The Complete Guide to Dunning: Recover Revenue Without Burning Bridges

The Complete Guide to Dunning: Recover Revenue Without Burning Bridges

Every B2B company has overdue invoices. The question isn't whether customers will pay late -- some always will. The question is what you do about it.

Dunning is the process of systematically communicating with customers about overdue payments. The word comes from the 17th-century English verb "dun," meaning to make persistent demands for payment. Despite the aggressive etymology, modern dunning works best when it's firm but respectful.

Here's the business case: companies with structured dunning processes recover 15-20% more overdue revenue than companies that rely on ad hoc follow-up. The difference is consistency, timing, and tone.

Why Most Dunning Fails

Before getting into what works, here's what doesn't:

The "one and done" approach. You send a single overdue notice, get no response, and give up. The invoice ages. After 90 days, you write it off. This is the most common pattern, and it leaves money on the table.

The angry email. A customer is 3 days late, and you fire off a terse message about "immediate payment required" and "potential legal action." You might get paid, but you've damaged a relationship worth far more than one invoice.

The inconsistent chase. Your AR person follows up when they remember, which means some invoices get five touchpoints and others get zero. Customers learn that your payment terms are suggestions, not commitments.

The one-size-fits-all blast. Every overdue customer gets the same message at the same time, regardless of how much they owe, how long they've been a customer, or why they haven't paid. A $50 invoice from a customer who's been loyal for 5 years gets the same treatment as a $50,000 invoice from someone who's never paid on time.

The Dunning Timeline: When to Send What

Timing is the single most important variable in dunning. The IAPP (Institute of Accounts Payable Professionals) research consistently shows that the probability of collecting an invoice decreases steadily with age:

• Current (not yet due): 99% collection probability
• 1-30 days past due: 94%
• 31-60 days past due: 85%
• 61-90 days past due: 74%
• 91-180 days past due: 58%
• 180+ days past due: 29%

Those numbers tell a clear story: every week you wait to follow up, the odds get worse. Here's a dunning timeline that balances urgency with relationship preservation.

Pre-Due Date (Day -5 to Day -3)

Most businesses skip this step entirely. That's a mistake. A simple reminder before the due date isn't dunning at all -- it's customer service.

Purpose: Ensure the customer is aware of the upcoming payment and has everything they need to pay on time.

Tone: Helpful and informational. Zero pressure.

Content should include:

• Invoice number and amount
• Due date
• Direct link to pay
• Contact information if there are questions

Why it works: About 40% of late payments happen because the invoice was lost, forgotten, or stuck in an approval queue. A pre-due reminder fixes all three.

First Contact (Day 1-3 Past Due)

The invoice is now overdue, but barely. Most customers who are 1-3 days late will pay within the week without any intervention. Your first touch should reflect that reality.

Purpose: Gentle nudge. Acknowledge the missed date without making it a confrontation.

Tone: Casual, understanding. "Hey, just a heads up."

Example approach:

• Subject: "Quick reminder: Invoice #1234 was due on [date]"
• Body: Reference the invoice, include the amount, provide a payment link, and offer to help if there's an issue. That's it. No warnings, no consequences.

Second Contact (Day 7-10 Past Due)

Now you're past the "they probably just forgot" window. This message should be slightly more direct.

Purpose: Confirm the customer is aware of the outstanding balance and intends to pay.

Tone: Professional and clear. Not angry, but not casual either.

Content should include:

• Specific reference to the previous reminder
• Clear statement of the amount and how overdue it is
• Payment options and instructions
• A direct ask: "Could you let us know when to expect payment?"

The direct ask is important. It creates a social obligation to respond, even if the customer can't pay immediately. A response gives you information. Silence forces you to guess.

Third Contact (Day 14-21 Past Due)

Two weeks overdue with no response is a different situation than three days overdue. Your messaging should reflect the escalation.

Purpose: Signal that this is being tracked and will continue to be followed up on. Open a dialogue about payment obstacles.

Tone: Firm but solution-oriented.

Content should include:

• Acknowledgment that previous messages may have been missed
• Clear statement of the consequences of continued non-payment (late fees, service restrictions, credit reporting)
• An offer to discuss payment plans or resolve disputes
• Escalation to a specific named person (not just "accounts receivable")

This is where most businesses either give up or get aggressive. The right move is neither. Stay persistent, stay professional, and start offering solutions.

Final Notice (Day 30-45 Past Due)

If you've sent three messages over 30 days with no response or payment, it's time for a final notice.

Purpose: Last chance before escalation to collections, legal, or service suspension.

Tone: Direct and serious. No ambiguity.

Content should include:

• Complete history of the debt and all previous communication attempts
• Specific deadline for payment or response (7-10 business days is standard)
• Exact consequences if the deadline passes
• One last offer to resolve the situation

Critical rule: Never threaten an action you won't take. If you say "we will refer this to collections," you need to actually do it. Empty threats teach customers that your warnings are meaningless.

Escalation (Day 45+ Past Due)

Beyond 45 days, you're in collections territory. This typically means:

• Engaging a collections agency
• Suspending services or access
• Reporting to credit bureaus (for significant amounts)
• Legal action (as a last resort for large debts)

The specific path depends on the amount, the customer relationship, and your industry. A $200 invoice doesn't justify legal fees. A $20,000 invoice might.

