Dunning

A Dunning is a letter or form sent as a regular reminder to ask for payment of overdue obligations, usually for unpaid Sales Invoices. It allows businesses to keep track of outstanding payments and follow up in an organized manner.

To open the Dunning list, go to:

Home > Accounting > Dunning

1. Prerequisites

Sales Invoice: A document sent to a customer as a legal demand for payment following a sale. It indicates the goods or services rendered, the amount owed, and the terms of payment.

Dunning can be made only against an overdue Sales Invoice.

Dunning Type: Employed for automatically populating interest rates, charges, and blocks of text when producing a new Dunning.

2. Creating a Dunning

You can create a Dunning to deal with overdue scheduled payments. There are two ways:

a) Create a New Dunning

Navigate to the Dunning list and click on "Add Dunning".
Choose a Customer and click "Fetch Overdue Payments". It will display all overdue Sales Invoices for the selected customer.
Select the invoices to include and click "Get Items".

b) Create a Dunning from an Overdue Sales Invoice

Go to the Sales Invoice list and select an overdue invoice.
Click on "Create > Dunning" to pull overdue payments from the payment schedule of the invoice into a new Dunning.

If the payment schedule of the invoice is split into more than one installment, a Payment Terms Template should be utilized. On manually split payment schedules, Dunning must be manually controlled.

c) Completing the Dunning

Choose a Dunning Type to have interest rates, fees, and text blocks automatically filled in or fill them in manually.
Set an Income Account (such as "Other interest and similar income") and Cost Center for interest and fee income if desired.
Save and submit the Dunning prior to sending it to the customer.

2.1. Dunning Type

When a customer doesn’t pay on time, you remind them. These reminders are called dunning notices.

A Dunning Type in ERPNext means:

How do you want to handle late payments?

It helps you set rules for what happens in each reminder — like whether to charge a late fee, interest, or just send a friendly reminder.

Example:

Assume your customer hasn't paid the invoice within time.

You generate a Dunning Type with these steps:

1. 1st Reminder (5 days later):

No late fee. Just a soft reminder such as:

"Hi! Just a friendly reminder, your payment is due. Please pay soon. Thanks!"

2. 2nd Reminder (10 days later):

Add PKR 300 late fee.
Also charge 2% interest on unpaid amount

"Hello again! Your bill remains unpaid. There has been a late payment of PKR 300 and 2% interest added. Pay soon, please."

3. 3rd Reminder (15 days later):

Late fee + additional interest

"Final notice! Your outstanding amount is growing. Pay immediately to prevent further action."

Why use it?

So you don't have to send reminders manually. ERPNext will do it for you, depending on the Dunning Type you've set.

2.2. Dunning Statuse

1. Draft:

It simply means the dunning notice is prepared but not sent yet.
You can still edit or make modifications before sending it to the customer.

2. Unresolved:

The notice has been sent (submitted), but the customer is not paid yet.
The system is still waiting for payment.

3. Resolved:

The customer has now paid in full, including late charges or interest.
The dunning case is closed — all good now!

4. Cancelled:

The dunning notice has been revoked (perhaps inadvertently or intentionally).
It's no longer in force and won't impact anything.

3. Payment

On payment in full (interest and fee included), open the pending Dunning and select "Create > Payment". This creates a Payment Entry against the outstanding payments, posting interest and fee as Payment Deductions or Loss. The status of the Dunning then becomes Resolved.