When pursuing late payments, it’s important that businesses have a structured approach. The law in Germany provides for a number of different ways to collect on outstanding receivables. In this article, you’ll learn whether businesses in Germany can send a dunning letter without first issuing a payment reminder. We’ll also explain what the difference is between a dunning letter and a payment reminder, what information should be included in a dunning letter, and how businesses can integrate dunning into their accounting system.

What’s in this article?

• What’s the difference between a dunning letter and a payment reminder?
  
• When is a dunning letter mandatory and when is it not?
  
• What information should be included in a dunning letter?
  
• Is it legal to send a dunning letter without issuing a payment reminder?
  
• How can businesses in Germany integrate dunning into their accounting system?
  

What’s the difference between a dunning letter and a payment reminder?

In Germany, payment reminders and dunning letters both constitute tools for managing accounts receivable (AR). In both cases, a creditor is urging a debtor to make an outstanding payment. This usually concerns an invoice that is past its due date.

Payment reminder

A payment reminder is a politely worded request to settle an outstanding debt. Creditors send these reminders once an agreed payment deadline has passed, as a way of notifying the debtor that a payment is outstanding. There are no legal requirements that a payment reminder must satisfy, and so the tone tends to be friendly and cooperative. A payment reminder does not have to specify a concrete date for payment. Creditors are not permitted to charge additional fees for sending a reminder.

Dunning

A dunning letter is a formal request for payment in which the creditor urges the debtor to settle an outstanding debt. In some cases, a dunning letter must be sent before a debtor can be considered in default, and often it establishes a foundation for further AR management steps, such as judicial dunning proceedings. In a dunning letter, a creditor sets a specific deadline for making the outstanding payment. Unlike with a payment reminder, creditors are in principle allowed to impose appropriate dunning charges.

When is a dunning letter mandatory and when is it not?

Late payments are governed by German Civil Code (BGB). A late payment requires that a creditor has a claim to payment and that this payment is now due. In addition, Section 286.1 of the BGB stipulates that, as a rule, creditors must “dun” this payment. A creditor is only in default once they have received a formal dunning letter and have failed to comply with the request for payment.

However, according to Section 286.2 of the BGB, dunning is not necessary if a specific deadline for payment was set. An example of this would be an invoice that explicitly states a specific date by which payment must be made, such as “Payable by June 15, 2026,” rather than a phrase like “Please settle within 14 days.” Likewise, prior dunning is not required if a debtor seriously and definitively refuses to pay or if special circumstances justify immediate payment default.

In principle, debtors are considered in default 30 days after the due date or receipt of the invoice, whichever is later. If the debtor is a private individual, however, then this rule applies only if the legal consequences of nonpayment were explicitly noted on the invoice. A debtor is not considered to be in default if nonpayment is due to circumstances beyond the debtor's control.

What information should be included in a dunning letter?

A dunning letter should include all of the information required for a debtor to be able to clearly understand the demand for payment, and for the payment default to be legally effective. There are no legal requirements regarding the exact information that a reminder must contain; the only decisive factor is that the request for payment is unambiguous. In practice, however, certain details have proven effective in increasing both the enforceability of the claim and transparency for customers.

Heading, invoice number, and notice of late payment

A dunning letter usually includes the heading “Dunning letter,” which immediately makes it clear that this is a formal request for payment rather than a nonbinding reminder. It’s also important to include the original invoice number so the debtor can easily identify the account. Adding a note about late payment informs the debtor that the payment deadline has passed and that legal consequences such as late payment interest could apply.

Original and new payment deadline

A dunning letter should also include the original payment deadline, that is, the date by which the invoice should have been settled initially. This makes it easier for debtors to trace the invoice in question. At the same time, creditors should set a new payment due date, giving debtors a clear deadline for settling their outstanding account.

Dunning fees and late payment interest

If creditors are charging fees or interest, then they should state these amounts clearly in their dunning letter. That includes dunning fees which creditors can charge to an appropriate amount in order to cover material and delivery costs or costs for chargebacks. Section 288 of the BGB also allows creditors to charge late payment interest. These charges are intended to compensate businesses for any expenditure or damages incurred as a result of the late payment. There are legal regulations governing late payment interest which, unlike dunning fees, cannot be set at the discretion of the creditor.

