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What is dunning? What is dunning level..? How many dunning
levels can be configured?
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Answer Posted / g vidyadhar
Customers with whom you transact business have to pay their
dues eventually. Generally the due date on which the
customers have to settle the dues is stipulated in the
terms of payment agreed into with them.
Now one of the three logical events can happen:
1) Customers pay on the due date specified:
They pay the entire value of money for which you have
supplied materials and / rendered services. Not a bad
situation at all..... you can meet your financial
commitments as planned since you have received prompt
payment ....
2) Customers pay ahead of the due date specified:
This is a better situation for you..... Your money comes
ahead of your original plan and you can be safe about
meeting your financial commitments as
planned ......Therefore, You waive off a small part of the
dues owed by your customers since your working capital is
not hampered.
3)What a mess things are in this business world !. You had
promised money to your creditors assuming that your
customers would pay promptly and that is not happening.
This is a Domino effect commencing with your customers
which you are forced to pass on to your vendors..... That
is not one bit good !!!!. You must do something to prevent
recurrence of such an uncomfortable situation !
What are the corrective measures which you intend to take?
SAP calls it as DUNNING.
As a first step, you need to identify which of your
customers have not paid their dues promptly . You need to
remind each one of such customers about the non-payment and
insist that the dues are settled immediately. This is done
through letter correspondences ( indicating break up of
dues owed by the customers). Some deaf customers who do not
heed your letters need to be reminded often ( that is
periodically , each time the letter sounding a little
sterner than the earlier one.
The second optional step would be to levy penal charges for
the defaulted payment in the following manner:
1. Levy of interest for nonpayment / belated payment
2. Levy of incidental charges incurred with regard to
dunning ( the process of dunning is going to cost you by
way of follow up,dunning and printing costs, maintenance of
additonal records,additional labor incurred by way of wages
to dunning clerks etc...)
Customers who are tone deaf even after repeated reminders
would be handled through a legal process.
This is the process of dunning.
Generally, each time you dun a customer you are crossing
one level of dunning. Though you can dun upto a maximum of
nine times , you would normally resort to legal help after
dunning three or four times, at the most. The number of
dunning levels you need can be configured and theoretically
it ranges from 0 to 9 levels ( 0 if your company is run by
an inefficient management which does not bother to collect
money on time and 9 if your management is too liberal with
your customers !).
I trust this gives you a basic understanding of what
dunning is and what the dunning levels are.....
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