Defining Dunning Procedures and Define Levels

Some fields are filled automatically by copying the dunning procedure. Carla must ensure that the fields are filled correctly according to our requirements. She discusses the hiring options with her colleague, Stefanos. Carla notes the settings and enters them later in the dunning procedure 1003.

Stefanos explains when the accounts are included in the dunning run.

The account selection is the first step in the dunning run. The program checks all the accounts using the criteria entered in the parameters. To be considered in the dunning run, the accounts must fulfill the following criteria:

• A dunning procedure is entered in the master data.
• The date of the last dunning run for the account is before the dunning interval date of the dunning procedure. If the accounts fulfill these criteria, the system includes them in the dunning run. Otherwise, the system ignores them.

For each dunning procedure, you determine the dunning interval, and therefore the frequency at which the dunning is to happen. This is the minimum number of days that must elapse after a dunning run, before an account can be dunned again. Enter the Dunning Interval in Days at which the allocated accounts can be dunned again.

The dunning program saves the date of the last dunning run in the business partner master record of the customer in the company code data on the Dunning Data tab.

For each dunning run, the system checks whether the Run On date in the Create Dunning Notices app is at least this number of days after the date of the last dunning run. If the required dunning interval has not passed, the account is not dunned, even if the account contains overdue items or the dunning level has changed.

The last dunning run can be deleted both in the master record and in the line item.

The Run On date does not have to be the date when the system executes the program.

Each item to be dunned is assigned a dunning level according to the number of days the item is in arrears. Each dunning procedure contains up to nine dunning levels. The wording of the dunning notice is usually influenced by the dunning level. The higher the dunning level, the stricter the message in the dunning text.

For invoice-related credit memos, the system uses the dunning level of the invoice. The dunning level can only be raised by one, from one dunning level to another. Therefore, you cannot skip any dunning levels.

Enter the highest dunning level associated with this dunning procedure.

Next, let's look at the days in arrears.

For an open item to be dunned, it must have a due date for net payment. An invoice receives the net due date through the payment term. The due date for net payment is the day by which the item must be paid. An open item is not dunned until it is assigned to a dunning level.

The number of days in arrears in relation to the due date for net payment determines the dunning level of the item.

Refer to the video to learn more about the days in arrears and line-item grace periods.

Let us assume that we have four dunning levels, no grace days are granted, and the days in arrears of dunning level 1 is 7 days.

All items that are a day in arrears are printed on the dunning letter (dunning level 0). The items that are seven days in arrears receive dunning level 1.

Dunning level 2 is reached after a further seven days in arrears, so we store the total on days in arrears 14. Dunning level 3 is reached after a further seven days, so we define 21 under dunning level 3. Dunning level 4 is reached after a further seven days, so we define 28 under dunning level 4.

For example, let's say we grant two grace days for line items.

All items that are 3 days in arrears are included in the dunning letter with dunning level 0, the items that are 7 days in arrears receive dunning level 1.

You can also enter a negative value in the days in arrears: in this case, an item can receive this dunning level before the due date.

The grace days in the dunning procedure must be less than the days in arrears defined for the first dunning level so that an item is considered during dunning. This is particularly important if the dunning level is to be triggered for negative days in arrears. Then, the grace days must also be negative.

Let's look at an example from the system Carla uses

In detail, you can see for each of the items:

• Item 1 is overdue and has reached the days in arrears for dunning level 1.
• Item 2 is overdue but is within the grace days; so the item is not dunned.
• Item 3 receives dunning level 0, the item is in arrears between the grace days and the days in arrears of the first dunning level.
• Item 4 is overdue and has reached the days in arrears for dunning level 1.

Grace days are not considered when calculating the days in arrears.

Stefanos explains to Carla: "You can only dun the account if at least one item reaches the permitted minimum number of days in arrears for the account."

In the figure, the conditions for account dunning are as follows:

• Item 1 is overdue and must be dunned, but the minimum number of days in arrears has not been reached.
• Item 2 is overdue, but it is still within the grace period.
• Item 3 is overdue and must be dunned, but the minimum number of days in arrears has not been reached.
• Item 4 is overdue and the minimum number of days in arrears (account) has been reached.

This means that open items 1, 3, and 4 are dunned. Item 2 is not dunned because it is still within the line-item grace period.

Refer to the video to learn more about the minimum days in arrears for the account.

Once we have defined the days in arrears for each dunning level, we clarify the printing of interest on the dunning notice.

Let’s start with a screenshot showing an example of the Maintain Dunning Procedure: Dunning levels.

You can specify that interest must be calculated for each dunning level. The dunning interest is not posted as a debit, it is only printed on the dunning letter.

When the Print All items indicator is selected, you can determine that all other open items are also printed in the dunning notice, in addition to the dunned items. This gives the customer/vendor an overview of the whole account balance.

The Print All items indicator has no effect if separate dunning notices are to be created for each dunning level in a company code.

If so, open items that are not yet due cannot be properly assigned to a dunning notice.

You can define the Dunning by Level in the Implementation Activities app under SAP Business Configuration → Payables and Receivables Management → Open Item Management → Dunning → Define your dunning procedures → Manage Dunning Control for Company Codes.

In contrast to standard dunning in which all items at all dunning levels are dunned with one dunning notice and the highest occurring dunning level determines the dunning text, when dunning by dunning level a separate dunning notice is produced per dunning level with a different accompanying text in each case. The customer can then receive several dunning notices from one dunning run.

After the dunning data is determined, the system checks whether the dunning process is necessary. Normally, it is not necessary to send a dunning notice if the dunning data has not changed since the last dunning run. The system only duns an account if it fulfills one of the following conditions:

• The dunning data has changed since the last dunning run.
  • At least one item has reached another dunning level.
  • A new item was included in the dunning notice,
  • The dunning level of the account was changed.
• The Always dunning notice indicator is selected for the dunning level.

This option is usually selected for the last dunning level and for payment reminders (dunning procedures that comprise only one dunning level).

To enter a payment deadline for payment of the overdue items in the dunning notice, you can enter the number of days here. These are then added to the date of issue of the dunning run and the system creates the payment deadline, which can be printed on the dunning notice.

If a legal dunning procedure has been entered in the customer/vendor master record, a further dunning notice is usually only sent when further account movements have occurred. If you wish to send a dunning notice although no further account movements have occurred, select this indicator.

The system does not send any dunning notices to a customer with a legal dunning procedure, even if the dunning data changed. It does not make any sense to send a dunning letter to a customer who has not responded to any previous dunning notices. If the system duns an account according to one of the criteria, it prints an internal note on a special form and sends the note to the legal department. To prevent any open items posted before the start of the legal dunning procedure from being overlooked, the Always Dun in Legal Dunning Procedure indicator must be selected.