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Dunnings

Accounting Support

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.

dunning
Dunning reminder that involves two invoices

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.

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 and late fees as required,
  • the due period and a grace period.
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 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.

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.
  • You can redistribute dunning reminder PDF documents to 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.

Managing Dunning Reminders
Setting Up Dunning Process Management

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