Dunning costs

What are dunning fees? 

Dunning fees are fees charged for reminding or sending formal notices about outstanding receivables, such as an invoice. As a business, you can choose to first send a friendly payment reminder without additional costs. If the customer still does not pay, you can charge dunning fees.

How do you charge dunning fees?

You charge dunning fees or administration fees for preparing and sending the formal notices. If you invoice other businesses (B2B), you are free to decide how high the dunning fees are.

It is best to include this type of fee explicitly in your company's terms and conditions. That way, their nature and amount are clear, which is in fact a requirement for them to be legally valid in disputes. Vague statements such as "… reserves the right to charge administration fees", without further specification, are not sufficient. A clear flat-rate amount in the terms and conditions allows you to rely on it when charging. If you don't include an amount, you risk only being able to charge the actual cost of the formal notice, for example the actual cost of a registered letter.

Keep the dunning fees reasonable. Charging € 20,- in dunning fees for an invoice of € 40,- doesn't seem very proportionate. 

Statutory interest

If the customer does not pay, you can increase the invoiced amount by a certain interest rate. That is the cost of late payment. The maximum applicable rate is set by law. Read more about applying (statutory) interest here. Note that charging this late payment interest is also a cost for late payment and should be included in the terms and conditions.

Compensation

Compensation goes one step further. In that case, the supplier claims an additional sum on top of the invoice amount. Like the dunning fee, the compensation is laid down in the terms and conditions. You are free to use a fixed amount per invoice or to work with a percentage of the invoice amount.

Unlike statutory interest, there are no guidelines for determining a compensation percentage. In case of a dispute about reasonableness, the court will decide. Usually, it will also consider the original invoice amount and whether the compensation is fair within the total.

Dunning fees in onFact

In onFact, you can easily add additional costs to payment reminders. Read here how to include dunning fees in your reminders.