Dunning & Collections
Payment lifecycle, the dunning escalation ladder, credit management, debt aging, write-offs, and SLM integration for service actions.
The Payment Lifecycle
Once an invoice is generated, the payment lifecycle begins. For most postpaid customers, payment is collected automatically via direct debit or credit card. But a significant percentage of payments fail — declined cards, insufficient funds, expired payment methods, disputed charges. Dunning is the systematic process of pursuing overdue payments through escalating actions. Collections is the end-stage process for accounts that dunning cannot recover.
The Dunning Escalation Ladder
Dunning follows a defined escalation path. Each step increases pressure while giving the customer opportunity to pay. The timing and severity of each step are configurable per customer segment, payment history, and account value.
Typical Dunning Escalation
Payment Retry
Payment GatewayAutomatic retry of the failed payment method after 2-3 days. Many failures are transient (temporary insufficient funds, bank processing delay). Retry recovers 30-50% of initial failures with no customer impact.
Friendly Reminder
CRM / Notification EngineSMS or email notification that payment failed, with a link to update payment method or pay manually. Sent 5-7 days after initial failure. Tone is informational, not threatening.
Formal Notice
Billing / Dunning EngineWritten notice (email/letter) stating the overdue amount, due date, and consequences of non-payment. Typically sent at 14-21 days overdue. May include a late payment fee.
Service Restriction
SOM / Network Policy (PCRF/PCF)Outbound services restricted (e.g., international calls barred, data throttled) while maintaining inbound connectivity. The customer can still receive calls and access their account to make payment. Triggered at 30-45 days overdue.
Suspension
SLM / SOM / NetworkFull service suspension — the customer cannot use the service but the subscription remains active. The account can be reactivated upon payment. Typically 45-60 days overdue.
Disconnection & Collections
SLM / Billing / Collections AgencyService permanently disconnected, subscription terminated. Outstanding debt moves to collections — either internal recovery or handoff to external collection agency. Number may be quarantined. Typically 90+ days overdue.
Credit Management and Write-Offs
Dunning and collections intersect with credit management — the function that determines how much credit risk to extend to each customer. Credit limits, deposit requirements, and spending caps are set based on credit scoring at onboarding and adjusted based on payment behaviour. The goal is to minimise bad debt while not over-restricting good customers.
- Credit scoring — At onboarding, customers are scored (via credit bureau data or internal models) to set initial credit limits and deposit requirements. Low-score customers may be offered prepaid only.
- Dynamic credit adjustment — Payment history drives credit limit changes. Consistently on-time customers get higher limits; late payers get reduced limits or tighter dunning timelines.
- Debt aging — Outstanding debt is categorised by age (30, 60, 90, 120+ days). Older debt has a lower probability of recovery. Provisioning for bad debt is based on aging distribution.
- Write-off — Debt deemed unrecoverable is written off — removed from accounts receivable and recognised as a loss. Regulatory and accounting rules govern write-off timing and treatment.
Key Takeaways
- Dunning follows a 6-step escalation: retry → reminder → formal notice → restriction → suspension → disconnection
- Each step requires tighter integration with SLM and network systems — service actions must be synchronised with billing status
- Credit management sets the risk boundary: credit scoring, dynamic limits, and deposit requirements control exposure to bad debt
- Dunning effectiveness directly impacts cash flow — the gap between billed revenue and collected revenue is managed here