The term comes from the old verb to dun, which means to make persistent demands for payment. The whole sequence of letters, emails and calls is the dunning process, and some ERP systems call its stages dunning levels. In subscription billing, dunning also means retrying failed card payments and asking customers to update their card details.
How the dunning process works
The sequence starts from the due date and stops as soon as the customer pays, agrees a payment date or raises a dispute. A courtesy reminder a few days before the due date catches invoices that never reached the right person. In the UK this work usually sits with the credit control team.
| Stage | Typical timing | What it does |
|---|---|---|
| Friendly reminder | 1 to 7 days after the due date | Flags the unpaid invoice, attaches a copy and asks what is holding up payment |
| Firmer letter | 14 to 30 days after the due date | Refers to earlier reminders, sets a payment date and mentions interest if your terms or the law allow it |
| Final notice | 30 to 60 days after the due date | Sets a last deadline, usually 7 to 14 days, and states what happens next |
These timings are a convention, so adjust them to your payment terms and customers. Keep the sequence consistent, because customers soon learn whether reminders lead anywhere.
Dunning letter examples for each stage
Send every letter to whoever pays invoices, usually accounts payable, quote the invoice number, amount and due date, and attach the invoice or a statement of account. In a final notice, name only steps you will actually take. For email versions you can adapt, see these payment reminder email templates.
Friendly reminder
Hi Sam, a quick reminder that invoice 1043 for $4,800 was due on September 30. I have attached a copy in case it did not reach you. If payment is on its way, thank you. If something is holding it up, such as a missing purchase order, just reply and let me know.
Firmer letter
Hi Sam, invoice 1043 for $4,800 is now 21 days overdue, and we have not heard back about our reminder of October 3. Please pay by October 28 or tell us what is stopping payment. Our terms allow interest on overdue balances, and your statement of account is attached.
Final notice
Dear Ms. Jones, despite our letters of October 3 and October 21, invoice 1043 for $4,800 is now 45 days overdue. Please pay the full amount by November 28. If we have not heard from you by then, we will stop deliveries and pass the debt to a collection agency.
In England and Wales, a final notice before a court claim should work as a letter before claim. Between companies, the Practice Direction on Pre-Action Conduct expects concise details of the claim and a reasonable time to reply, 14 days in a straightforward case. If the customer is an individual or sole trader, the Pre-Action Protocol for Debt Claims gives them 30 days to reply.
Adding interest and late fees to a dunning letter
In the UK, business customers owe statutory interest at 8% over the Bank of England base rate plus a fixed sum of £40, £70 or £100 per invoice, unless your contract sets its own substantial remedy. EU countries apply similar rules under the Late Payment Directive, while in the US late fees depend on your contract and state law. The overdue invoice entry has the details.
Example. A UK customer owes £4,800 on an invoice due on August 31, 2026, and your contract has no interest clause. Bank Rate on June 30, 2026 was 3.75%, so statutory interest is 11.75% a year, which gives £4,800 × 11.75% = £564 a year, or £564 ÷ 365 = about £1.55 a day. A final notice sent on October 10, 40 days after the due date, can claim £61.81 of interest plus the £70 fixed sum for a debt of this size, so £4,931.81 in total.
How to write a dunning letter
- Ask for a payment date, which gives you something specific to follow up on.
- Make paying easy with your bank details, a payment link and the invoice as a PDF.
- Pause the sequence during a dispute or payment plan, and restart it if a promise is missed.
- Log every reply next to the invoice so whoever picks up the account sees the history.
Sunbay runs the dunning sequence from your ERP or accounting system. It sends reminders by email and SMS at the stages you set, adds AI voice calls, issues interest notes and demand letters at later stages and keeps every customer reply and agreement next to the invoice. When the payment is posted in your ERP, Sunbay matches it to the invoice and the sequence ends. See how automated reminders and escalations work.
Frequently asked questions
What is a dunning letter?
It is a reminder that an invoice is unpaid, sent as part of a sequence that runs from a friendly reminder through a firmer letter to a final notice. Dunning notice and payment reminder mean the same thing.
What is the difference between a dunning letter and a demand letter?
The term dunning letter covers every reminder in the sequence. A demand letter is the formal last step before legal action, often sent by a lawyer or collection agency, with the amount, the legal basis and a final deadline. In England and Wales it is called a letter before claim or letter before action.
How many dunning letters should you send?
Three is a common pattern, often with phone calls in between. After the final notice, follow through with the step you named, or later deadlines will carry less weight.
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