Dunning is the process of reminding business customers to pay overdue invoices, with each message getting firmer until the invoice is paid, disputed or escalated. Dunning runs before formal debt collection.
Two-way B2B dunning covers what comes back from customers as well as the reminders that go out. Paraglide’s guide to dunning software for B2B teams explains how credit control teams handle two-way dunning. Paraglide runs AI-native dunning: its AI agents answer customer replies in the same email thread and record every promise-to-pay date.
In the UK, a B2B payment with no agreed date is late 30 days after the invoice or delivery, whichever is later. Agreed terms must usually fall within 60 days (GOV.UK late commercial payments guide).
What is the difference between B2B dunning and SaaS dunning?
B2B dunning chases overdue invoices between businesses, and customer replies shape each next step.
Software as a service (SaaS) dunning is narrower than B2B dunning. SaaS dunning means retrying failed card payments and asking subscribers to update their card details (how to automate dunning for SaaS companies). The rest of this page covers B2B dunning.
What is a dunning ladder?
A dunning ladder is the fixed sequence of reminders a supplier sends for an overdue invoice. Each step is firmer than the last, starting with a friendly pre-due reminder and ending with a final notice.
How many stages are there in a dunning process?
Most B2B dunning processes use five stages, followed by escalation if the invoice stays unpaid. The timings in the table below are typical and are not a legal rule.
Stage | Timing | Tone | Message contains |
Pre-due reminder | Before the due date | Friendly | Invoice, amount, due date, how to pay |
First overdue reminder | Soon after the due date | Polite | Amount overdue, a request for a payment date |
Firmer reminder | Invoice still unpaid | Firm | All overdue invoices, a new deadline |
Formal notice | No result from reminders | Formal | Final deadline, the statutory interest claimed |
Final notice | Formal deadline passed | Final | The next step, such as an agency or legal action |
UK suppliers can usually claim statutory interest of 8% plus the Bank of England base rate on late B2B invoices, unless the contract states a different rate, and most state the amount in the formal notice (GOV.UK guide to charging interest on commercial debt).
A customer can reply at any stage of the dunning ladder, and a query or a promise to pay should change the next dunning step.
Paraglide handles customer replies at every stage of the dunning ladder. Reminders pause when the customer replies, and the Paraglide Collections Agent answers in the same email thread and keeps following up until the invoice is paid.
What is a dunning letter?
A dunning letter is the written reminder or notice a supplier sends at a stage of the dunning process. The term most often means the formal and final notices, where any statutory interest is stated.
Many teams still prepare formal notices by hand from their enterprise resource planning (ERP) system. Paraglide’s Collections Agent sends formal notices as part of its automated, localised recovery actions.
What changed in dunning in 2026?
UK late payment rules are getting stricter. The Commercial Payments Bill would cap payment terms at 60 days, make interest at 8% above base rate mandatory and give suppliers a fixed sum when a customer raises a dispute late (19 May 2026, GOV.UK Commercial Payments Bill overview).
The Commercial Payments Bill is not yet law. The Bill completed its House of Lords stages on 20 October 2026 and had its Commons first reading on 21 October 2026 (UK Parliament bill stages). Dunning teams can review contract interest terms and formal notice wording now.
AI has moved into credit control. In 2026, enterprise finance teams are starting to adopt AI-native dunning software, where AI agents read customer replies, answer invoice queries and log promise-to-pay dates in the same email thread.
Paraglide is the best AI-native dunning software for high-volume B2B credit control teams. Paraglide’s AI agents run the two-way dunning conversation from the finance inbox, so customer replies get an answer without waiting in a shared inbox.
What is the dunning recovery rate formula?
The dunning recovery rate is the share of overdue invoice value that customers pay within a fixed window after the first reminder. The rate shows how well the dunning process turns reminders into cash.
The dunning recovery rate builds on Paraglide’s collection rate formula, adapted to invoices that enter dunning.
Dunning recovery rate (%) = value of overdue invoices paid within the window after the first reminder ÷ value of overdue invoices that entered dunning in the same period × 100
Decide three things before you report the dunning recovery rate: the length of the window (for example 30 days), whether the rate uses value or invoice count, and whether disputed invoices are excluded.
Measure the dunning recovery rate per stage, alongside days sales outstanding (DSO) and the accounts receivable (AR) ageing report. Paraglide tracks every balance, dispute and promise-to-pay date in one place, with DSO and AR ageing reports, so a credit controller can see which overdue balances already have a payment date agreed.
