What is a Payment Reminder? Definition and meaning
A payment reminder, also known as a dunning notice, is a document that a company issues when a customer has not paid a due invoice within the specified payment deadline (see also: receivables management). How the dunning process is structured and how high the reminder fees can be is not prescribed by law.
Payment Reminder vs admonition: which one is meant
In everyday German, the word for a payment reminder (“Mahnung”) is also used for a general admonition, an urgent appeal or a warning, for example a reminder to be careful. In a commercial context and in business software, however, it refers exclusively to the demand for payment on an overdue invoice. That is the meaning this article deals with.
Course of the dunning process
As soon as a company provides a service to a customer, an invoice is issued for it. A payment deadline is noted on it. The payment deadline indicates by when an invoice must be paid. This can be indicated with days (e.g. “Payable within 14 days”) or with a date (e.g. “Payable by 01.01.2021”).
In principle: an invoice is always due immediately (§ 271 para. 1 BGB). However, § 286 para. 3 BGB legally grants a customer a period of up to 30 days to settle an invoice. If no payment target is stated on the invoice, the legal basis applies.
If the customer exceeds the deadline, the actual dunning process begins. As a rule, there are between two and four dunning levels. This is not prescribed by law and can be handled individually by each company.
The first dunning level is usually referred to as a payment reminder. As the name already suggests, the customer is kindly reminded that a payment is still outstanding. If still no payment has been received, the reminder can be worded more urgently. From the last dunning level onwards, you should hand the case over to a collections agency and initiate legal proceedings.
Reminder Fees
Reminder fees are not mandatory and can be set up as needed. There is no legal regulation on the amount of these. As a rule, the following fees are charged:
1. Reminder: 2.50 to 5.00 euros
2. Reminder: 5.00 to 7.50 euros
3. Reminder: 7.50 to 10.00 euros