What Is Dunning & Why It's Important for B2B SaaS Companies?

Dunning is the systematic process of following up on unpaid invoices, and the operational discipline that turns earned revenue into collected cash. For sales-led B2B SaaS founders selling $10K+ annual contracts with Net 30/60/90 payment terms (meaning payment is due 30, 60, or 90 days after the invoice date), dunning manages the reality that enterprise customers have complex AP approval workflows and payment cycles averaging 45-65 days.

Here's what that looks like in practice: You closed a $50K annual contract three months ago. The customer is actively using your product. Their team loves it. But when you check your bank account, you realize they never paid the second quarterly invoice.

You sent it 45 days ago. It's sitting in someone's procurement queue, and you've been too busy shipping features to follow up consistently. Without structured follow-up, you're leaving real money on the table and undervaluing your product by inadvertently giving it away for free.

This article covers the complete dunning framework for B2B SaaS: how the three-phase dunning process works (prevention, early follow-up, and escalation), the key operational decisions that separate effective dunning from chaos, why proper dunning directly impacts your unit economics and CAC payback, when and how to send formal dunning letters, and how to automate dunning as you scale beyond 50-100 customers.

How Does The Dunning Process Work? Effective dunning operates in four phases: 

Phase 1: Pre-Invoice Prevention (Days -7 to invoice due date)

Send a reminder email 3-5 days before the invoice due date if payment has not yet been received. This isn't a demand. It's a courtesy that surfaces problems early. Maybe they never received the invoice because it went to someone who left the company. Maybe they need a different PO number to match their procurement system. Catching these issues before the due date prevents the invoice from going overdue in the first place. Pre-invoice reminders significantly reduce payment failures compared to reactive approaches that begin only after invoices become overdue.

Phase 2: Early Post-Due Follow-Up (Days 1-30 Overdue)

When an invoice becomes overdue, your first communication maintains a friendly, problem-solving tone. Send an email on Day 1 noting that the payment is past due and asking if there are any issues you can help resolve. If you don't receive a response within 3-5 days, make a phone call to the accounts payable contact (the department that processes outgoing payments).

Your goal is diagnostic: Is this a missing PO number, an approval workflow bottleneck, an invoice routing issue, or a service dispute?

By Day 15 without payment or clear commitment, escalate internally. Whether you're handling this yourself or have a dedicated Customer Success team, reach out to the customer champion—the person who actually uses your product and advocated for the purchase—to understand what's blocking payment.

Coordinating payment follow-up across your revenue functions significantly improves payment recovery outcomes for enterprise accounts by addressing both administrative blockers and relationship dynamics.

Phase 3: Final Escalation (Days 45+ Overdue)

For accounts that remain unpaid beyond 45-60 days, you're approaching the decision point about service suspension or legal escalation. Enterprise accounts ($50K+ annually) at this stage require executive-level communication before any automated action, as 60-day delays often indicate the invoice was lost in an internal queue or due to a routing issue rather than an inability or unwillingness to pay. The key distinction is understanding your customer's typical payment patterns and organizational context versus making binary assumptions about payment intent based on dollar amount alone.

Phase 4: Service Suspension (Days 60-90+ Overdue)

When escalation efforts fail and payment remains outstanding beyond 60-90 days, service suspension becomes the final lever. Before taking action, send a formal final notice giving 7-14 days warning with specific suspension date, required payment amount, and clear instructions for resolution. This notice should go to multiple contacts: the accounts payable team, your customer champion, and an executive sponsor if you have one.

For enterprise accounts, a phone call from your side (ideally from someone with an existing relationship) should accompany the written notice. The goal isn't to threaten but to create urgency and surface any remaining blockers. Sometimes, the final notice is what finally gets the invoice prioritized internally.

If suspension becomes necessary, implement it gracefully: provide read-only access or a data export window rather than immediate lockout, document everything for potential collections proceedings, and leave the door open for reactivation upon payment. The relationship may not be salvageable, but your professional handling protects your reputation and preserves the possibility of future business.

What Are The Key Aspects Of Dunning?

Effective dunning requires operational decisions about customer segmentation, coordination across revenue functions, and communication timing—decisions that separate systematic recovery from revenue-destroying chaos.

• Customer Segmentation That Matches Operational Reality: Enterprise customers ($50K+ annual contracts) and strategically important accounts (case studies, logo customers, key references) require relationship-driven dunning with 60+ day grace periods before service suspension consideration, while self-serve accounts (under $10K annually) should face automatic service suspension within 10-14 days. Enterprise accounts operate through multi-stakeholder approval workflows with Net 30/60/90 payment cycles, while smaller accounts respond well to automated sequences with clear payment consequences.
• Coordination Across Revenue Functions (Whether One Person or Multiple Teams): Organizations with strong coordination achieve significantly higher customer retention and sales win rates. Whoever handles billing owns Days 0-15 post invoice due date with automated reminders and direct outreach to AP contacts, escalates to customer-facing functions at Day 15 if no payment commitment exists, and brings in sales or executive involvement at Day 30+ to distinguish payment problems from product or relationship problems.

These operational foundations matter because dunning failures don't stay contained. They compound into financial impact that early-stage founders typically discover during fundraising or board reviews, when it's too late to recover quietly.

Why Proper Dunning Matters To B2B SaaS Businesses

Revenue you've earned but never collected doesn't show up in churn metrics, doesn't trigger customer success alerts, and doesn't appear in your product analytics. Yet it undermines your business just as severely as voluntary cancellations. 