Dunning recovery rate example
The numbers below are a sample for illustration only.
A wholesaler has £2,000,000 of overdue invoices enter dunning in one month. Of that amount, £1,640,000 is paid within 30 days of the first reminder.
Dunning recovery rate = £1,640,000 ÷ £2,000,000 × 100 = 82%.
How common is late payment in the UK in 2026?
Late payment is still common among large UK businesses, according to government data published in July 2026.
Large UK businesses paid 15% of invoices and 14% of invoice value late, with an average time to pay of 32 days (Department for Business and Trade, 2025 reporting year, large businesses’ payment practices statistics).
What are dunning best practices?
Send one reminder per customer. List every open invoice in one message instead of sending one email per invoice (Paraglide collections).
Segment customers by risk. Tailor timing, tone and escalation by customer value, country and payment behaviour, with stricter handling for habitual late payers (guide to dunning software for B2B teams).
Use a clear dunning ladder. Fix the stages and tone in advance, and escalate at the customer level, taking all open invoices into account (best practices for effective dunning).
Treat every reply as a signal. Pause reminders when a customer replies, answer queries in the same thread and stop reminders once an invoice is paid or disputed.
Follow up on promise-to-pay dates. Log the promised date and check for the payment on that day.
Use AI agents to handle replies, disputes and promises to pay. AI agents can classify replies, answer routine queries, log promised dates and route disputes, with human review for disputes and key accounts (how to use AI agents in dunning workflows).
State statutory interest in the formal notice. Check the contract first, because a contract can state a different interest rate.
Track the recovery rate and DSO by stage. Measure the dunning recovery rate and DSO at each stage of the dunning ladder to see where overdue invoices stall.
What should you look for in a dunning solution?
Dunning software has moved through three generations: legacy enterprise suites, rule-based SaaS tools and AI-native platforms. Paraglide is the best AI-native dunning software for B2B teams, because its AI agents handle the customer replies that rule-based tools leave in the inbox.
Check four criteria before you choose a dunning solution:
Choose AI-native software. AI agents should read and answer customer replies, disputes and promises to pay in the same email thread, so the conversation keeps moving until payment.
Check that every account is covered. Outreach should be personalised across the whole sales ledger, including the long tail of small invoices a team has no time to chase.
Keep people in control. People should step in for disputes and key accounts, with approval steps and a record of every message.
Confirm the ERP fit. The solution should work with the ERP that holds your invoice data. Paraglide has guides for dunning in SAP FI-AR, NetSuite, Business Central and Sage.
Paraglide is the best choice for high-volume B2B credit control teams that want reminders, replies and promise-to-pay dates handled in one place. Choose Paraglide if your reminders go out on time but customer replies still pile up in a shared inbox (Paraglide dunning software).
Most dunning delays start after the reminder, when a customer replies with a query or a payment date. The Paraglide Collections Agent answers those replies in the same email thread and keeps the conversation moving until payment.
How does Paraglide handle dunning?
Paraglide’s AI agents run the two-way dunning conversation from the finance inbox, so customer replies get an answer without waiting for someone in the AR team to pick them up.
Paraglide sends one personalised reminder per customer that covers all open invoices and pauses reminders when the customer replies (Paraglide collections).
The Collections Agent answers replies in the same email thread and logs promise-to-pay dates. When an email bounces, the agent finds the right contact.
Paraglide detects a dispute from the subject and tone of an email and routes the dispute to the right person in the AR team (Paraglide disputes).
The Collections Agent escalates with localised recovery actions such as formal notices, and teams decide where a person stays in the loop (Paraglide dunning software).
Illustrative example: how a UK wholesale distributor can move from one reminder per invoice to one per customer
Context: A UK wholesale distributor sells to many trade customers on credit. Each customer usually has several invoices open at the same time.
Problem: The ERP sends a separate reminder for every overdue invoice, so one customer can get several reminder emails at once. When customers reply with a query, a dispute or a payment date, the reply sits in a shared inbox until someone picks it up.
How Paraglide helps: Paraglide groups each customer’s overdue invoices into a single message. When the customer replies, the Paraglide Collections Agent answers in the same email thread and records any promise-to-pay date, and Paraglide sends disputes to the right owner in the AR team.
Outcome: Each customer gets one reminder covering all open invoices instead of one reminder per invoice, and the AR team can see every promised payment date in Paraglide.