Procurement Glossary
Dunning process: Systematic receivables management in Procurement
November 19, 2025
The dunning process is a structured process for systematically tracking outstanding receivables and payables in procurement. It ensures that invoices are paid on time and that payment terms between companies and suppliers are met. Find out below what the dunning process involves, which methods are used, and how modern systems optimize this process.
Key Facts
- Automated process for monitoring and tracking open items
- Multi-stage process with escalating reminders in the event of late payment
- Integration into ERP systems enables efficient processing
- Reduces default risks and improves liquidity planning
- Legal basis for further collection measures in the event of default
Contents
Definition: Reminder run
The dunning process refers to a systematic, usually automated business process for tracking overdue receivables and payables.
Basic mode of operation
A dunning process is usually multi-stage and time-controlled. The system automatically checks open items after the payment deadlines have expired and generates corresponding reminder letters. The escalation levels range from friendly payment reminders to legal warnings with the threat of further action.
Reminder process vs. manual receivables management
Unlike manual processing, automated dunning offers significant advantages:
- Continuous monitoring without human resources
- Standardized and legally compliant communication
- Complete documentation of all reminder steps
Importance of the dunning process in Procurement
In the procurement context, the dunning run supports the monitoring of payment terms and contributes to the optimization of supplier relationships. It ensures compliance with agreed terms and conditions and minimizes financial risks.
Methods and procedures for dunning runs
Implementing an effective dunning process requires structured procedures and clear process definitions.
Configuring reminder parameters
The basis for this is the definition of reminder intervals, escalation levels, and thresholds. Typically, three to four reminder levels are configured with increasing intensity. The time intervals between the levels vary depending on the industry and business relationship, with intervals of 10-14 days being common.
Integration into existing systems
The dunning process is integrated into the ERP system and linked to accounts payable. This enables automatic recording of open items and seamless transfer of incoming payments. The workflow rules define the specific processes and responsibilities.
Monitoring and adaptation
Regular evaluations of dunning cycle performance enable continuous optimization. Key figures such as success rates per dunning level and average payment duration after dunning provide valuable insights for process improvements.
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Important KPIs and targets
The effectiveness of the dunning process is measured using specific key performance indicators that enable continuous monitoring and optimization.
Success rates and payment behavior
The success rate per reminder level shows the effectiveness of the various escalation levels. Typical benchmarks are 60-70% for the first reminder and 20-30% for the second level. The average payment period after a reminder (days sales outstanding after reminder) is another important indicator.
Cost efficiency of the dunning process
The costs per reminder case and the return on investment of the reminder system evaluate economic efficiency. Automation significantly reduces processing costs, while higher success rates increase ROI. Spend analysis can help evaluate the total costs.
Quality indicators
The error rate for reminders and the number of justified complaints measure process quality. A low value indicates high data quality and correct system configuration. In addition, the compliance rate with regard to legal requirements is monitored.
Risks, dependencies and countermeasures
The dunning process involves various operational and legal risks, which can be minimized by taking appropriate measures.
System failures and technical faults
Technical problems can lead to delayed or missing reminders, which can have legal consequences. Redundant systems, regular backups, and monitoring tools reduce these risks. A manual emergency process should be defined for critical situations.
Legal compliance risks
Incorrect reminders or violations of legal requirements can lead to legal problems. Regular review of reminder texts by legal experts and training of the employees involved are essential. Workflow rules must always be kept up to date.
Relationship risks with suppliers
Excessively aggressive collection strategies can jeopardize important business relationships. It is crucial to strike a balance between enforcing legitimate claims and maintaining cooperative relationships. Individual collection strategies for strategic partners can help here.
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Practical example
A medium-sized manufacturing company implements an automated dunning process for its 500 active suppliers. The system checks all open items daily and automatically initiates the three-stage dunning process if the payment deadline is exceeded. After the first reminder, 65% of suppliers pay within 10 days. The second reminder stage leads to success for a further 25%. Automation reduces manual effort by 80%, while the average payment period is shortened from 45 to 32 days.
- Daily automatic check of all open items
- Three-stage escalation process with defined intervals
- Integration into the existing ERP system for seamless data transfer
Trends and developments related to dunning
Modern technologies and changing business requirements are significantly shaping the further development of dunning procedures.
AI-supported optimization
Artificial intelligence is revolutionizing receivables management through predictive analytics and personalized dunning strategies. Machine learning algorithms analyze payment behavior and customer profiles to determine the optimal timing and content of dunning letters. This leads to higher success rates while reducing effort.
Digital communication channels
Traditional paper mail is increasingly giving way to digital channels. Email-based reminders, SMS notifications, and customer portals enable faster and more cost-effective communication. Supplier portals provide transparent overviews of open items and payment histories.
Compliance and data protection
Stricter data protection regulations and regulatory requirements are influencing the design of dunning processes. Companies must ensure that their dunning cycles are GDPR-compliant and meet all legal requirements while remaining efficient.
Conclusion
The dunning process is an indispensable tool in modern receivables management, which is becoming increasingly efficient thanks to automation and AI support. Its systematic implementation reduces default risks, improves liquidity planning, and optimizes supplier relationships. Companies should always keep an eye on the balance between economic efficiency and cooperative business relationships. Integration into modern ERP systems and the use of digital communication channels will become even more important for success in the future.
FAQ
What is the difference between a reminder and a payment reminder?
A payment reminder is a friendly notification about a payment that is due, without any legal consequences. A reminder, on the other hand, is a formal request for payment that threatens legal action and asserts default interest. It is a prerequisite for further collection measures.
How often should a dunning run be performed?
The frequency depends on the business model. Daily reminder cycles are common for high transaction volumes, while weekly or monthly cycles may be sufficient for smaller companies. It is important to be consistent and adhere to the defined intervals between reminder levels.
What legal aspects need to be considered when sending reminders?
Reminders must contain certain mandatory information and must not be misleading or overly intimidating. GDPR compliance must be ensured in data processing. Interest on arrears may only be charged after a reminder has been sent, and the wording of reminders should be legally reviewed.
How can the efficiency of the dunning process be measured?
Key performance indicators include the success rate per reminder level, the average payment period after a reminder, and the cost efficiency of the process. In addition, quality indicators such as error rates and complaints should be monitored. Regular evaluations enable continuous optimization of the reminder strategy.
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