Dunning is the structured escalation of payment reminders sent to customers with overdue invoices, from a polite notice to fees, interest and collection.
Dunning is the process of chasing customers whose invoices are past due, organised as a ladder rather than as a single letter. Each step, usually called a level, has its own trigger expressed in days after the due date, its own wording and its own consequence: a neutral notice first, then a fixed fee, then interest on the outstanding amount, then a delivery block or a handover to a collection agency. A reminder is one document inside that ladder; dunning is the policy that decides when each document goes out and what it carries.
The point of a ladder is predictability on both sides. Every day an invoice stays open is a day your company finances the customer instead of the other way round: on a CHF 40 000 invoice paid 45 days late, at an assumed 6 percent cost of funds, the carrying cost is 40 000 x 0.06 x 45 / 365, roughly CHF 296, before counting the time your finance team spends on it. A documented escalation also matters later: fees and interest are only defensible if they were announced, and a collection agency or a court will ask what was sent and when.
Business Central covers the mechanics with its reminder functionality. Reminder Terms define numbered levels, each with a grace period, a waiting time before the next level, an optional additional fee and an option to calculate interest, the rate itself coming from the finance charge terms on the customer, plus the beginning and ending text printed on the letter. A Reminder Terms Code on the customer card decides which ladder applies, the Create Reminders batch builds proposals from open customer ledger entries, and issuing a reminder stamps the reminder level on the entries and files the document under Issued Reminders. The fee and the interest only reach the ledgers if Post Additional Fee and Post Interest are switched on in the reminder terms. Finance charge memos handle interest on their own. What Business Central does not ship is a collections workspace: there is no promise to pay field, no dispute flag, no call log, no automatic customer block when level 3 is reached, and no ownership of an account by a collector. Those either stay in a spreadsheet or come from an add-on.
Customer C00210 has invoice SI-2026-0442 for CHF 12 600.00 dated 14 April 2026 with 30 day terms, so it falls due on 14 May. The reminder terms have three levels: level 1 after a 5 day grace period with no fee, level 2 fourteen days later with a CHF 25.00 fee, level 3 fourteen days after that with a CHF 50.00 fee and interest. The level 1 letter goes out on 19 May, level 2 on 2 June, level 3 on 16 June. At an annual rate of 5 percent, the interest on 33 days overdue is 12 600.00 x 0.05 x 33 / 365, about CHF 56.96, so the level 3 document asks for CHF 12 600.00 plus CHF 75.00 of fees plus the interest.
The classic failure is chasing money you already received: a payment posted on account but never applied leaves the invoice open, so the customer gets a level 2 letter for an invoice they paid three weeks ago, and the next real reminder is ignored. Close behind are disputed invoices that nobody excluded from the run, letters sent to a generic accounts mailbox rather than to the person who releases payments, and a batch that is skipped for two months so the ladder restarts from zero. Teams usually measure dunning through days sales outstanding, the share of the receivables balance that is past due, and the average days to payment after a level 1 letter, which tells you whether the first step is doing any work at all.
A reminder is a single document listing overdue invoices. Dunning is the whole escalation policy around it: how many levels, how long between them, what fee or interest each level adds, and when the account leaves accounts receivable for collection.
The Create Reminders batch can be scheduled with a job queue entry, but issuing is best kept manual. A quick review catches unapplied payments and disputed invoices before letters leave the building.
Zentriq's AI tools automate many of the manual processes around dunning in Business Central. Learn about the Zentriq Agent or try Zentriq PunchOut to see how AI simplifies procurement in BC.