Dunning, or the dunning process, is term that represents the steps taken to communicate with customers about collecting accounts receivable payments. “Dunning” is derived from a 17th century verb (dun) which means demanding payment of a debt. As accounts become more and more overdue, this process can become increasingly invasive. That being said, countries do implement specific laws that cover the different avenues the dunning process can take. There is a subjective nature surrounding the regulation of this process. Anyone has the authority to instill firm reminders and push the limits of the acceptable areas of collection but it is illegal to harass or threaten anyone you are trying to collect from. Who draws the line from when one crosses over into the other?
The first step of the process is normally a letter that outlines the late payment per the previously agreed upon payment due date. Some institutions have systems in place that allow for certain aspects of the dunning process to be handled automatically. Things from tracing customers who have pending payments to notifying and involving collection agencies are handled from these systems, as well as manually. The severity of collective actions are often determined by a number of contributing factors such as how long overdue the payment is, the amount of the payment, and even the relationship between the two parties.
Once collection agencies are involved, they will go through internal processes of collection which include everything from simple notices to serious legal actions.
How can this nightmare of a scenario be avoided? Most would think it is fairly simple, pay your invoices on time. As we all know, depending on your internal AP/AR processes, this is not always as simple as it sounds.
One way to avoid becoming involved in a dunning process is to maintain a trustworthy team managing all of your internal processes. More importantly, working to ensure that those process continue to evolve and become more efficient. Granted, there will always be an anomalies that throw a wrench into processes and procedures but hopefully not enough to find yourself fighting your way out of a dunning process.
Maintaining healthy business relationships is another way to minimize your risk of getting yourself in trouble. Collection agencies only become involved in the dunning process if the payee requests them to be. This can often be avoided by keeping positive and respectful working relationships and putting effort into letting them know they are valued. A business relationship is often more important than a single invoice.
The easiest and most relevant way to avoid late payments and dunning processes in 2018 is true automation! NetChain Squared allows you to fully automate your procure-to-pay and order-to-cash processes that eliminates late payments and the need for collections of any kind. The focus can then shift from chasing payments to never missing early payment discounts. True automation technology exists right now, is not another workflow tool in a different package, and can have an instant and repeatable positive impact on your organization and its processes.
If you would like to learn more about NetChain Squared and how we can help you automate your AP/AR procedures and develop streamlined processes to better your business in 2018 and beyond simply fill out the brief form below and we will be in touch to get you started!