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What is dunning?

Like invoicing and accounts receivable, dunning is part of a company's receivables management.

Editorial Team Germany | Oct 4, 2022 5 min
What is dunning?

Definition of dunning

The dunning process deals with outstanding receivables. This is where the management of invoices and the checking of incoming payments takes place. If an invoice is not paid within the specified payment deadline, the dunning process starts.

Every company has its own approach with regard to the content and number of reminders, the procedure and the deadlines. Nevertheless, there are also generally accepted as well as binding legal regulations.

Deadlines in the dunning procedure

What is legally regulated in the commercial dunning procedure?
And what deadlines must be met?

If a company discovers that a customer has not yet paid, it starts the so-called commercial dunning procedure. The commercial dunning procedure is subject to certain rules: A claim can be dunned if the claim is justified and this claim is also due. The time at which a claim is due can be contractually agreed. This means that this rule is either noted on the invoice or included in the general terms and conditions.

It is common that a deadline is set for payment of a service rendered or that a date is specified for it. For example, it may be stated on an invoice or in a contract that the payment is due 2 weeks after receipt of the invoice. If the customer does not pay within this time, the company can directly start the dunning process.

If no specific deadline has been agreed, payment is due immediately after the service has been rendered. This is how the legislator regulates it in § 271 (1) German Civil Code (BGB). If the customer remains in arrears for a longer period of time, it is at the discretion of the company when to send a reminder.

Commercial dunning

How many reminders are actually required by law? And at what point are you in default of payment?

In commercial dunning, there is no legal obligation to send a certain number of reminders. If a company sends more than one reminder, it is usually done as a gesture of goodwill towards the customer. Dunning costs may be incurred at the latest from the point in time when there is a delay in payment. The debtor has to bear these costs as damage caused by delay.

A creditor can take further steps from the time the default occurs. Usually, the last reminder sent by the creditor himself announces when the matter of the claim will subsequently be handed over to a debt collection agency or a lawyer. There are no legal regulations for the announcement of further steps that a company has to comply with.

Steps after an unsuccessful dunning procedure

How many reminders are necessary until the case is handed over to a debt collection agency? What happens if a payment is not made despite reminders?

There is no statutory number of reminders after which a collection file may be handed over. Once a commercial dunning procedure has been completed on the part of the creditor, it moves to the next stage. In this stage, a company can seek assistance from an external service provider and, for example, commission a debt collection agency to collect the outstanding amount. The creditor has this right as soon as the debtor is in default, i.e. he has not responded to the reminder letters. Trying to find a good solution for both sides, the debt collection agency contacts the debtor - in writing or by telephone - to collect the creditor's account receivable.

Once the debt collection agency has been commissioned, it becomes the debtor's first point of contact and takes care of all other aspects of the dunning procedure. Payments should then only be transferred directly to the debt collection service provider, so that the dunning procedure can be stopped as quickly as possible after receipt of payment. If the debtor does not respond to the collection letters or the collection agency is unable to reach a solution with the debtor, the last resort is judicial dunning proceedings or even a lawsuit. However, this should be avoided in the interest of all parties involved. This is because the costs that the debtor has to reimburse as damage caused by default are increased enormously by legal proceedings.

What is external dunning?

External dunning

Does a company have to send reminders itself? Or can the entire dunning process also be outsourced?

If companies want to focus exclusively on their core competence, they can also outsource their entire dunning process and commission an external service provider starting from the first commercial reminder. Outsourcing the monitoring and dunning of due receivables saves capacity and costs for an in-house debt collection department.


Please understand that for reasons of readability we only use the grammatically masculine form when referring to persons. This always refers to people of any gender identity.