Tone Progression: The Art of Getting Firmer

The key to good dunning is progressive firmness. Each message should be slightly more serious than the last, but none should be hostile. Here's how tone should shift:

| Stage | Tone | Key Phrase Style | |-------|------|-----------------| | Pre-due | Helpful | "Just a friendly reminder..." | | Day 1-3 | Casual | "Wanted to check in on..." | | Day 7-10 | Professional | "Following up regarding..." | | Day 14-21 | Firm | "This balance requires attention..." | | Day 30-45 | Serious | "Final notice before escalation..." | | Day 45+ | Formal | "We regret to inform you that..." |

Notice that even at the most serious stage, the language is professional, not angry. The goal is always to get paid, not to punish.

Segmenting Your Dunning Strategy

Not every customer should get the same treatment. Here's how to segment:

By relationship length

Long-term customers (2+ years, good payment history): Give them the benefit of the doubt. Extend timelines. A customer who's paid on time for 24 months and is suddenly late probably has a reason. A phone call works better than a templated email.

New customers (under 6 months): Stick to the standard timeline. You don't have enough data to know their patterns yet. Consistent follow-up sets expectations early.

By invoice amount

Small invoices (under $500): Automate everything. The cost of manual follow-up can exceed the invoice value. Keep it light and efficient.

Medium invoices ($500-$10,000): Automate the first two touches, then involve a human for follow-up if needed.

Large invoices ($10,000+): Automate reminders, but have a named account manager handle escalation personally. Large invoices justify the attention.

By payment pattern

First-time late: Lighter touch. Could be a one-off.

Occasionally late: Standard process. They know the drill.

Chronically late: Consider changing their payment terms (Net 15 instead of Net 30, or prepayment required). Dunning treats the symptom; terms changes treat the cause.

Building Dunning Workflows in Corinthian

Corinthian's workflow engine is built for exactly this type of structured communication sequence. Here's how it works:

Visual Workflow Builder

Dunning workflows are defined as directed acyclic graphs (DAGs). Each node in the workflow represents an action (send email, send SMS, apply late fee) or a condition (has the customer paid? has the customer responded? is the amount above $5,000?).

You drag, connect, and configure -- no code required. The workflow engine handles execution, timing, and state management.

Wait States

Between each step, you define wait periods. "Wait 7 days, then check if paid. If not, send the next message." The system tracks these wait states reliably, even if they span weeks.

Conditions and Branching

Your workflow can branch based on conditions:

• Invoice amount thresholds
• Customer segment
• Whether the customer has opened previous messages
• Whether the customer has responded
• Payment history

This means one workflow can handle your entire dunning strategy, with different paths for different scenarios.

Action Nodes

Each action node can:

• Send an email with customizable templates
• Send an SMS notification
• Apply a late fee to the invoice
• Assign the invoice to a team member
• Create a task for manual follow-up
• Escalate to a different workflow

Delivery Tracking

Every communication sent through a dunning workflow is tracked. You can see delivery status, open rates, and response rates across your entire dunning operation. If emails aren't being delivered, you'll know immediately.

Measuring Dunning Performance

Track these metrics monthly:

Recovery rate: What percentage of overdue invoices are eventually collected? Target 85%+ for invoices under 60 days past due.

Average days to payment (after due date): How long does it take overdue invoices to get paid? This should decrease as your dunning process matures.

Touchpoints to resolution: How many messages does it take to get payment? Fewer is better. If you consistently need 5+ touches, your initial messaging isn't effective enough.

Customer churn from dunning: Track whether customers leave after going through a dunning sequence. If your churn rate spikes after dunning, your tone is too aggressive.

Channel effectiveness: Which channels (email, SMS, phone) produce the fastest response? Use this data to optimize your workflow.

Seven Rules for Dunning That Preserves Relationships

1. Always provide a way to pay immediately. Every dunning message should include a one-click payment link. Remove friction from the payment process.

2. Acknowledge payment instantly. When a customer pays an overdue invoice, send a thank-you message and stop the dunning sequence immediately. Nothing damages trust faster than getting a collections email after you've already paid.

3. Make it easy to dispute. Some invoices are late because the customer disagrees with the charges. Your dunning messages should include a clear path to raise disputes. Ignoring disputes doesn't make them go away.

4. Respect time zones and business hours. A dunning email at 2 AM signals desperation. Send during business hours in the customer's time zone.

5. Keep records of everything. Every message sent, every response received, every payment made. If a dispute escalates, you'll need this history. Corinthian tracks all dunning communications automatically.

6. Know when to stop. If a customer is going through genuine hardship (bankruptcy, natural disaster, health crisis), pause the dunning sequence. Offer a payment plan. Being human in these moments creates loyalty that lasts years.

7. Review and iterate. Your dunning process should improve quarterly. Look at the data, identify where people drop off or respond, and adjust timing and messaging accordingly.

Getting Started

If you don't have a structured dunning process today, start simple:

1. Set up pre-due-date reminders (this alone will reduce your late invoices by 15-20%)
2. Create a three-step post-due sequence with escalating firmness
3. Track delivery and response rates for each step
4. After 90 days of data, refine your timing and messaging based on what's working
5. Add segmentation as your volume grows

Dunning doesn't have to be adversarial. Done right, it's a system that protects your cash flow while treating customers with respect. The companies that figure this out collect more revenue, faster, with less friction.

Build your first dunning workflow in Corinthian and start recovering revenue today.