Proper dunning matters because:

• It protects your LTV:CAC ratio. When you spend $8K to acquire a customer expecting $15K in first-year revenue, but collection failures reduce actual cash collected to $9K, your CAC payback extends significantly. Companies implementing effective dunning processes can achieve substantial revenue uplift in the first year.
• It prevents permanent revenue loss. Early-stage companies accumulate significant uncollectible receivables over time, typically 5-10% of annual revenue. For a company approaching $5M ARR, that's $250,000 to $500,000 that has become permanently unrecoverable.
• It preserves customer relationships. Annual contracts involve multiple stakeholders in purchasing and payment approval. Overly aggressive dunning, such as suspending service within 10-14 days of invoice due date, can trigger unintended churn. Yet being too passive means customers learn that payment is optional.
• It requires segment-appropriate responses. Enterprise accounts ($50K+ annually) typically warrant 60+ day grace periods with personal account manager outreach, while self-serve accounts respond better to automated action within 10-14 days.

Understanding the stakes clarifies why dunning requires more than ad-hoc follow-up. The next question becomes how to formalize your approach through dunning letters and systematic dunning management.

What Is A Dunning Letter And When Should You Send One?

Within this escalation framework, formal dunning letters represent a specific communication tool with distinct timing requirements. A dunning letter is a formal communication sent when payments are 30+ days overdue, creating legal documentation that may be referenced in collections proceedings.

For B2B SaaS companies with Net 30 terms, send payment reminders 3-5 days before the invoice due date, send friendly follow-ups on Day 1 and escalate to the customer champion by Day 15 if no payment commitment exists, and begin formal dunning letters at 30+ days past due. For Net 30 terms, formal dunning letters would begin around 60 days from the original invoice date.

For high-value (typically enterprise) contracts exceeding $50K+ annually, dunning should be personalized rather than rely on automated templates, with direct account manager outreach beginning by day 5-7 of delinquency. Human-centric communications from identified account managers recover significantly more payments than automated sequences alone.

How To Automate The Dunning Process For Your SaaS Business

Manual dunning becomes unsustainable beyond 50-100 customers or $50K+ MRR. When you're spending 5+ hours weekly on payment follow-up and losing 5%+ of monthly revenue to unpaid invoices, the math on automation becomes straightforward: at 100 customers with $100K MRR, losing 5% to failed payments costs $5K monthly. Automation that costs $200-500/month and recovers even half of those failed payments puts you net positive in month one.

The question isn't whether to automate, but how to do it effectively:

1. Start communication before the due date, not after. Send payment reminders 3-5 days if payment is not received by the due date. This surfaces problems early: the invoice went to the wrong person, procurement never received it, or their system requires a specific PO number that's missing. Prevention beats recovery.
2. Segment automation by customer value. Sending identical dunning messages to all customers either over-communicates with high-value relationships or under-recovers from transactional accounts. Strategic accounts over $50K annually require personalized outreach with longer grace periods. Self-serve accounts under $10K annually perform best with fully automated sequences over a 10-14 day period before service suspension (which blocks access to get their attention, not to cause harm—never delete their data).
3. Define clear handoff points across revenue functions. The most common dunning failure is organizational silos where billing sends increasingly urgent emails while customer-facing teams have no visibility until crisis levels. Account managers thinks the customer is healthy based on their product usage, but the customer is actually very unhealthy based on their outstanding overdue balances! Automate the handoff: whoever handles billing owns Days 0-14 with automated sequences and direct AP contact outreach, then the system escalates to customer-facing functions at Day 15 for accounts over $10K if no payment commitment exists.
4. Use contract-aware automation, not generic emails. Basic payment processor features lack context about what customers actually agreed to pay. Quote-to-cash platforms like Turnstile serve as your single system of record for all commercial agreements, storing contract terms as structured data from the moment quotes are created. This enables dunning communications that reference specific payment amounts, service periods, and actual dates from customer agreements rather than generic templates. This structured data foundation makes communications feel legitimate rather than robotic, significantly improving response rates.
5. Track performance to improve continuously. Your automation should tell you recovery rate by customer segment, average days to recovery, percentage of revenue at risk at any given time, and which communication tactics perform best.

These practices work whether you build automation internally or buy it. But adopting a structured approach from day one prevents operational debt from accumulating rather than forcing you to clean it up later when you have 100+ customers across different payment terms and billing schedules.

Stop Treating Dunning as an Afterthought

Most founders treat dunning as a billing problem they'll solve later. They send invoices through one system, track payments in spreadsheets, and follow up manually when they remember. By the time they have 50-100 customers across different payment terms and billing schedules, catching up becomes a months-long project that pulls focus from growth.

The companies that avoid this pain are those that build quote-to-cash infrastructure from day one, before operational debt accumulates, using platforms like Turnstile.

Turnstile serves as your single system of record for all commercial agreements, storing contract terms as structured data from the moment you create a quote. When your customer signs, those terms automatically become billing configurations and invoice schedules, creating one source of truth across your entire revenue lifecycle. Dunning communications reference the actual amounts, dates, and terms from customer agreements rather than generic templates.

No manual re-entry, no weekend reconciliation, no scrambling to figure out what someone owes based on scattered email threads. Book a demo to see how quote-to-cash works from day one.