Once you have selected your dunning level and defined other settings, a deeper understanding of how dunning starts and ends will help you structure effective dunning policies. The core questions to address are:
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When does a dunning process begin? (Dunning Entry Rule)
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When should a dunning process stop? (Dunning Exit Rule)
1. Dunning Entry Rule: When Does Dunning Start?
A Dunning Policy defines a minimum balance threshold that determines when the dunning process is triggered. The behavior is the same for both invoice-based and customer-based dunning:
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If the invoice due amount (invoice mode) or the customer balance (customer mode) exceeds the threshold, dunning is triggered.
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Depending on the configuration, this can result in:
- A collection plan being created.
- A reminder being sent.
- Both a collection plan and a reminder being executed.
For example, if the entry threshold is set to €1,000, dunning will only apply to invoices or customer balances above this amount.
2. Dunning Exit Rule: When Does Dunning Stop?
A dunning process cannot continue indefinitely; it needs a defined stopping condition. The Dunning Exit Rule determines when a collection plan ends.
The exit rule can be based on:
📌 Option 1: Days Overdue Only
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All levels and actions are executed until completion or ignored if the balance is fully paid before reaching the final level.
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If the balance reaches zero, the collection plan is considered recovered, and all remaining levels are ignored.
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The minimum balance configured on levels is not considered—only the execution schedule matters.
Example:
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A collection plan has five dunning levels, each executed at different days overdue.
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If the customer pays in full at Level 3, Levels 4 and 5 are ignored, and the plan is closed as recovered.
📌 Option 2: Days Overdue & Balance Thresholds
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In this approach, both overdue days and a minimum balance per level are considered.
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Each level will execute only if the invoice or customer balance meets the minimum threshold for that level.
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If the remaining balance falls below the required amount for the next level, dunning stops early.
Example:
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Entry Threshold: €1,000
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Exit Threshold: €150
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If the balance drops below €150 before all levels are executed, the collection plan ends early rather than running indefinitely.
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This approach ensures persistent non-payers continue through the process, while minor overdue amounts are not endlessly pursued.
3. Currency Consideration
Each dunning policy must specify a currency to ensure that dunning applies only to invoices or customer accounts in that currency. This prevents mismatched currency dunning and maintains consistency across financial operations.
Summary: Choosing the Right Exit Strategy
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Invoice-Based Dunning often uses an exit rule of Balance = 0, since invoices are isolated cases.
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Customer-Based Dunning benefits from a more flexible approach, ensuring that collection plans do not run indefinitely as new invoices are generated every month.
By structuring entry and exit rules effectively, you can ensure a balanced and efficient dunning process that maximizes collections while avoiding unnecessary escalations.