Dunning Letters and Debt Chasing Procedures

Dunning is the structured process of chasing customers for overdue payments. It typically involves a series of increasingly firm communications – from a friendly reminder to a formal demand – designed to recover the money owed while preserving the customer relationship where possible.

For UK businesses, unpaid invoices are not just an inconvenience. They directly damage cash flow, increase the risk of bad debts and consume time that could be spent on productive work. A clear, documented dunning process ensures overdue invoices are chased consistently and escalated appropriately.

The dunning timeline

A typical dunning sequence for a UK business follows this pattern:

The exact timings depend on your industry, your payment terms and the size of the debt. Some businesses compress the timeline for smaller invoices and extend it for larger accounts.

Pre-due reminders

Sending a reminder before the invoice is due reduces late payments significantly. Many customers pay late not because they intend to but because the invoice has been lost, misfiled or forgotten.

A pre-due reminder should:

• Reference the invoice number and amount
• State the due date
• Provide payment details (bank account, sort code, reference)
• Be short and friendly

Accounting software can automate these reminders, sending them at a set number of days before the due date without any manual effort.

First reminder

If the due date passes without payment, send a first reminder within one to three days. At this stage, assume the customer simply overlooked the invoice.

The first reminder should:

• Note that the invoice is now overdue
• Include the invoice number, amount, original due date and how many days overdue
• Restate payment details
• Ask the customer to contact you if there is a query or dispute

Keep the tone polite and professional. Many late payments are resolved at this stage.

Second reminder

If the first reminder produces no response after seven to fourteen days, send a second, firmer communication.

The second reminder should:

• State clearly that the invoice remains unpaid
• Reference your previous reminder
• Request payment within a specific number of days (e.g. seven)
• Mention that you reserve the right to charge interest under the Late Payment of Commercial Debts (Interest) Act 1998
• State the consequences of continued non-payment

The phone call

A phone call is often more effective than written reminders because it demands an immediate response. Call the person responsible for paying invoices (not just a general switchboard) and:

• Confirm they received the invoice and reminders
• Ask when payment will be made and get a specific date
• Note the name of the person you spoke to and what was agreed
• Follow up with a written confirmation of the agreed payment date

If the customer raises a dispute, address it promptly. A genuine dispute should not be pursued through the dunning process – resolve the query first, then chase for payment.

Final demand

If the phone call and earlier reminders are unsuccessful, send a formal final demand letter. This letter serves as the last step before legal or professional debt recovery action.

A final demand should:

• State the total amount outstanding, including any statutory interest and compensation
• Reference all previous communications and the dates they were sent
• Give a final deadline for payment (typically seven to fourteen days)
• State clearly what will happen if payment is not received (referral to a debt collection agency, solicitor’s letter, county court claim)
• Be sent by recorded delivery or with proof of delivery

Statutory late payment rights

Under the Late Payment of Commercial Debts (Interest) Act 1998 , UK businesses have statutory rights when another business pays late:

These rights apply to business-to-business transactions (not consumer sales). You do not need to have included them in your contract – they apply automatically. However, stating them in your payment terms makes the position clear from the outset.

Escalation options

If the dunning process fails to produce payment, you have several options:

For more detail on these options, see our guide to debt recovery .

Automation

Modern accounting software can automate much of the dunning process:

• Automated email reminders sent at pre-set intervals before and after the due date
• Aged debtor reports highlighting which invoices are overdue and by how many days
• Customer communication logs recording when reminders were sent and any responses
• Escalation flags alerting you when an invoice reaches a certain age threshold

Automation ensures consistency. Every overdue invoice gets chased, not just the ones you remember to follow up on.

Maintaining the relationship

Chasing debts is uncomfortable, but failing to chase them is worse. A professional, consistent dunning process is not aggressive – it is a standard part of doing business. Most customers expect to be reminded and do not take it personally.

To maintain the relationship:

• Always be professional and factual – never emotional or accusatory
• Separate the dispute from the debt – if there is a genuine problem with the goods or service, resolve it; the remainder should still be paid
• Offer payment plans for customers in genuine difficulty – recovering the debt in instalments is better than not recovering it at all
• Document everything – if the matter escalates to legal action, you will need a record of every communication
• Chase promptly and consistently – the longer you leave it, the harder recovery becomes and the more it damages your cash flow