Pre-Dunning: Why It Is Beneficial for Your Collection Process

Pre-dunning is a dunning best practice. Customers often fail to pay because they did not comprehend the payment terms fully or were unaware of the obligations they were committing to. These irregularities can be readily rectified by including pre-dunning into your collection strategies. 

Pre-dunning helps prevent invoice-related discrepancies, short payments, and payment disputes. Moreover, pre-dunning allows the customer to review the invoices ahead of the due date and raise any issues or concerns they might have.

Here are some benefits of implementing pre-dunning into your collections strategy.

1. Soft reminder about the due date

Late payments often happen because customers forget or miss the due dates. A payment reminder can help persuade your customers to pay on time for the goods and services.  It also allows customers to proactively take steps to complete the necessary payment approvals and release the money.

2. Error-free collections process

Many times payments are delayed because of errors in the invoice or disputes raised by customers. Disputes arise when there is an error in the dollar amount or the quantity of the goods shipped. Tax miscalculations and quality issues with the product(s) delivered may also lead to disputes and a delay in paying up. A pre-dunning email can help you identify such issues at the earliest and resolve them before the payment due date.  

3. Increased recovery rate

Due to the lack of a defined collections strategy, many debt collection cases reach a point where the creditor considers negotiating a payment plan and accepting partial payment. Although this is not an ideal situation, businesses often prefer this compared to the other option of not getting paid at all.

One of the best strategies is to remind clients of the contract details well before the payment due date. You can use a  pre-dunning email to provide more clarity on the payment due date, the payment conditions, and the implications of late or nonpayment. Even in case of unforeseen or unfortunate circumstances at the client’s end, you could begin negotiating on the right foot by reminding the customers that they are indebted to you.

Pre-dunning emails need to be polite and action-oriented. Here’s a checklist that you can follow for your next pre-dunning email: 

• Set the right tone: Be polite and treat your customers with empathy. 
• Make it personal: Personalization helps your email stand out from the mass emails that clutter your customers’ inbox.
• Add details: Send detailed information about the invoices that need to be paid.
• Be specific: Specify the exact amount and date by which the amount is due.
• Make it easy to pay: Include a link to the payment portal to improve your customer’s experience.

Now that you have a brief idea of what to include in a pre-dunning email, let’s look at an example:

Outstanding debt, if not managed efficiently, takes a heavy toll on your company’s financial health. Pre-dunning techniques can help improve your collection strategies. Automating pre-dunning can ensure that your executives do not miss any accounts or aren’t over-burdened with this step. 

Identifying high-risk customers and sending timely pre-dunning emails is tedious, and this is where automation could give you the edge.  Use HighRadius’ e-invoicing and collections solutions to automate your collections process, including sending timely pre-dunning emails to your customers. Enhance your dunning management now.