What does the term ‘dunning’ refer to in accounts receivable?

The term 'dunning' specifically refers to the systematic process of communicating with customers in order to collect overdue payments. This practice is essential in accounts receivable management, as it involves a series of reminders or notices sent to customers whose invoices are past due. Dunning can take various forms, such as letters, emails, or phone calls, and is typically structured in stages that escalate in urgency depending on how far past due the payment is. It is an integral part of maintaining cash flow for a business and ensuring that outstanding debts are addressed in a timely manner.

The effectiveness of dunning lies in its ability to prompt customers to fulfill their payment obligations, thereby minimizing the risk of bad debts and improving the overall financial health of the company.