What Is a Dunning Letter?
A dunning letter is a formal written notice sent to a debtor requesting payment of an overdue invoice. The term comes from the verb "to dun" — to make persistent demands for payment.
In practice, dunning is a sequence of letters that escalate in formality and urgency. The first is polite. The last is a legal precursor. Most businesses need three to five letters before either receiving payment or deciding to pursue legal action.
Dunning letters are distinct from payment reminder emails. They're more formal, typically sent on company letterhead (by post or as a PDF attachment), and carry more weight with debtors — especially in industries where formal correspondence is expected.
Every template below includes a payment link and QR code placement. A payment link turns a formal demand into an instant payment opportunity — the debtor reads the letter and can pay from their phone in 60 seconds by scanning the QR code.
The Dunning Sequence: When to Send Each Letter
Letter | Timing | Tone | Purpose |
|---|---|---|---|
Letter 1 | 7-10 days overdue | Friendly reminder | Prompt payment, assume oversight |
Letter 2 | 21 days overdue | Firm | Establish the debt is being actively pursued |
Letter 3 | 30-35 days overdue | Formal with legal reference | Warn of statutory interest and consequences |
Letter 4 | 45+ days overdue | Pre-legal (Letter Before Action) | Final notice before formal recovery |
Between letters, use other channels to resend the payment link: email at Day 7, SMS at Day 14, WhatsApp at Day 21. See our multi-channel payment collection guide for the full escalation sequence.
Letter 1: Friendly Payment Reminder
Send this 7-10 days after the due date. Post it on company letterhead, or send it as a PDF attachment with the payment link in the email body.
[YOUR COMPANY LETTERHEAD] [DATE] [CUSTOMER NAME] [CUSTOMER ADDRESS] Re: Invoice #[NUMBER] — Payment Reminder Dear [NAME], We are writing to remind you that invoice #[NUMBER] for £[AMOUNT], dated [INVOICE DATE], was due for payment on [DUE DATE]. As of today, we have not received payment. We trust this is simply an oversight and would be grateful if you could arrange payment at your earliest convenience. Pay online: [PAYMENT LINK URL] [QR CODE HERE] Scan to pay instantly by card, bank transfer, or Apple Pay If you have already sent payment, please accept our apologies for this letter crossing in the post. If there is a query regarding this invoice, please contact us at [EMAIL] or [PHONE]. Yours sincerely, [YOUR NAME] [YOUR TITLE] [YOUR COMPANY]
Formatting notes:
Print the QR code at minimum 2cm x 2cm. Larger is better — 3cm x 3cm is ideal.
Place the QR code next to the payment URL so the reader understands what it does.
If posting, use your standard company letterhead.
Letter 2: Firm Follow-Up
Send this at 21 days overdue. The tone shifts from "we're sure this is an oversight" to "we need to hear from you."
[YOUR COMPANY LETTERHEAD] [DATE] [CUSTOMER NAME] [CUSTOMER ADDRESS] Re: Invoice #[NUMBER] — Second Payment Notice Dear [NAME], Further to our letter of [DATE OF LETTER 1], we note that invoice #[NUMBER] for £[AMOUNT] remains unpaid. This balance was due on [DUE DATE] and is now [NUMBER] days overdue. We have not received payment or a response to our previous correspondence. Please arrange payment within 7 days of the date of this letter: Pay online: [PAYMENT LINK URL] [QR CODE HERE] Scan to pay securely If you are unable to pay the full amount, we are open to discussing a payment arrangement. Please contact [NAME] at [EMAIL] or [PHONE] to discuss your options. We value our business relationship and would like to resolve this without further action. Yours sincerely, [YOUR NAME] [YOUR TITLE] [YOUR COMPANY]
Key points: Mentions "further action" for the first time. Offers a payment plan — this catches debtors who want to pay but can't pay in full.
Letter 3: Formal Notice With Statutory Interest
Send this at 30-35 days overdue. This letter references the Late Payment of Commercial Debts (Interest) Act 1998 and formally applies statutory charges.
[YOUR COMPANY LETTERHEAD] [DATE] [CUSTOMER NAME] [CUSTOMER ADDRESS] Re: Invoice #[NUMBER] — Formal Notice of Overdue Debt Dear [NAME], We have written to you on two previous occasions regarding the unpaid balance of £[AMOUNT] on invoice #[NUMBER], dated [INVOICE DATE], with payment terms of [NUMBER] days. This balance has been outstanding since [DUE DATE] — now [NUMBER] days overdue. Statutory Interest and Compensation Under the Late Payment of Commercial Debts (Interest) Act 1998, we are entitled to charge: - Statutory interest at 8% per annum above the Bank of England base rate, calculated from the due date - Fixed compensation of £[40/70/100] for the cost of debt recovery We are now applying these charges. The revised balance is: - Original invoice amount: £[AMOUNT] - Statutory interest ([NUMBER] days at [RATE]%): £[INTEREST AMOUNT] - Fixed compensation: £[40/70/100] - Total now due: £[REVISED TOTAL] Please make payment within 7 days: Pay online: [PAYMENT LINK URL] [QR CODE HERE] If payment is not received by [DATE + 7 DAYS], we will refer this debt for formal recovery, which may include County Court proceedings. Any court fees and legal costs will be added to the amount owed. To discuss a payment arrangement, contact [NAME] at [EMAIL] or [PHONE]. Yours sincerely, [YOUR NAME] [YOUR TITLE] [YOUR COMPANY]
Important: Only apply statutory interest to B2B debts. The Act does not cover consumer transactions. Check the GOV.UK guidance on late commercial payments.
