Ever Heard of Dunning? Here’s What It Means

Every business faces the common issue of pending overdue payments that must be paid. If there are more pending payments to be obtained for a business, then think about the financial status of that business. It will be going in a drop-off trend. If the business continues to travel on this drop-off trend, then it will get demolished completely.   

To uphold the business from this situation, the dunning process can be implemented. Often many business owners neglect this dunning process by not knowing the advantages of it. But if the dunning process is applied to the business, it yields numerous benefits. This blog outlines the clear details about the dunning process that makes the business experience enhanced development. Let’s delve deeper.   

What is Dunning for a Business?  

In a business deal, the communication made with the client to inform them about the pending and past due payment they must make for the purchase is referred to as a dunning process. This communication is made by the business owner of the supplier or the accounts receivable staff of the business to the client from whom the amount must be collected. This communication takes place only when the client forgets to make the payment or misses out on any large payments. This dunning process ensures the financial stability of the business.  

Working Process of Dunning: A Step-by-Step Guide 

The dunning process does not have specific guidelines and files to be followed. The dunning process can be varied according to the business size, location of the business, relationship with the clients, etc. But a common procedure among it is as follows.    

Step 1: The invoices must be forwarded to the clients at once they receive the product. The invoicing software for small business plays a crucial role in generating professional invoices.  

Step 2: As the next step, make a gentle reminder to the clients via phone call, email, or text message when the invoice due date arrives.  

Step 3: If still the payment is not received, then make continuous reminders through different ways if the deadline mentioned in the invoice exceeds.  

Step 4: As the next step, you can approach a financing agency to hand over the collection process to get quick payment.  

Step 5: If there is still no chance of collecting the payment means, then file a complaint against the client by making prior information about the complaint filing process. 

Step 6: If all the steps mentioned above failed, then consider the invoice amount as bad debt. 

Some of the best practices of the dunning process are mentioned below. 

• If the number of clients who need to undergo the dunning process is higher, differentiate the client’s profile as high-risk and low-risk profiles.   
• The communication made with the client must be clear and transparent. All the details regarding the payment must be explained carefully. 
• To make clients make payments, offer numerous payment methods to them.  
• Review the dunning process regularly and make necessary changes in the places where alterations are needed. 
• Train your business team to handle the dunning process and ensure effective communication to get proper payments. 

Advantages of the Dunning Process:  

1. Enhanced Cash Flow: The dunning process results in improved cash flow by ensuring that the business receives cash on time. The daily and operational expenses of the business cash flow can be met effectively.  

2. Reduction in Bad Debt: As the dunning process assists in receiving the invoice amount, the amount of bad debt will be reduced.   

3. Better Client relationship: Handling the dunning process with kindness and maintaining transparent and smooth communication with the client results in a better client relationship. This makes the clients feel valued and results in client retention. 

If your business faces non-payment issues, then the dunning process is crucial to get the payment. So, start implementing it in your business and experience a smooth cash flow. 

For professional creation of invoices and effective client management, software like InvoiceTemple can be used. Make use of it and enhance your business standard.