Dunning Reminders

← Overdue Receivable Management

Dunning, in general, is the process of communicating with customers to claim outstanding receivables, for example (but not exclusively), overdue payment requests for invoices.

JustOn Billing & Invoice Management implements dunning process support based on configurable dunning statements.

AR collection tools in JustOn

The following table lists tools for collecting overdue receivables using JustOn Billing & Invoice Management. To actively trigger timely payments, by contrast, you can use JustOn Cash Management's bank integration or payment provider integration.

Tool	Description
Account statements	Account statements are reports that show the billings and payments of a given account for a specific time period. Businesses can use them to remind customers of sales that have not yet been paid, without expressly stating an overdue receivable and without starting a dunning process. JustOn implements account statements using specific statements that summarize the account's balances.
Dunning statements	Dunning statements officially notify customers of overdue payments. According to the overdue status, these notifications can progress from friendly reminders to firm warning letters. JustOn implements dunning process support based on configurable dunning statements. Using multiple dunning levels, you can build your individual dunning escalation scenario.
Debt collection	If the dunning communication remains unfruitful, businesses may turn customers over to debt collection agencies, who usually proceed to take other collection options. To support this option, you can specify the name of a debt collection agency when configuring your dunning levels. When set, JustOn copies the name to the invoice, where it is then available for further custom processing.
Individual value adjustment	Individual value adjustment (or IVA) is an accounting procedure for devaluing receivables, for example, outstanding payment requests for invoices. JustOn implements IVA for invoices using specific bookkeeping data.
Write-off	Write-off is an accounting procedure for reducing or completely removing the value of an asset or receivable – for example, an uncollectible payment for an invoice. JustOn supports writing off invoices using specific balances that count against the invoice balance.

To illustrate the options in the context of invoicing, think of the following scenario:

(1) A customer defaults on paying an invoice. You notify them of the overdue payment using account statements or (multi-level) dunning reminders.

(2) If the invoice remains unpaid and becomes more overdue, you may consider applying individual value adjustments in order to devalue the corresponding receivable.

(3) Eventually you realize that the customer is definitely not going to pay – the receivable becomes uncollectible. In this case, you must account for the loss, writing off the open amount.

(4) You may call on a debt collection agency to handle the collection. Usually, doing so also involves an individual value adjustment on your receivable.

collection_escalation
Example AR collection scenario

Setting Up Dunning Process Management
Managing Dunning Reminders

Understanding Dunning

Sometimes customers default on payments – for example, they may not pay their invoices promptly or completely. In such cases, businesses usually send notifications, stating the overdue payment. According to the overdue status, these notifications progress from friendly reminders to firm warning letters.

If the dunning communication remains unfruitful, businesses may turn customers over to debt collection agencies, who usually proceed to take other collection options.

As receivables become more overdue, you may consider applying individual value adjustments in parallel in order to devalue the corresponding invoice amounts.

Dunning Support in JustOn

JustOn Billing & Invoice Management implements dunning process support based on configurable dunning statements.

Implementation Details

To help tracking and claiming outstanding payments, JustOn supports dunning processes. With this respect, the following objects are important:

Statements

Represent the dunning statements that document outstanding payments, based on which you generate dunning reminders to be sent out to the corresponding accounts. The statement records are associated to the relevant accounts and hold the corresponding data as well as payment information.

Statement details

Represent the individual items to which the dunning refers – the actual invoices and, if set up accordingly, the dunning fees. Statement details are in a master-detail relationship to a statement.

A dunning run can include multiple invoices per account, producing an individual statement detail for each involved invoice. Consequently, an invoice that is subject to a dunning process relates to the produced statement detail, but not to the statement.

For invoices with installments, the dunning run takes the relevant amount due only. If, for example, at the time of a dunning run only the first and second installments of a payment plan are overdue, only this portion will be subject to the produced reminder.

dunning
Dunning reminder that involves two invoices

The statement records display their involved statement details in a related list. The PDF file printed from the statement includes the statement detail table, which, by default, shows the original invoice numbers.

