Automating Dunning: When the ROI Adds Up

What manual dunning really costs: the hidden line items 

Companies usually underestimate what manual dunning actually costs, because the costs are spread across four different buckets (and none of them shows up clearly on any invoice).

1. Direct staff cost 

Every dunning notice means: checking deadlines, drafting the notice, sending it, following up. Sounds like a few minutes per case. Multiplied by the accounting team’s hourly rate and the number of cases per month, it quickly becomes a real cost line. But it’s rarely labeled as one.

2. Cash flow cost from delays 

A dunning notice that goes out late or doesn’t get followed up consistently means tied-up capital. When money comes in 10 days later than it should, it’s not available for purchasing, inventory, or growth in that window. That’s a hit to cash flow management.

3. Error cost 

Missed deadlines, wrong assignments, duplicate reminders: with manual processes, these happen regularly. Best case, it costs correction time. Worst case, a receivable gets written off because the dunning level came too late.

4. Opportunity cost 

Capacity spent on dunning is capacity not spent on analysis, forecasting, and strategic work. This item is the hardest to quantify and the most frequently ignored.

How much these positions add up to together is illustrated in the following worked example.

Worked example: what 12 manual dunning cases per month can cost you 

The following example calculation for a typical retail business gives you a sense of the cost dimensions of manual dunning. For your own numbers, there’s a simple formula below to determine your ROI and figure out when automating dunning pays off.

Assumptions for this example:

• 80 invoices per month on account (payment terms 14 to 30 days)
• 15% overdue rate = 12 cases per month that need to be dunned
• 3 dunning levels at 15 minutes each = 45 minutes of work per case
• Total workload: 12 × 45 minutes = 9 working hours per month
• Accounting hourly rate (cost of manual dunning per hour): about €40 to €50
• Cash flow delay from overdue payments: average 10 days on receivables of €500 each = €60,000 in tied-up capital
• Cost of capital: 5% p.a.
• Bad debt (errors / forgotten cases): conservatively 1 to 2 cases per year at €500 = €500 to €1,000 in lost receivables per year

For a retail business with these numbers, the picture looks like this:

Break-even: when automated dunning starts paying off 

For the example company, just handling 12 manual dunning cases per month costs between €525 and €615. The Xentral Pro plan, which lets you automate dunning, costs €849 per month. Xentral Pro pays for itself on dunning alone from around 17 to 18 dunning cases per month.

On top of that: the Pro plan contains far more than just automated dunning. It’s a full-scope ERP for scaling businesses with complex workflows. Xentral Flows are included in the existing ERP plan. So if you want to cut time spent on dunning, you don’t need to buy new software. You just need to set up the process cleanly in Xentral once. Anyone already using the many other ERP functions benefits from automated dunning from the very first case.

Calculating ROI for automated dunning: your formula:

If this number is greater than zero and your ERP includes dunning automation: it pays off immediately. For a general overview on calculating ERP ROI, see our lexicon.

How automated dunning works in Xentral 

Automated dunning is a process that runs from order creation to payment intake. In Xentral, this process runs in three distinct but seamlessly connected phases.

Phase 1: proactive. Set payment terms automatically 

Before any delay can occur, Xentral automatically sets the contractually agreed payment term when the order comes in. No manual entry, no forgetting. The "Set payment term on new orders" flow from the Xentral Workflow library activates without coding and runs in the background from then on.

This eliminates one of the most common triggers for dunning cases: payment terms that were set wrong or not at all.

Phase 2: reactive. Send payment reminders and dunning notices automatically from the ERP  

When a payment doesn’t arrive, Xentral takes over the dunning process automatically. You configure the various conditions once: dunning levels, deadlines, templates per level, exception flags for special cases. After that, Xentral ERP can dun overdue items automatically. As long as there’s no special case, the process around payment reminder plus dunning levels 1, 2, and 3 runs without manual intervention.

No coding or middleware needed. Everything runs natively in Xentral’s accounting and dunning module.

Phase 3: close. Automate payment reconciliation in the ERP 

The last and often most error-prone manual step: assigning an incoming payment to the right open item. Wrong assignments, manual reconciliation errors, or overlooked partial payments regularly cost even well-organized finance teams time.

Xentral’s payment reconciliation agent, currently in beta, handles this step automatically. It matches incoming bank payments against open items, recognizes partial and overpayments, and proposes the booking. Your finance team approves the prepared decisions. The principle: rules-based matching goes to the AI, exceptions go to your team.

When automating dunning isn’t worth it 

Growing e-commerce businesses hit the point where automating receivables management pays off quickly.

Still, automated dunning isn’t the right next step for every company. Here are three scenarios where setup effort and cost outweigh the short-term benefit:

1. Under about 15 to 17 dunning cases per month: The time savings are real but small. Only above this threshold does the calculation clearly tip toward automation.
2. When master data isn’t cleanly maintained: If payment terms or contact data are missing or wrong in the ERP, the system will also dun incorrectly or incompletely. Clean master data quality is the most important prerequisite for automated dunning. Our lexicon explains how to structure item master data.
3. In legally complex cases: For international receivables, payment plans, or disputes, human judgment stays important. Automation supports the process. It doesn’t replace the decision.

If you meet the requirements (sufficient volume, clean master data, no more than 30% special cases), there’s no reason to wait.

Bottom line: manual dunning costs you extra every month 

If you regularly dun 15 to 20 invoices per month by hand, you’re letting this cost you more than necessary, month after month. Staff hours, cash flow delays, and errors.

Xentral automates all three phases of dunning natively: setting payment terms, running dunning levels, reconciling incoming payments. Every function for automating your dunning is included in the ERP. You don’t need additional software.