Moving process

If a customer does not pay an invoice, it may be necessary to send a reminder for non-payment if a debtor fails to make a payment.

The reminder can be designed in many different ways, sent out in different ways, at varying intervals and either with or without reminder fees. The purpose of the reminder is to send a reminder for non-payment - and thus draw attention to the fact that there is an outstanding balance that has not been paid.

In this section, we focus on the dunning process and give advice on how you as a company can build your own dunning process.

Requirements and rules for your dunning process

Basically, there aren't many requirements and regulations in Denmark regarding the dunning process, and you can pretty much shape and send out your reminders as you wish.

Before you as a creditor can send a reminder for non-payment, the payment deadline must have passed. In other words, you are not allowed to start reminders before the payment deadline has expired.

Once the payment deadline has passed, the company can build its dunning process as it wishes.

You should be aware that if you impose reminder fees on your reminders, the debtor MUST have a minimum of 10 days to pay.

The maximum reminder fee is DKK 100 and a maximum of three reminders with a reminder fee can be sent.

If no reminder fees are imposed, the creditor is largely free to determine its reminder process. It is important to note that it is not a requirement that the creditor has sent out reminders prior to any debt collection process, neither with the debt collection company nor with the enforcement court.
However, it is an important prerequisite that a debt collection notice is sent out before collection is started. The collection notice may be sent together with a reminder. This means that the debt collection notice is often part of the reminder process.

Efficient reminder process

Historically, there has been a lot of discussion about what the most efficient reminder process is, and the debate is likely to continue for many years.

As a debt collection company, we believe that the most effective reminder process is short and to the point. It should be shortened if it is deemed that the reminder process is not leading to any result.

There is the option to send friendly reminders, typically a heads-up to the customer about a missed payment. But there's also the option to send collection notices with a reminder fee.

For many, effective reminder processes can also be differentiated. This means that some customers get one type of reminder process, while other customers or customer types get a different type.

We always recommend that the creditor has a defined reminder process so that the bookkeeper always knows what steps are next, regardless of whether you have a long, short or differentiated reminder process.

The typical reminder process

Although there are many different dunning processes, our experience as a debt collection company is that many still follow a very classic model. A typical reminder process can look something like this:

Day 0: Payment deadline is missed.
Day 7: Friendly reminder is sent without a reminder fee.
Day 18: First reminder letter is sent with a reminder fee applied.
Day 29: Second reminder is sent with a reminder fee applied.
Day 40: Third reminder is sent with a reminder fee applied.
Day 51: Collection notice is sent.
Day 62: The case is handed over to debt collection.

The above outlines a traditional reminder process, but it also illustrates a weakness of following a lengthy reminder process. If a creditor chooses to send a friendly reminder, all three reminder letters with a reminder fee and at the same time comply with the debt collection notice deadline, it can take almost two months from the payment deadline before the case can and must legally be handed over to debt collection.

Therefore, it may be worth considering whether it is necessary to send all three reminders before the debt collection notice or whether one would be sufficient. It is important to assess whether the third reminder actually motivates the debtor to pay.

The effect of a reminder letter - depends on the reminder process

Historically, there has always been a lot of discussion about the effect of a reminder letter - is it effective or not - do we get paid when we send a reminder letter?

The answer is not clear-cut and depends a lot on the industry, amount, debtor, etc. But one thing is certain; the reminder letter is dependent on an efficient reminder process.

Some companies send few or no reminders, while others send many. At first glance, many reminders are not effective - the creditor should shorten the process and consider debt collection as the next step.

Rykkerskrivelsen har dog ofte den bedste effekt på de debitorer, der blot har glemt din faktura. Her er rykkerskrivelsen effektiv som reminder, og i disse tilfælde, betales den ofte meget hurtigt.

If the debtor has no intention of paying you or doesn't have the means to do so, the reminder letter will often have no effect at all.

Reminder service

If your company does not want to send out reminder letters and follow up on your reminder process itself, it may be a good idea to consider a reminder service.

Dunning is a solution where an external company, typically a debt collection agency, handles your entire dunning process. The debt collection company sends out reminder letters, follows up and can quickly move the case to debt collection - both judicial and extrajudicial.

In other words, reminder services provide a high degree of freedom and less work for the bookkeeper - and a partner who can handle the entire process.

At Collectia we offer dunning service - read more about Collectia dunning service here.