Accounts receivable teams face a persistent challenge: managing overdue invoices efficiently while maintaining healthy cash flow. Late payments can disrupt working capital, increase the risk of bad debt, and require finance teams to spend significant time on follow-ups and administrative tasks.
SAP FI-AR (Financial Accounting – Accounts Receivable) dunning provides a structured framework for managing overdue invoices in enterprise accounts receivable. It defines invoice eligibility, escalation levels, and communication rules based on ageing, credit policy, and customer segments. For finance teams in large organisations, SAP FI-AR ensures accurate invoice data, visibility of customer balances, and consistent receivables management across entities and geographies.
While the framework provides control and compliance, executing dunning processes manually can be time-consuming. Automation in SAP FI-AR addresses these challenges by systematically generating dunning letters, applying escalation rules, and tracking outcomes. This reduces administrative effort, ensures consistent communication, and increases the likelihood of timely payment.
This guide provides a practical, step-by-step approach to automating dunning letters in SAP FI-AR. It explains the benefits of automation, outlines key implementation steps, and shares best practices to build a process that is efficient, scalable, and aligned with broader cash collection strategies.
What are SAP FI-AR dunning Letters and how do they work?
Dunning letters are formal, structured notices sent to customers when invoices are overdue. Unlike simple payment reminders, their purpose is clear: they are designed to trigger timely customer action — whether that is payment, a commitment to pay, or notification of a dispute that needs resolution.
SAP FI-AR ensures these letters are:
Policy-aligned: Generated according to defined procedures and escalation levels
Auditable: Maintaining a complete history for compliance and reporting
Consistent: Sent according to predefined thresholds and intervals
By standardising the escalation path, SAP FI-AR gives AR teams control over receivables workflows and enables accurate forecasting and reporting.
SAP FI-AR executes dunning through a structured logic flow that ensures overdue invoices follow a consistent, auditable escalation path:
Identify overdue invoices
Determine which invoices are eligible for dunning
Apply the correct dunning procedure and level
Generate the appropriate dunning letter or form
Record dunning history for reporting and compliance
SAP’s framework also enables automation of routine tasks, helping teams reduce manual work while keeping high-volume AR workflows structured.
How SAP FI-AR supports dunning automation
SAP FI-AR includes a structured dunning process that can be tailored to an organisation’s specific requirements:
Dunning levels – Define the number of reminders a customer receives (e.g., first, second, final notice).
Dunning charges – Apply late payment fees automatically according to company policy.
Dunning texts – Predefine letter templates for each level of reminder.
Customer Groups and Rules – Adjust dunning frequency, grace periods, and escalation criteria for different customer segments.
When configured correctly, SAP FI-AR can generate dunning notices automatically for the appropriate customers at the correct intervals.
SAP FI-AR Dunning Levels for Accounts Receivable Teams
Dunning levels in SAP FI-AR escalate communication pressure over time. While each organisation may customise levels, escalation typically evolves across three dimensions:
Dunning Level | Tone | Authority | Intended Outcome |
1 | Informational | AR Operations | Payment reminder |
2 | Directive | AR Operations / Team Lead | Confirm payment commitment |
3 | Enforcement-focused | Finance Leadership | Prompt payment or dispute resolution |
4 | Legal / Credit escalation | Credit / Legal Team | Escalated credit or formal action |
Each level is designed to progressively increase urgency while assigning authority and expected outcome.
Automating SAP FI-AR dunning execution: Step-by-Step
1. Define the dunning procedure
Establish the framework for your automated process:
Set dunning levels and intervals (e.g., first reminder after 30 days, second after 45, final after 60)
Determine any applicable charges for late payments
Align the procedure with internal policies and customer agreements
2. Configure customer-specific rules
Not all customers should receive identical treatment. Consider:
High-risk accounts may require more frequent reminders
VIP clients may receive softer messaging or extended grace periods
Regional or legal requirements for collections may differ and should be reflected in the rules
3. Set up dunning texts
Letter templates should be clear, professional, and tailored to each dunning level:
SAP standard templates can be used as a starting point
Custom texts should maintain a professional tone and align with company communication standards
Include necessary payment instructions and contact information
4. Schedule automatic dunning runs
SAP FI-AR provides transaction F150 to execute dunning runs automatically:
Define the frequency of runs based on invoice volume (daily, weekly, or monthly)
Ensure system parameters are configured to include the correct customer and invoice selection criteria
Automation ensures letters are generated consistently without manual effort
5. Optional Review and Approval
Some organisations include a review step before sending dunning letters:
Provides an opportunity to verify accuracy
Reduces the risk of errors that could affect customer relationships
Particularly useful for high-value accounts or sensitive clients
6. Monitor and adjust
Continuous monitoring is essential for optimising effectiveness:
Track payment responses by dunning level
Adjust intervals, text content, or charges as needed to improve collections outcomes
Analyse trends to identify recurring issues and refine the dunning procedure over time
Best practices for dunning automation in SAP
To ensure an efficient and scalable process, consider these best practices:
Segment customers by risk – Tailor the intensity of follow-up to balance collection effectiveness and customer relationships
Enable digital delivery – Automate email notifications to accelerate payment cycles and reduce printing or mailing costs
Audit regularly – Verify dunning runs for accuracy and compliance with internal and external accounting standards
Document procedures – Maintain clear records for training, audits, and consistency across teams
Iterate based on results – Analyse which steps drive payments and adjust the procedure accordingly
SAP FI-AR dunning automation checklist for enterprise teams
Use this checklist to ensure your enterprise accounts receivable team is fully prepared for automated dunning execution. Each checkpoint highlights key areas to verify for accuracy, compliance, and efficient collections management.
Checkpoint | Why it matters |
SAP defines dunning levels and eligibility | Ensures policy-aligned escalation |
Dunning letters are sent consistently | Covers the full customer portfolio |
Customer replies captured & linked | Improves auditability & compliance |
Promises to pay recorded | Enables follow-up and forecasting |
Disputes detected early & routed | Prevents escalation errors |
Pause/resume rules applied | Maintains consistent treatment |
Credit escalation is managed consistently | Reduces risk exposure |
Outcomes visible to finance leadership | Supports reporting and decision-making |
AI agents and the future of dunning automation
Beyond traditional SAP automation, finance teams are increasingly turning to AI agents to make dunning processes more intelligent, personalised, and data-driven. Unlike standard automation, which follows fixed rules, AI agents analyse patterns in customer and invoice data to support more informed decisions and accelerate collections.
In practice, AI agents can:
Prioritise overdue accounts by identifying invoices most likely to be paid late
Generate follow-up communications automatically, reducing manual outreach
Resolve routine billing queries to prevent payment delays
Track payment commitments to monitor promises-to-pay and improve forecasting
Remove payment bottlenecks by highlighting accounts needing immediate attention
Escalate high-risk cases according to internal policies
AI agents can integrate with a variety of finance systems, including:
ERP platforms such as SAP, Oracle, and Microsoft Dynamics
Accounts receivable modules and collections management software
Billing or invoicing systems
Agentic AI solutions like Paraglide automate dunning with AI agents that work directly within the finance inbox. It handles routine follow-ups, resolves billing queries, tracks payment commitments, and identifies bottlenecks in collections — enabling finance teams to focus on high-value accounts and strategic cash collection, all while maintaining professional, timely communication with customers.