Letter 4: Letter Before Action (Pre-Legal)
Send this at 45+ days overdue. This is a formal Letter Before Action (LBA) — a required step before issuing a County Court claim under the Pre-Action Protocol for Debt Claims.
[YOUR COMPANY LETTERHEAD] [DATE] SENT BY RECORDED DELIVERY AND EMAIL [CUSTOMER NAME] [CUSTOMER ADDRESS] LETTER BEFORE ACTION Re: Claim by [YOUR COMPANY] against [CUSTOMER COMPANY] — Invoice #[NUMBER] Dear [NAME], NOTICE UNDER THE PRE-ACTION PROTOCOL FOR DEBT CLAIMS We write in accordance with the Pre-Action Protocol for Debt Claims (Practice Direction — Pre-Action Conduct and Protocols). The Debt [YOUR COMPANY] provided [DESCRIPTION OF GOODS/SERVICES] to [CUSTOMER COMPANY] as detailed in invoice #[NUMBER], dated [INVOICE DATE]. Payment of £[ORIGINAL AMOUNT] was due on [DUE DATE] under [NUMBER]-day payment terms [as agreed in our contract dated [DATE] / as standard commercial terms]. Previous Correspondence We have made the following attempts to collect this debt: 1. [DATE] — Payment reminder sent by [email/post] 2. [DATE] — Second notice sent by [email/post] 3. [DATE] — Formal notice with statutory interest applied, sent by [email/post] None of these communications have resulted in payment or a substantive response. Amount Claimed - Original debt: £[AMOUNT] - Statutory interest (8% + BoE base rate, [NUMBER] days): £[INTEREST] - Fixed compensation under the Act: £[40/70/100] - Total claimed: £[TOTAL] What You Need to Do You have 30 days from the date of this letter to: 1. Pay the outstanding amount in full: [PAYMENT LINK URL] 2. Propose a payment plan by contacting [NAME] at [EMAIL] or [PHONE] 3. Dispute the debt in writing, setting out the specific grounds of your dispute [QR CODE HERE] Scan to pay the outstanding balance If You Do Not Respond If we do not receive payment, a payment proposal, or a written dispute within 30 days, we will issue a claim through the County Court without further notice. Court fees (currently £[AMOUNT] for claims of this value) and any legal costs will be added to the claim. We strongly encourage you to resolve this matter before court proceedings become necessary. Yours faithfully, [YOUR NAME] [YOUR TITLE] [YOUR COMPANY] [COMPANY REGISTRATION NUMBER] [COMPANY ADDRESS]
Critical notes:
Send by recorded delivery and keep proof of posting. The court will want evidence the debtor received the LBA.
The 30-day response period is required by the Pre-Action Protocol. Do not issue proceedings before 30 days have passed.
Include your company registration number and full address — these are required for court claims.
If the debtor proposes a reasonable payment plan, you should consider it. Courts look unfavourably on claimants who reject reasonable proposals.
Adding QR Codes to Dunning Letters
Every posted letter should include a QR code that links to the payment page. Here's why:
Bridges physical to digital — The debtor reads a paper letter but can pay instantly from their phone.
No URLs to type — Payment link URLs can be long. A QR code eliminates typing errors.
Works on every phone — All modern smartphones can scan QR codes with the default camera app.
To generate a QR code from a payment link, most payment link providers offer built-in QR generation. If yours doesn't, any QR code generator works — just paste the payment link URL.
Placement: Put the QR code in the body of the letter, near the payment amount. Label it clearly: "Scan to pay securely." Print at minimum 2cm x 2cm.
What Happens After the Final Letter
If the debtor doesn't pay, propose a plan, or dispute within 30 days of the Letter Before Action:
Small Claims Court (Under £10,000)
For debts under £10,000, use the Money Claim Online service. Court fees range from £35 (up to £300) to £455 (£5,000-£10,000). The process is straightforward and doesn't require a solicitor.
County Court (£10,000+)
For larger debts, issue a Part 7 claim through the County Court. This typically requires legal advice. Court fees are based on the claim value (e.g., £528 for a £10,000-£50,000 claim).
Debt Recovery Agency
An alternative to court proceedings. Agencies typically charge 5-15% of the recovered amount. They handle all communication and can be more effective for smaller debts where court costs aren't justified.
Common Questions
Can I send dunning letters by email instead of post?
Yes, but posted letters carry more weight — especially in formal B2B relationships and if you may need to pursue legal action. For the Letter Before Action specifically, best practice is to send by both recorded delivery and email.
How do I calculate statutory interest?
Interest accrues at 8% per year above the Bank of England base rate, calculated daily from the due date. Formula: (Debt x (8% + BoE rate) / 365) x days overdue. For example, on a £5,000 debt at a total rate of 13.25% over 30 days: £5,000 x 0.1325 / 365 x 30 = £54.45.
Should I use a solicitor for the Letter Before Action?
Not necessarily. The template above follows the Pre-Action Protocol and is legally sufficient. However, a letter from a solicitor's firm carries additional weight. Some solicitors offer LBA services for a fixed fee of £50-150.
What if the debtor disputes the invoice?
If the debtor provides a written dispute with specific grounds, you must respond to those grounds before proceeding with court action. The Pre-Action Protocol requires both parties to attempt to resolve disputes before involving the court.
Get Started
Dunning letters work. Dunning letters with payment links and QR codes work faster — because they turn a formal demand into a one-scan payment.
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