You may need to write a letter demanding payment from a customer as part of your business operations. Known as a dunning letter, this correspondence triggers the process for amicable payment collection. This article covers everything you need to know about dunning letters, including where to find a dunning letter template for your outstanding invoices.

What’s in this article?

• What is a dunning letter and what is it used for?
  
• Why is a dunning letter important?
  
• When should you send a dunning letter?
  
• What does a dunning letter need to contain?
  
• Where can I find a dunning letter template for outstanding invoices?
  

What is a dunning letter and what is it used for?

A dunning letter (also known as a collection letter or reminder letter) is required when an invoice is not paid within the allotted time. This letter, which a business sends to its customer once the payment term has passed, is intended to remind the recipient that payment is due for a service already rendered or for goods sold and delivered. The customer is then considered to be in debt to the company from this point onward. This letter, therefore, represents an amicable procedure initiated by the business professional to notify the customer of their debt so that they can settle it.

Why is a dunning letter important?

An outstanding invoice can cause cash flow problems for the company affected. A payment reminder letter is the most amicable way of prompting the customer to fulfill their business obligation while avoiding legal action.

When should you send a dunning letter?

Legally, you can send your administrative dunning letter as soon as the due date for the invoice has passed. However, you may wish to start your collection procedure by asking your customer by telephone or email about the reasons for the delay before resorting to this letter. For instance, your customer may have simply misplaced the invoice. Following this amicable approach, and in the event of an extended delay, we recommend sending a formal (yet still courteous) dunning letter.

If the payment is not received after the dunning letter has been issued, the business is entitled to issue a second (or even third) letter reminding the customer of their obligations. In the event of a continued failure to pay, we recommend sending the customer a formal notice.

Note: a dunning letter is not a mandatory document from a legal point of view. You may go ahead and issue a formal notice directly, although this is not advisable.

What does a dunning letter need to contain?

A dunning letter should contain the following information:

• The original invoice number and date that it was issued
  
• The amount owed for the product or service
  
• The invoice due date
  
• A reminder of the terms and conditions of sale and of the late payment penalties, as well as the consequences of failing to pay (costs, formal notice, legal proceedings)
  

Including a copy of the invoice for the customer’s reference is also good practice. Make sure to make the request for payment an amicable one (any threatening, aggressive, accusatory, or repeated correspondence may be punishable by law), and to state the customer’s contact details as well as your own business details.

Where can I find a dunning letter template for outstanding invoices?

The French postal service, La Poste, provides an effective and courteous dunning letter template. It also provides a service that allows you to send a registered letter from your computer—without having to go to a post office. To simplify your collection procedures even further, you may hire a collection company to contact your late-paying customer.

Alternatively, you could use an advanced invoicing tool such as Stripe Billing, which lets you automate payment reminders without having to write a single line of code. Stripe’s customized workflows enable you to streamline your processes, improve communication with your customers, and optimize your collection efforts. Contact one of our experts to learn more about Stripe’s automated dunning services.