Dunning Procedure in SAP S/4 HANA

What is Dunning ?

Dunning is a process used by businesses to systematically communicate with customers or vendors to ensure the collection of overdue payments.

• It involves various methods and steps a company takes to remind customers about their overdue payments.

• The term can also refer to the actual communications, such as letters, emails, or phone calls, sent to customers regarding their outstanding debts.

• Effective dunning processes aim to recover outstanding debts while maintaining good customer relationships.

How to configure Dunning in SAP S/4 HANA ?

Configuring dunning in SAP involves several steps, which include setting up dunning procedures, defining dunning levels, customizing dunning texts, and assigning these procedures to customers. Just like the APP Configuration in SAP S/4 HANA which is maintained within one single T.Code FBZP similarly, Dunning Procedure is maintained with Transaction code FBMP.

Here is a detailed guide on configuring Dunning functionality in SAP S/4 HANA -

STEP 1 : Go to Transaction Code FBMP

Click on New Procedure, to create New Dunning Procedure for your Company code

STEP 2 : Dunning Procedure

In this step, we define and maintain Dunning Procedure which is a structured method used to remind customer about overdue payments and encourage them to settle their debts.

Dunning Intervals in Days : The number of days between each dunning level.

Number of Dunning Levels : Specifies how many different levels of dunning notices will be sent to customers.

Minimum Days in Arrears (Account) : In which at least one item in this account must have for a dunning notice to be created.

Line item Grace Periods : To provide a buffer period for overdue line items before they are considered for dunning. This grace period allows additional days beyond the due date before the system includes the overdue line item in the dunning run.

Dun Special G/L Transaction : To include special G/L Transaction like Down Payment, Guarantees also to send reminder

Enter values in the above fields and then click on next step "Dunning Levels" as shown below

STEP 3 : Dunning Levels

Dunning Levels are stages within a dunning procedure that represent the escalating severity of reminders sent to customers for overdue payments. Each level represents increasing urgency.

Days in Arrears : Minimum number of days in arrears, referring to the due date for net payment, which an item must show in order to reach a certain dunning level. No grace periods are taken into consideration for calculating the days in arrears.

Always Dun? : Indicates that a dunning notice is still printed even if no change has been made to the dunning proposal since the last dunning run.

Enter values in the above fields and then click on next step "charges" and provide currency for Dunning charge as shown below  in the pop-up screen

STEP 4 : Dunning Charges

Dunning charges are fees that are applied to a customer's account as part of the dunning procedure when their payments are overdue. Specify the amount to be charged at each dunning level. These charges can be a fixed amount or based on a percentage of the overdue amount.

From Dunning Amount :  Minimum overdue amount at which a particular dunning charge becomes applicable.

Dunning Charge : The fixed dunning charge in dunning currency can be printed on the dunning notice.

Dunning Charge % : Dunning charge is calculated based on specified percentage.

NOTE :- If you have specified a dunning charge as a percentage, a fixed dunning charge cannot be issued at the same time

Enter values in the above fields and then click on next step "Minimum Amounts" and provide currency for Minimum Amount as shown below  in the pop-up screen

STEP 5 : Minimum Amount

The Minimum Amount step specifies the minimum overdue amount that must be reached for an invoice to trigger a particular dunning level.

Minimum Amount : Minimum amount of the overdue items which is necessary to set a dunning level.

Minimum Percentage : Minimum Amount specified on Percentage.

NOTE - If you have specified a minimum amount for this dunning level, then this must also have been equaled or exceeded.

Enter values in the above fields and then click on next step "Dunning Texts" and provide your Company code & Select Account Type between Customer and Vendor as shown below in the pop-up screen

STEP 6 : Dunning Text

Dunning texts are predefined messages that are included in dunning notices sent to customers during the dunning process. These texts serve to inform customers about their overdue payments and urge them to settle their outstanding debts. Dunning texts vary in tone and content depending on the dunning level and the organization's communication strategy.

