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Sender’s Signature]
[Your Company Name]
[Address]
[ZIP code and City]
[Email Address]
[Customer Name]
[Customer Address]
[ZIP code and City]
[City], [Date]
Subject: Final dunning letter — invoice [Invoice Number]
Dear [Mr./Ms.] [Last Name],
According to our records, invoice [Invoice Number], dated [Invoice Date], in the amount of €[Amount], is still unpaid. The original due date was [Due Date].
We urge you to pay this amount within 14 days of the date of this letter by transferring it to [IBAN], in the name of [Company Name], referencing the invoice number.
If payment is not received within this period, we will be forced to charge statutory collection fees. These costs start at €40 and may increase depending on the outstanding balance.
If you have already made the payment, you may disregard this letter. If you have any questions or are experiencing payment difficulties, please feel free to contact us via [Email Address/Phone Number].
Sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Sender’s Signature]
Before applying collection costs or legal pressure, you’re legally required to send a final dunning letter to consumers. This letter provides a final 14-day period to pay without extra charges and clearly outlines the potential consequences. It’s a critical step that strengthens your legal position.
If no payment follows, you may choose to transfer the claim to a professional debt collection agency. They take over communication with the debtor and attempt to collect the payment through letters, phone calls, and possibly a settlement plan. A reputable agency follows industry standards and safeguards your reputation.
Before taking legal action, offering a payment plan can be a smart move, especially in the case of long-term customer relationships. With software like Payt, you can automate payment plans and manage communication all in one place.
If all out-of-court options are exhausted, legal action may be necessary. This typically starts with a formal summons from a bailiff. If the court issues a judgment, you can proceed with enforcement measures such as wage garnishment or asset seizure. Keep in mind that this process takes time and comes with legal costs, so proper documentation is essential.
With Payt, you’re prepared for every stage of the dunning process. Our software ensures that every reminder and dunning letter is sent on time while keeping communication organized. Whether you opt for a friendly settlement or a legal approach, you stay in control.
Curious how Payt can support your dunning process? Schedule 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 really matters: growing your business.
Contact us today and discover how we can help you maintain financial stability and get paid faster.
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 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 personalized.
It’s common to send one or two friendly payment reminders before escalating to a formal dunning letter. These initial reminders give the customer a chance to pay without added pressure. If payment is still not received, a dunning letter marks the next step in the process as more formal. It often includes the possibility of additional costs or legal consequences.
A payment reminder is an informal and friendly message that simply reminds the customer of an overdue invoice. A dunning letter, on the other hand, is a formal notice that often follows one or more reminders. It usually sets a strict payment deadline and may include a warning about potential collection fees or legal action if payment isn’t made in time.
A dunning letter urges the debtor to pay and may include a warning about future consequences. A notice of default is a more severe step; it officially states that the debtor has failed to meet their payment obligation and that legal consequences may now follow. In many jurisdictions, including the Netherlands, a notice of default is often required before initiating legal proceedings.
