Late payments are a pain in every walk of life. However, for B2B companies, unpaid invoices remain a persistent challenge, particularly for SMEs with limited time and resources to chase them.
While most businesses have some form of follow-up procedure in place for this eventuality, it is often inconsistent, reactive or dependent on individual effort rather than a defined system.
The dunning process provides a more structured alternative.
Though it’s widely used in finance, the word ‘dunning’ may be unfamiliar to many smaller business owners. This term refers to a planned sequence of communications used to recover overdue payments, escalating from informal reminders to more formal escalation if needed.
For those who wish to improve payment rates and reduce reliance on last-minute or manual chasing, getting to grips with the dunning process is your first step. This is especially the case when dealing with international clients, where recovery can quickly become more complex.
What is the dunning process in accounts receivable?
According to Investopedia, the dunning process is a structured workflow businesses use to follow up on unpaid invoices. It consists of a series of pre-defined actions (typically emails, calls or letters) sent at specific intervals once a payment becomes due.
Implementing the process introduces a timeline for your debt recovery efforts, with each stage serving a clear purpose: the initial contact serves as a prompt, while later stages increase urgency and outline potential consequences if payment doesn’t arrive. Only if these steps fail should the process move into third-party recovery or legal escalation.
A key feature of dunning is consistency. If B2B businesses handle every overdue invoice in the same way, it reduces the risk of delays caused by oversight or uncertainty about what to do next. This is particularly useful for any growing business, as manual tracking becomes harder to manage at scale.
Why the dunning process matters for B2B companies
For companies that don’t have a defined dunning process in place, invoice follow-up can quickly become delayed or inconsistent. As a result, overdue payments can quietly pile up until they become difficult to manage.
Implementing a structured approach therefore prevents invoices from slipping through the cracks. Clear follow-up timelines allow businesses to act early, when recovery is most likely, therefore reducing the need for costly escalation later down the line.
There’s an operational benefit, too. Rather than treating each late payment as a one-off decision, teams can rely on a standardised system that saves time and brings predictability to accounts receivable.
The dunning process step by step
A successful dunning process depends on consistency, timing and tone. Each step should feel like a natural progression, giving the client every opportunity to pay, while making clear that the matter will escalate if ignored.
Here’s a practical framework B2B companies can follow.
Step 1: Friendly payment reminder
Your first message in the dunning process should be polite and low-pressure. Send it shortly before the due date or within a few days after the due date. At this stage, you’re treating non-payment as an oversight rather than a deliberate delay.
Keep the tone light and helpful, and be sure to include the invoice number, amount due and payment instructions. A well-timed nudge can resolve most cases without further action.
Step 2: First overdue notice
If there is no sign of payment, follow up with a firmer but still professional message that clearly states the invoice is overdue. Reference the original invoice and due date, confirm the outstanding amount, and invite the client to get in touch if anything is unclear or disputed.
This is an excellent opportunity to catch problems before they develop. It’s better to know early on if there is a dispute or if the client has cash flow difficulties.
Step 3: Second reminder (escalation begins)
By this point, the invoice is significantly overdue. The tone, therefore, should reflect that.
The message should be direct and convey genuine urgency: request immediate payment, ask for confirmation of when it will be made, and make clear the account is moving towards escalation.
This stage is often a turning point. Clients who intend to pay will likely respond here. By contrast, continued silence signals a rising risk of non-recovery.
Step 4: Final notice / letter before action
This is no longer a reminder; it’s a formal demand. Be sure to set a specific payment deadline and state clearly that failure to pay will result in escalation. Explain what that escalation will look like, whether third-party collection, legal proceedings or both.
Keep the tone firm and unambiguous, but professional. The goal here is clarity, not confrontation.
Step 5: Escalation to collections or legal action
If internal efforts have been exhausted, escalation to external recovery becomes the only option. This could mean instructing a debt collection agency, initiating legal proceedings or both, depending on the size and nature of the debt.
Limitations of the dunning process
As cases grow more complex, a structured dunning process helps, but it doesn’t guarantee consistent recovery.
Timing is a common stumbling block. If follow-ups arrive too late, or not at all, invoices can fall through the cracks. On the other hand, if businesses escalate too quickly or use language that feels aggressive or overly formal, this risks damaging client relationships without improving the chances of getting paid.
These problems become more pronounced across borders. International debt recovery brings added friction, including language barriers, different payment cultures and unfamiliar legal systems. An approach that works well domestically can be ineffective, or backfire entirely, when applied to overseas clients.
There’s also a ceiling to what in-house teams can realistically handle. Once several reminders have gone unanswered, internal processes often stall.
This is where Oddcoll provides a clear advantage.
Rather than relying solely on internal follow-up, Oddcoll enables businesses to escalate seamlessly to local, in-country experts when the standard dunning process reaches its limits.
By connecting each case with vetted debt collection agencies and legal specialists in the debtor’s country, it removes the friction associated with language, legal differences and local practices.
In addition, Oddcoll’s data-driven approach ensures that cases are handled by partners with proven performance in specific markets. This increases the likelihood of recovery while taking the burden away from internal teams.
Ready to improve your recovery rates?
A well-structured dunning process can significantly improve how you manage overdue invoices. However, when payments still don’t come through, the next step matters just as much.
Instead of letting debts stall or writing them off too early, businesses can strengthen their approach by combining internal processes with the right external support.
With access to trusted, in-country collection experts and a data-driven approach to recovery, Oddcoll helps B2B companies turn stalled invoices into successful outcomes, particularly in complex international cases.
If your current process isn’t delivering results, it may be time to take the next step. Get in touch and start your debt recovery journey!
