How to write a dunning letter | 3 example dunning letter templates

Late payments are a persistent challenge for businesses of all sizes. While polite reminders can work in some cases, others require a more formal and structured approach. That’s where dunning letters come in. A well-written dunning letter can help recover unpaid invoices while preserving the relationship with the customer.

This post explores the best practices for writing effective dunning letters, when to send them, what to include, and provides three professionally worded templates suitable for different stages of the collections process.

What is a dunning letter?

A dunning letter is a formal written notice sent to customers to remind them of overdue payments. Unlike a casual reminder email, a dunning letter follows a structured approach, often escalating in tone with each stage. The goal is to recover outstanding debt while maintaining professionalism and legal compliance.

When should a dunning letter be sent?

Timing is critical. A good rule of thumb is to escalate from informal reminders to formal dunning letters as follows:

• First dunning letter: 30 days past due

• Second dunning letter: 60 days past due

• Final dunning letter: 90 days past due

Each letter should be sent at regular intervals, allowing the customer time to respond or resolve the issue before the next communication.

What to include in a dunning letter

Every dunning letter should contain the following essential elements:

• Customer's full name and address

• Invoice number(s) and original due date(s)

• Outstanding amount owed

• A clear request for payment

• New payment deadline

• Accepted payment methods

• Contact information for any queries

Optional but helpful elements include:

• Reference to previous communications

• Consequences of continued non-payment (e.g. fees, service interruption)

• Payment link or QR code

• Instructions for disputing the invoice

The importance of tone

Tone can make or break a dunning letter. A friendly yet firm tone encourages cooperation, while an overly aggressive letter can damage the relationship and prompt defensive responses. It’s important to escalate tone appropriately:

• First letter: polite and professional

• Second letter: firmer tone, with mention of late fees or consequences

• Final letter: direct and formal, possibly indicating legal action

Avoid accusatory language. Always assume the delay is unintentional, unless proven otherwise.

Dunning letter templates that actually work

Below are three dunning letter templates tailored for different stages of the collections process. Each letter is formal, professional, and designed to prompt payment without burning bridges.

First dunning letter (30 days past due)

Dear [Customer Name],

This is a friendly reminder that invoice [Invoice Number], dated [Invoice Date], remains unpaid. As of today, the total outstanding balance is [Amount Due], which was originally due on [Due Date].

Please review the invoice and arrange for payment at your earliest convenience. If payment has already been sent, kindly disregard this notice. Otherwise, payment can be made using the methods outlined below:

[Insert payment link QR code or bank transfer details]

If there are any issues with this invoice or if additional documentation is required, please do not hesitate to get in touch.

Thank you for your prompt attention to this matter.

Sincerely,
[Your Name]
[Job Title]

Second dunning letter (60 days past due)

Dear [Customer Name],

This is a follow-up regarding invoice [Invoice Number], issued on [Invoice Date], which remains unpaid and is now 60 days overdue. The current outstanding amount is [Amount Due].

Despite previous communication, payment has not been received. Please be advised that continued delay may result in the application of late fees or further action.

To avoid additional charges or disruption of services, please make payment no later than [New Deadline Date]. Payment can be made using the following link:

[Insert payment link QR code or bank transfer details]

If you have already processed this payment or believe there is an error, please contact us immediately.

Your cooperation is appreciated.

Sincerely,
[Your Name]
[Job Title]

Final dunning letter (90+ days past due)

Dear [Customer Name],

Despite multiple previous requests, invoice [Invoice Number], dated [Invoice Date], remains unpaid. The balance of [Amount Due] is now more than 90 days overdue.

This letter serves as a final notice before further action is considered. If full payment is not received within seven (7) days of the date of this letter, this matter may be escalated, which could include referral to a collections agency or initiation of legal proceedings.

Please make payment using the following:

[Insert payment link QR code or bank transfer details]

If there are any extenuating circumstances preventing payment, it is essential to get in touch immediately to discuss a resolution.

Thank you for your urgent attention.

Sincerely,
[Your Name]
[Job Title]

Best practices for effective dunning processes

1. Send reminders consistently
   Establish a cadence and stick to it. Don’t wait too long between reminders.

2. Automate with flexibility
   Use accounts receivable software that allows scheduled reminders, personalization, and tracking.

3. Personalize messages
   Address customers by name and reference specific invoices to make communications feel less generic.

4. Provide multiple payment options
   Offer bank transfer, card payment, and links or scannable QR codes in your letters to streamline the process.

5. Keep records of all communication
   Document each reminder or letter sent to provide a clear trail if disputes arise.

6. Use a professional tone
   Even in final notices, maintain professionalism and avoid threats.

7. Follow up manually where needed
   For high-value invoices, consider phone calls in addition to letters.

Common mistakes to avoid

• Sending reminders too late or inconsistently

• Using overly harsh or legalistic language too early

• Failing to provide clear payment instructions

• Ignoring the customer’s situation or previous responses

• Not following up after sending letters

How automated dunning tools can help

Manual follow-up is time-consuming and prone to errors. Automated dunning tools help streamline this process by sending scheduled reminders and letters, tracking engagement, and customizing content for each customer. This leads to faster payments and less strain on internal teams.

Platforms like Chaser also offer integration with accounting systems and ERP softwares, enabling end-to-end automation from credit checking, to dunning, to final debt collection efforts.

Key takeaways

• Dunning letters are essential tools for recovering unpaid invoices

• The right tone, timing, and structure make a significant difference

• Templates should be personalized, clear, and progressively firmer

• Automation tools can enhance efficiency and payment recovery

FAQs

Is a dunning letter legally required?
No, but it is considered a best practice and can support legal proceedings if necessary.

Can late fees be added to a dunning letter?
Yes, but this depends on the terms outlined in the original agreement and local laws. See more information here. 

What if the customer still doesn’t pay after the final dunning letter?
The next step is usually referring the case to a trusted debt collections service or initiating legal action.

Can a dunning letter be sent by post or must it be by email?
Either method is acceptable. To maximize your chances of timely payments, it is recommended to follow up on outstanding debts via multiple channels.

How long should one wait between dunning letters?
Usually 7 to 15 days between each stage, but this can vary based on the company’s policy and payment terms.

To reduce time spent on chasing late payments and to improve cash flow, consider implementing a dunning system that automates follow-ups and personalizes communication based on the customer’s profile and payment history. View a fact sheet about Chaser's automated follow-up tools which are helping businesses globally to collect payments without the extra work here.

For more templates, downloadable assets, or best practice guidance designed specifically for credit control and collections view the Chaser resources centre. Or, automate your dunning letters for free with a 10-day free trial of the Chaser accounts receivables software.