Total due

Finally, the dunning letter should clearly indicate the total due. This means the original invoice total, plus any fees or interest. Providing a clear breakdown of all items facilitates immediate payment and minimizes inquiries.

Is it legal to send a dunning letter without issuing a payment reminder?

Sending a dunning letter without a prior payment reminder is generally legally permissible. The BGB does not stipulate that companies must first send their debtors a payment reminder. The key factor is that the dunning letter unambiguously requires payment of the outstanding debt within a clearly defined period. Sending a dunning letter without issuing a payment reminder is therefore legal, as long as the letter contains all the necessary information.

Strategic decision

Whether a business sends a dunning letter without issuing a payment reminder is not just a legal issue, though. Above all, it’s a strategic decision. Dunning early and directly can speed up the payment process and shore up a business’s liquidity, especially with large accounts. Setting binding deadlines increases the pressure on debtors and reduces the risk of further delays.

Comms decision

Issues around communication also play a key role in this decision. Sending a nonbinding payment reminder shows a high degree of understanding and customer focus. In many cases, invoices go unpaid not because customers are acting in bad faith, but simply because they’ve overlooked the invoice, forgotten the due date, or gotten so busy they lost track of things. When this happens, a friendly reminder is usually enough to ensure swift payment. It’s also a good way of maintaining trust with customers and avoiding unnecessary conflict. Especially in long-standing, trusted business relationships, it’s not advisable to send dunning letters without prior payment reminders.

Payment reminders and dunning in practice

In practice, a multistep approach to chasing late payments has proven successful. Creditors start by sending a friendly reminder. If the invoice remains unpaid, then the creditor will send out a first dunning letter, possibly followed by a second or third. If this does not result in payment, there are a number of different steps businesses can take to recover their money. These options include initiating judicial dunning proceedings, filing a lawsuit, or selling their AR in a process known as factoring.

Depending on the situation, it might make sense for a business to send a dunning letter straight away, without first issuing a payment reminder. A company might take this course of action if it urgently needs cash in order to shore up its liquidity, for example. It would also be a sensible option for a customer that has a track record of paying late.

How can businesses in Germany integrate dunning into their accounting system?

Thorough documentation of the dunning process is of central importance for businesses in Germany. It ensures that every step of AR management can be tracked and verified, and that all steps fulfill the auditing and compliance requirements. Businesses should therefore properly record and archive every payment reminder, dunning letter, and deadline. This is the only way to systematically track missing payments, enforce legal claims, and avoid unnecessary disputes.

Manual and digital methods of dunning

When it comes to dunning, businesses can choose between traditional, manual processes and digital solutions. The former means that businesses send out payment reminders and dunning letters by hand. They also have to monitor all deadlines themselves and archive all documents, either in physical folders or digital storage. As the unpaid invoices pile up, it doesn’t take long for this process to become unwieldy and prone to error.

Digital solutions can simplify this workflow enormously by monitoring deadlines, sending automated reminders and dunning letters, and documenting every step of the dunning process in one central location. This enables businesses to keep track of even large backlogs of outstanding bills and considerably reduces the administrative workload. Businesses can also standardize their processes, which supports consistent communication and compliance with legal requirements.

Automating dunning with Stripe Billing

Stripe Billing is an automated solution for managing recurring invoices, usage-based billing, and individually negotiated contract models. It also allows businesses to send out payment reminders and dunning letters automatically. Billing helps businesses establish structured, compliant dunning processes using scheduled reminders, clearly defined deadlines, consideration of late payment interest, and transparent documentation of all dunning steps. This automation reduces errors, speeds up dunning processes, and increases the likelihood of outstanding accounts being settled in a timely manner.

Billing also enables personalized customer communication: Payment reminders can be individually worded and sent at the optimal time. Intelligent retries ensure that failed payments are collected automatically, with repeat attempts timed to increase the chances of successful payment. Configurable cadences and communication styles allow the dunning process to be precisely tailored to customer payment behavior, so businesses can streamline their AR management and improve their liquidity.