Explain about dunning process in credit management?
Let me explain in simple terms:
1) You have a Customer which you had felt, he is doing good business and
supplied material on Credit of 45 days.
2) Since this customer is good as you felt, you have not managed Credit
Checks as well. So, he had comfortably reached to the fullest credit (or even
more) which you can afford for any customer.
3) One fine day you got realised that, there is very bad debt with this
customer and need to recover from him and till then, there will be no further
supply to the customer.
4) Your company's legal department has laid a policy that, inorder to recover
any bad debts, like:
a) We will send a normal payment reminder.
b) In case customer doesnt respond, we will send at least further reminder
(dunning notice) may be 9 times
(9 reminders) (Dunning level) and what intervels of time (dunning
c) Still if the customer doesnt resopond for the reminders, you will file a law
suit against the customer for recovering
d) Finally, after getting veridict, you may proceed for auction of his property
or as per the order for Law.
Now in SAP, the definition of Dunning procedure is a pre-defined procedure
specifying how customers or vendors are dunned.
For each procedure, the user defines
- Number of dunning levels
- Dunning frequency
- Amount limits
- Texts for the dunning notices
In SAP, you will maintain the Dunning Procedure at customer master.
Referring to this your SD Team / FI Team (user team) will effect Dunning
PS: You might remembered the dunning procedure laid by Relaince Mobile,
sometime back, sending street rowdies for recovering the bad debts from users.
That is dunning. Remember Reliance, you will not forget dunning forever.