# Collections and the dunning cadence

> A dunning cadence dated from the due date, what to do with disputes and broken promises, and when an overdue account leaves your hands.

Source: https://lopifi.com/learn/how-to-collect-unpaid-invoices
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do I collect unpaid invoices without losing the customer?** A dunning cadence dated from the due date, what to do with disputes and broken promises, and when an overdue account leaves your hands.

Most late payments aren't refusals. The invoice went to the wrong inbox, it's waiting for a PO, or nobody asked. [Dunning](https://lopifi.com/md/glossary/dunning) is the schedule of reminders that catches these before they age. Pinecrest's $6,000 invoice, INV-1005, was due November 11, 2026. Here's the cadence Northwind runs on it, dated from the due date.

- **November 8 (3 days before due)** — Friendly reminder with the invoice attached, before it's due
- **November 12 (day 1)** — Due yesterday: a short note and the payment link
- **November 18 (day 7)** — A week late: ask whether anything is blocking payment
- **November 25 (day 14)** — Two weeks late: a call to the person who approved the purchase
- **December 11 (day 30)** — A month late: statement of account, and a stop on new orders
- **December 26 (day 45)** — Six weeks late: a final written notice naming the next step

Northwind's cadence on INV-1005, dated from its due date by the same function the aging uses.

The cadence is a practice, not a rule, and the useful parts of it are the ones a script can't do. A call on day 14 finds the dispute that an email on day 30 wouldn't. A [statement of account](https://lopifi.com/md/glossary/statement-of-account) shows the customer every open item at once, which is often how a missing invoice turns up.

1. **Work the list.** Start from the aging, by due date, largest and oldest first.
2. **Pause the disputes.** A disputed invoice comes off the cadence until the dispute is settled. Chasing an invoice the customer has formally contested damages the relationship.
3. **Log every promise.** A [promise to pay](https://lopifi.com/md/glossary/promise-to-pay) gets a date and an amount in the record. Pinecrest promised to pay by December 15 and didn't, so the next step escalates rather than repeats.
4. **Keep the history on the customer.** One timeline per customer, not per invoice, so whoever picks it up next sees every conversation.
5. **Stop shipping, not talking.** Hold new orders past a set number of days late. Collections continue while the account is on hold.

Running collections each week.

*[Figure: invoice lifecycle]*

Illustrative: an invoice moving through its states, and the one entry each payment makes.

## When it goes to a collection agency

The federal Fair Debt Collection Practices Act is written for consumer debts: obligations for personal, family or household purposes. A business collecting its own business-to-business invoices in its own name is generally outside it. State law can still apply, and a third-party agency has its own obligations, so read the agreement before you hand an account over.

> “The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.”

— [15 U.S.C. §1692a(5) (Fair Debt Collection Practices Act)](https://www.law.cornell.edu/uscode/text/15/1692a), The FDCPA's “debt” is a consumer's debt

**Keep collecting yourself**
- Pro: Keeps the relationship
- Pro: No fee
- Con: Slow
- Con: Takes founder time
- Best for: A customer you want to keep

**Demand letter from counsel**
- Pro: Signals the next step is legal
- Pro: Often enough on its own
- Con: Ends the relationship
- Con: Fees and costs
- Best for: A large balance, a customer that has gone quiet

**Collection agency**
- Pro: Takes it off your desk
- Pro: Paid only on recovery under contingency terms
- Con: The agency keeps a share of what it recovers
- Con: Your name is on how they behave
- Best for: Small balances not worth founder time

When an invoice is 60+ days late.

## Where this lesson's rules come from

- [15 U.S.C. §1692a(5) (Fair Debt Collection Practices Act)](https://www.law.cornell.edu/uscode/text/15/1692a) — The FDCPA's “debt” is a consumer's debt (statute)
- [Wikipedia, “Dunning (process)”](https://en.wikipedia.org/wiki/Dunning_(process)) — Dunning (process) (reference)

## Read further

- https://lopifi.com/md/startups/ar-aging-and-collections
- https://lopifi.com/md/docs/domain/05-order-to-cash

- **Track:** [Accounts receivable](https://lopifi.com/md/learn/ar)
- **Lesson:** Lesson 5 of 9 — 8 min
- **Terms taught:** [Dunning](https://lopifi.com/md/glossary/dunning), [Promise to pay](https://lopifi.com/md/glossary/promise-to-pay), [Statement of account](https://lopifi.com/md/glossary/statement-of-account), [Aging](https://lopifi.com/md/glossary/aging)
- **Previous:** [Invoice, revenue and cash: deposits and ASC 606, AR · Lesson 4](https://lopifi.com/md/learn/customer-deposits-and-revenue-recognition)
- **Next:** [Cash application: matching payments to invoices, AR · Lesson 6](https://lopifi.com/md/learn/cash-application-explained)
- **The course:** https://lopifi.com/md/learn