Reminder procedure
What is a reminder procedure?
A dunning procedure is a set of written and unwritten rules and procedures that a creditor follows when handling their dunning letters.
When it comes to sending reminders and debt collection, there are a number of requirements and rules that creditors must follow. These requirements and rules include the size of reminder fees, how often you can send reminders and how many reminders you can send.
We always recommend that your company has clear policies for your reminder procedure that comply with regulatory requirements and rules for sending reminder letters.
Why is a reminder procedure important?
Having a reminder procedure is important for many reasons.
Firstly, good and efficient dunning, debt collection and debt recovery is about having a clear framework for who and what is handled and when. Without a clear framework, reminder procedures often end up being de-prioritized, which can be dangerous for the company's liquidity.
All statistics also show that the faster you as a creditor are to get in contact and dialog with your debtor about unpaid invoices, the faster you as a creditor get your money back.
The quick contact can also help assess whether the case should be handed over to, for example, a lawyer, debt collection company or bailiff.
In other words, speed is crucial for reminder procedures and the debt collection process.
What should a reminder procedure contain?
A creditor has (almost) free choice as to what a reminder procedure should include - it basically depends on how much time and resources the creditor wants to spend on unpaid invoices. The reminder procedure can include personal contact with the debtor, phone calls, reminder letters, imposition of reminder fees and compensation fees.
The most important thing is that you as a creditor have a clear plan for what needs to be done in the reminder procedure, who will carry it out and how much time you want to spend on reminders to your customers before the case is transferred to self-collection or third-party collection by, for example, a lawyer or a debt collection agency.
We recommend that you write down your reminder procedure, for example in your business procedures or credit policies.
The written reminder procedure should at least include considerations about
- Who / which department handles the reminder sending
- When the reminder procedure is initiated
- When to apply reminder fees
- How many reminders are sent out before debt collection notices
- What do we do if the customer responds
- What do we do if the customer does not respond
- Who should answer and approve any questions during the reminder procedure
The more detailed your reminder procedure is, the greater the chance that your reminder process will be handled in the best possible way, without any misunderstandings or doubts arising along the way.
What does a typical reminder procedure look like?
A reminder procedure can take many different forms and can vary from company to company and industry to industry.
Some debtors require many reminders, inquiries and dialog in the reminder procedure, while others may only require a single reminder before they pay. Therefore, the reminder procedure, its actions and its length also depend on the debtor and their financial situation.
A typical reminder procedure could look like this:
The above is just an example, but as a creditor you have (almost) free rein to set up your reminder procedure as you wish. Just be aware that if you impose reminder fees, a payment deadline of at least 10 days must be given. Remember that no other reminders may be sent during this period.
We recommend that you carefully consider the length of your reminder procedure. For example, if you want to send all three reminders, subject to a reminder fee of DKK 100, with the statutory 10-day payment deadline, it will take at least one month from the start of the reminder procedure until the last reminder is sent.
This also means that it takes more than a month from the due date for any debt collection to be initiated.
You may not necessarily want to send all three reminders to shorten the reminder process. It's entirely up to your business and your cash flow.