Enter Dunning level and select the form (SAP Scripts, SAP Smart Forms) for printing the Dunning notice

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STEP 7 : Dunning Data maintained in Customer Master data (T.Code BP)

Once the Dunning Procedure is maintained in FBMP, now you have to activate the dunning procedure for your Customers in Customer Master data in BP under Dunning Data tab. This will enable the particular customer to receive reminders if customer is failing to make overdue payments.

Dunning Procedure : Select the Dunning Procedure.

Dunning Block : Select the Reason for stopping the dunning process.

Last Dunning Notice : Display the date of when was the last dunning notice sent.

Dunning Level : Display the status of Dunning level to the customer

To Define Dunning Areas ( T.Code OB61)

Dunning area is an organizational unit used to categorize customers or vendors for dunning purposes. Dunning areas are used if several organizational units are responsible for carrying out dunning within one company code

Example : A company that operates in multiple countries. They may define dunning areas to correspond to each country, allowing them to apply different dunning procedures based on country differences in payment behavior, regulatory requirements, or business practices.

PATH TO CONFIGURE :

SPRO > IMG > Financial Accounting > AP/AR > Business Transaction > Dunning > Dunning Areas

To Define Dunning Keys ( T.Code OB17)

A Dunning Key is a unique identifier assigned to each dunning level within a dunning procedure so with the dunning keys, you can limit the dunning level of an item.

PATH TO CONFIGURE :

SPRO > IMG > Financial Accounting > AP/AR > Business Transaction > Dunning > Dunning Key

To Define Block Reasons ( T.Code OB18)

A Dunning block reason allows you to prevent dunning notices from being sent to specific customers or accounts for a particular reason. It's a way to temporarily suspend the dunning process for certain accounts due to specific circumstances.

PATH TO CONFIGURE :

SPRO > IMG > Financial Accounting > AP/AR > Business Transaction > Dunning > Dunning Block Reasons

How to run Dunning Program in SAP S/4 HANA ?

The process of running the dunning program is similar to that of Automatic Payment Program run (F110), here we use Transaction Code - F150 to run Dunning Program.

Lets consider an example of a customer invoiced with terms of making payment on the same day of sale and customer can receive payment reminders up to 4 times and the customer have been assigned with above Dunning Procedure terms.

Creation of Customer Invoice (FB70)

Checking for overdue items in Customer Line item Display (FBL5N)

Dunning Program Run (T.Code F150)

The Dunning Program in SAP is a tool used to manage the process of reminding customers or vendors about overdue payments. It automates the generation and distribution of dunning notices, which are reminders sent to customers or vendors with outstanding invoices or debts. Dunning run in SAP can be scheduled to run at regular intervals, making it a periodic program.

Dunning Run is 3-Step process

Save the Parameter > Schedule the dunning run > Printout

STEP 1 : Save the Parameter

Run on : It is the date on which the program is to be carried out as planned.

Identification : Alphanumeric code to distinguish between several runs on same run on date.

Dunning date : It is the issue date of the dunning notice.

Documents Posted up to : Items which have been posted up to this date.

Company code : Specify Company code (not specific to country)

Customer/Supplier : Both customer and vendor can be dunned for overdue.

Enter Values in the above fields and Save the Parameter, then next click on Status tab as shown below.

STEP 2 : Schedule the Dunning Run

Schedule the Dunning run means to execute automatically at predefined intervals without the need for manual intervention.

Click on Schedule and then in the Pop-up screen select Start Immediately, Provide the printer and click on Dispatch.

STEP 3 : Printout

Printout refers to the generation and printing of dunning notices or letters that are sent to customers or vendors with overdue payments.

Press Enter and the Dunning notices have been generated.

Now, Click on Dunning Printout > Select Start Immediately and click on Printout icon.

Sample Printout - To Preview the Dunning form before Printout

Dunning Notice

Now, you can check for the updated Dunning data in Customer Master data (BP)

This dunning functionality provides organizations with a powerful tool to manage overdue payments effectively. By automating the process of reminding customers or vendors about outstanding debts, SAP helps businesses maintain healthy cash flow and minimize the risk of bad debts.

Thank you for taking the time to read my blog. I appreciate your support and hope you found this content valuable. Stay tuned for my upcoming blog posts.

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