Dunning Fee or Late Fee?

You decide whether to apply a flat dunning fee or percentage-based late fee (or both). The dunning fee is a fix amount (per dunning level) that is added, if set, to the dunning record as a separate statement detail. The late fee is a calculated amount that is added, if set, to the statement detail for the relevant invoice.

dunning_fees_statements
Applying dunning fee and late fee with dunnings

The late fee is calculated as follows:

Amount * Rate * DaysOverdue/30

So it is the multiplication product of the open invoice amount, the late fee percentage rate and the number of months since the overdue date. Assume, for example, an open invoice amount of 120,00, a late fee rate of 5% and 45 days overdue. The calculation would be as follows 120,00 x 5% x (45/30) (or 120,00 x 0,05 x 1,5), resulting in a late fee of 9,00. Consequently, this produces a statement detail amount of 129,00 for the open invoice.

Both the dunning fee and the late fee show up as individual balance records on the open invoice.

General Dunning Workflow

Basically, the dunning process involves three main steps:

Dunning run: You create draft dunnings for open invoices or account statements.
Finalizing: You close the dunnings and generate the dunning reminder PDF documents.
Distribution: You send out the dunning reminders via email, including the dunning reminder PDF and the involved invoices' PDF documents.

The dunning run refers to the operation that creates dunning notifications. The statements issued with the dunning run are referred to as dunnings. Depending on the progress of the dunning process, they can have different statuses.

Draft: New dunnings have the status Draft. You can check draft dunnings for correctness and edit them as necessary.
Closed: Finalizing dunnings sets them to Closed, generates the PDF dunning reminders to be sent out, and adds the defined dunning fees to the account balance and the open invoice amount. As a whole, this makes the dunning operation legally effective.

In order to use the dunning process feature, you must configure it accordingly using the custom setting Dunning Levels. This setting defines, among others,

the condition to be matched for activating the process,
dunning fees or late fees as required,
the due period and a grace period,
whether the related invoice PDF is attached to the dunning reminder email or not.

Using multiple dunning levels, you can build your individual dunning escalation scenario, which may progress from friendly reminders to firm warning letters:

Invoice payment due
↳ Failure to payment: First reminder
↳ Failure to first reminder: Second reminder
↳ Failure to second reminder: Final reminder

Once set up, you can then start a dunning run using the Statement Runs functionality.

Postponing the payment due date for an invoice suspends applicable dunning procedures for the specified time.

Dunning procedure examples

Example dunning procedure using three dunning level configurations (First Reminder, Second Reminder, Final Reminder) with a fix dunning fee:

Dunning Characteristic	First Reminder	Second Reminder	Final Reminder
	friendly reminder about an outstanding payment	firm reminder of the overdue amount, adding a late payment charge	last request to pay before legal action is taken and the service is terminated
Grace Period	30 days	60 days	90 days
Dunning Fee	0,00	5,00	10,00

If you apply fix dunning fees, JustOn recommends to include the corresponding information in the statement detail table of templates for higher dunning levels.

Example dunning procedure using three dunning level configurations (First Reminder, Second Reminder, Final Reminder) with a percentage late fee:

Dunning Characteristic	First Reminder	Second Reminder	Final Reminder
	friendly reminder about an outstanding payment	firm reminder of the overdue amount, adding a late payment charge	last request to pay before legal action is taken and the service is terminated
Grace Period	30 days	60 days	90 days
Late Fee Rate	0%	2%	5%

Finished dunning reminders, that is, those in the status Closed, are supposed to be distributed to their corresponding recipients.

By default, JustOn supports the distribution of the generated dunning reminder PDF documents via email.

By default, the dunning reminder emails include the related invoice PDF files. Optionally, the invoice attachments can be excluded using the Dunning Levels option Exclude Invoice PDF.
You can redistribute dunning reminder PDF documents to a new file distribution target or download them to a ZIP file.

Use the redistribution function with caution. JustOn does not check the selected file distribution target for existing files, so distributing the same files to the same targets produces duplicates, which may consequently have unwanted effects.

