The most crucial factor in keeping a business sustainable is the steady flow of cash. If the cash flow is interrupted due to negligence in collecting dues, the business’s financial health suffers. Sometimes it may be a seamless process – the client making payments before or on time. However, on some other occasions, you may be required to send in a reminder. How to manage to send a reminder which is persuasive yet not embarrassing for the client? How to balance the narrative? This art of writing effective payment reminders is known as dunning.
What is Dunning?
Dunning is a 17th-century term for the process of asking customers for the money they owe to the company. It can be done in any form – gentle telephonic reminders, email/ formal letter reminders, or personal visits. On a more severe level, dunning may involve more severe measures with defaulting customers. Hiring third-party collection agencies and taking legal action are some extreme forms of dunning. However, in most cases, a softer, politer, and more gentle form of dunning is enough to get your customers to pay the dues. Several factors determine which form of dunning best suits a particular situation. It depends on the following:
- The amount due
- The relationship with the customer
- The period for which the amount is overdue
In business, the dunning process is like one of those uncomfortable topics that offset any conversation between two people. For the customer, it might seem invasive or threatening. For the company, it might be problematic to collect the dues while dealing with an uncooperative customer.
How does Dunning Help in the Collection of Dues?
There can be several reasons why a client fails to make payment: insufficient funds in the account, lost or expired cards, or any other technical glitch. Whatever the reason, in case of any failed payments, the company resorts to dunning. Dunning is an automated process that works in several ways:
- Sending reminders for outstanding payments
- Notify customers regarding issues faced with the transaction
- Request current credit/ debit card details from providers to check the status
- Introduce smart retries for failed transactions.
Generally, the dunning process is handled by the accounts receivable department of the company. However, in the case of an uncooperative client, the company can outsource the procedure to a third-party collection agency operating within legal bounds.
Effective Dunning Letters – with Samples
Dunning indeed is a problematic area of the dialogue between you and your customer. You being the one chasing the dues, are in a position to set the tone of the dialogue right from the onset. So, while pursuing a debt, you must be careful to
- Choose your language correctly and effectively: It is necessary to set the tone right, respectful, polite, yet persuasive. Do not make the statements vague; mention who you are, the commitments, and the dues you are expecting. Explain the issue clearly so that the recipient knows where you are coming from.
Sample 1:
Dear customer, The invoices listed below are due for payment. Please ignore the letter if you have paid the amount by the time it reaches you. Sincerely, ________
If it is the first dunning letter, the language needs to be as short and to the point as possible. Don’t forget to put the disclaimer that the customer can ignore the message if they have already initiated the payment.
- Try to empathise: The letter should not at any point take an accusatory tone. Never make the customer feel that you believe they are trying to evade payment. Try to understand their pain point as, most of the time, delays are unintentional.
Sample 2:
Dear Sir/ madam, We recently attempted to charge your card registered in our records for recurring payment plans. Unfortunately, the transaction was not successful. We request you to update your card information at the given link: __________________________________________________ Kindly update the details before the 30th because that’s when we will make the next attempt to charge. If we fail to charge you before all our charging attempts expire, your recurring payment plan will continue. Recurring payment plan details: Amount payable: Next Due date: Card/ Account details:
Throughout the dunning process, maintain a friendly, professional, and polite dialogue. Harrying the customers for debts may earn a bad reputation for your business. Having said that, frequent payment anomalies may be unhealthy for your finances. Better to discontinue business with an uncooperative client as the loss will be more than monetary.
- Write to the Point: A dunning letter, like every other business correspondence, should be precise, to the point, and clear cut. Do not go on filling pages, as that would be unnecessary. Make sure the letter is high on readability and easy to comprehend. A vague and lengthy dunning letter may discourage your customers from paying instead of persuading them.
Sample 3:
Dear Customer, Account no.: xxxx00 Balance: x,xx,xxxx INR (as on dd/mm/yy) Further to our last two payment reminders, we haven’t received payment on the last two invoices. We request immediate payment for all overdue items to bring your account up to date. Your payments are due on
Please choose any of the payment methods below to take action or intimate us on your payment intentions:
- Pay by debit/ credit card (link)
- Pay by account transfer (link)
- I have already paid (link)
- I have a query (link)
Always write short and crisp sentences, and present the details in table form or bullet points. Better readability ensures better attention and prompts instant action.
Easy Payment Reminders With GrofleX
As stated earlier, the dunning process is taken care of by the account receivables department of a company. With a one-stop business solution like the GrofleX software, timely collection of dues is a breeze. GrofleX’s automated payment reminders make the due collection hassle-free, saving you time and the embarrassment of writing repeated emails to the customer. GrofleX software allows you to send four payment reminders at different stages. The first one is sent along with the invoice to the customer by email. The next three can be sent at different times; the software gives you the option to decide the frequency of sending payment reminders. You not just when to send a reminder, but you can also decide the content of the reminder. Depending on the current payment status of the customer, customized reminders can be sent out via mail at different times. All you have to do is to save the customer’s official email address while saving customer details on the software. Each time a reminder is sent via email, the invoice is also sent along with the reminder. What’s more, you can add details of fine amounts in case of a breach with any of the reminders. The benefits of an automated payment reminder or dunning process are manifold:
- It saves you a lot of time and paperwork
- The reminders are automated
- Error-free calculation of the due amount
- It saves the embarrassment of sending out manually drafted reminders
- Timely reminders automatically lead to the timely payment of dues
- Increases business efficiency and keeps the funds floating
Choose GrofleX today and smoothen the dunning process with its unique payment reminders feature.
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