Collections Cadence and Dunning

A standard dunning sequence

A typical sequence for net-30 invoices: invoice sent on day 0; friendly reminder on day 25 (5 days before due); past-due notice on day 31; second past-due notice with late-fee warning on day 45; phone call on day 50; final demand letter on day 60; collections referral or write-off on day 90.

Each touch is templated and automated where possible. Modern accounting and AR tools (QuickBooks, Xero, FreshBooks, Bill.com, Chaser) handle the email cadence. The phone call and personal escalation remain human.

Why cadence beats intensity

Customers who pay late are usually responding to the squeakiest wheel in their AP queue. A predictable, polite, timely sequence keeps you near the front of that queue without burning relationship capital.

Late fees (1.5% per month is common and legally enforceable in most US states) don't usually generate revenue — they generate response. Most customers will pay to avoid the fee, which is exactly the goal.

A standard cadence that works

A reliable cadence has friendly reminders before due, polite firmness right after due, and progressive escalation past 30 days late: e-mail at day -3 ('a heads-up your invoice is due Friday'), e-mail at day +1 ('just checking — did our invoice land?'), phone call at day +7, formal collections letter at day +21, finance-to-finance escalation at day +30, and a stop-work or stop-ship decision at day +45. The cadence is automatic; the conversations are human.

Tone matters more than frequency. Adversarial dunning ('you are now seriously delinquent') triggers defensive billing disputes that delay payment further. Curious-and-helpful dunning ('we want to make sure this didn't slip through your AP system — who should we be talking to?') resolves most legitimate delays without damage to the relationship and surfaces real disputes earlier.

Track collections effectiveness with the CEI (Collection Effectiveness Index): cash collected during the period ÷ cash collectible during the period. A CEI above 80% is acceptable, above 90% is good. Anything below 70% means either the team is understaffed, the cadence is being skipped, or the underlying customer base has fundamental credit issues that no amount of dunning will fix.

Modern collections platforms (Upflow, Versapay, Tesorio, YayPay) automate the cadence and let small finance teams operate with the discipline of much larger ones. The ROI is usually measured in weeks: a single tool that reduces DSO by 5 days on a $5M business releases $70k of working capital and pays for itself many times over in year one.