How to exclude accounts or invoices from the dunning run?

Certain circumstances may require to postpone the payment due date for invoices. This suspends applicable dunning procedures for the specified time.

As an alternative to the due date deferral, you may consider excluding specific accounts or specific invoices from being subject to the dunning process – using a so-called dunning block.

This involves the following steps:

(1) Create a custom checkbox, like, for example, PreventDunning, on the Account or Invoice object that defines whether to exclude (if true) a given record from the dunning run. Depending on your requirements, you can have this checkbox selected manually by a user, or automatically via a formula, for example, that can check a record for certain criteria and consequently select (or not select) this checkbox.

(2) In each dunning level configuration that you intend to apply, add a condition that evaluates this checkbox and consequently determines whether to exclude the current record:

PreventDunning__c = false

Following the example, JustOn excludes an invoice from the dunning run if the checkbox is selected (true) and the condition therefore yields false.

How to issue reminders in advance of the payment due date

Your business may require to issue a reminder before the actual due date of the invoice is reached. To support such scenarios, you need a dedicated Dunning Levels setting and a corresponding template detail.

Create a dedicated Dunning Levels custom setting record.

Proceed as described in Configuring Dunning Levels. Be aware, however, of the following specifics to support early reminders:
- The Condition must rule out the default DaysOverdue__c check.
- The Grace Period must be a negative value that defines the number of days before the invoice due date for triggering this dunning level.
Create a corresponding template detail.

Proceed as described in Customizing Dunning Reminders. Again, be aware of the following specifics to support early reminders:
- By default, the statement detail table shows the open amount, which is set only after the invoice due date has passed. For early reminders, this amount would be 0.
  
  If you want to show the amount that will become due, you add the field GrandTotal__c to the Table Columns field of your template detail. For details, see Adjusting Statement Detail Table.
- Adjust the template detail texts to unequivocally indicate the early reminder quality.
  
  For details, see Modifying Dunning Reminder Texts.

Dunning Fee Handling

When finalizing a dunning, JustOn usually creates balances of the type Dunning Fee for any involved flat dunning fee or percentage late fee and adds them to the account balance of the relevant account. Dunning fee balances, however, will show up as outstanding receivables. Therefore, your business may require to not immediately create dunning fee balances. In this case, you can disable the creation of dunning fee balances on dunning finalization.

Doing so, JustOn will still track dunning fees. If a dunning level defines a dunning fee or a late fee rate, it is saved in the invoice fields Expected Dunning Fee or Expected Dunning Late Fee. Now if a registered payment includes an additional amount to cover dunning fees, it is split into a Payment balance that covers the original open invoice amount, and an additional Dunning Income balance for the dunning fee amount. The two balances are assigned to the original invoice. Using this approach, a dunning fee produces a booking-relevant record only if and when it is actually paid. With a payment that covers the open invoice amount only, an invoice will still become Paid.

Dunning income balance example

Assume this dunning statement:

Detail	Amount
Invoice	100
Dunning fee	10

With dunning fee balances disabled, JustOn creates these balance records when registering a payment of 110:

#	Type	Amount
1	Payment	100
2	Dunning Income	10

Either way, you must, consequently, generate bookkeeping data from balances to produce dedicated dunning fee bookings. To set the intended account number, you need a collective account setting where Account specifies the required G/L account and Type is set to Dunning Fee or Dunning Income, respectively. For correctly booking dunning income balances, you need, in addition, a collective account setting for payments, where Account specifies the relevant G/L account and Type is set to Payment.

Info

JustOn will not create new booking details for the invoices that are subject to dunning processes. Bookkeeping data for invoices is produced on invoice finalization only.

howto_booking_dunning
Dunning-relevant booking details

Operation	Dunning Records	Relevant Step	Accounting Records
Generating draft invoice	Invoice Invoice line items
Finalizing invoice	↳	(1)	Invoice booking details
Generating draft dunning	Statement Statement details
Finalizing dunning or Registering payment	Dunning fee balances or Dunning income balances	(2)
Creating balance booking details	↳	(3)	Balance booking details