What is the Concept of Dunning Area.

Updated May 22, 2023

What is Dunning Area?

Dunning area is a feature that allows businesses to group customer accounts based on
specific criteria for the purpose of managing accounts receivable and collections
efficiently.

A Dunning area in SAP is a grouping of customer accounts that have outstanding

receivables or unpaid invoices. This grouping allows businesses to perform various
activities such as generating dunning letters, defining dunning intervals, and
calculating interest on overdue payments.

In SAP, each Dunning area is assigned to a company code and can have multiple
Dunning levels, which are used to determine the type and frequency of reminders that
are sent to customers. For example, Dunning Level 1 might be used for initial
reminders, while Dunning Level 2 might be used for more serious delinquencies.

SAP IMG PATH for Define Dunning Area

Financial Accounting New > Accounts Receivable and Accounts Payable > Business

Uses of Dunning Area

Here are some of the main uses of dunning:

i) Improve cash flow: Dunning can help businesses improve their cash flow by
reducing the amount of outstanding receivables. By sending timely and effective
reminders to customers, businesses can encourage them to pay their invoices more
quickly, thus improving their cash flow.

ii) Manage collections efficiently: Dunning allows businesses to manage their

collections process more efficiently by grouping customer accounts based on specific
criteria, such as payment history, creditworthiness, or geographic location. This allows
businesses to tailor their collections process to the specific needs of different groups
of customers.

iii) Maintain customer relationships: Dunning can help businesses maintain better

relationships with their customers by providing a clear and transparent collections
process that is consistent and fair for all customers. This can help prevent disputes
and misunderstandings that can damage customer relationships.

 iv) Calculate interest and fees: Dunning can be used to calculate interest and fees
on overdue payments, which can help businesses recover additional revenue and
discourage customers from making late payments in the future.

v) Ensure compliance: Dunning can help businesses ensure compliance with legal

and regulatory requirements related to collections and debt recovery. By following a
standard and transparent process, businesses can reduce their risk of legal or
regulatory action.

How to Define Dunning Area?

Please follow the steps below to define the dunning area:

Please follow the steps below to define dunning area:

Enter t-code  SPRO  in the SAP command field and execute it.

Click on the  SAP Reference IMG  button to proceed to the next screen.
Now, navigate to the following IMG path as mentioned below:

Financial Accounting > Accounts Receivable and Accounts Payable > Business Tran
On  Change View "Dunning Areas"; Overview  screen, you will see a list of all the
dunning areas defined in the system.
Next in order to create a new dunning area, click on the  New Entries  button.
In the dunning area maintenance screen, specify the  Company Code  to which the
dunning area belongs, as well as other texts such as  customer area  and  text .

Once entered all the details, click on the  Save  button to save the dunning area.

Next, select your  Customization Request  id and press enter key to proceed
A message  Data was saved  will appear on the bottom of your screen.

You have successfully define a new dunning area.