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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 Transactions > Dunning > Basic Settings for Dunning > Define Dunning Areas

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.

SPRO

Click on the SAP Reference IMG button to proceed to the next screen.

SAP Reference IMG

Now, navigate to the following IMG path as mentioned below:

Financial Accounting > Accounts Receivable and Accounts Payable > Business Transactions > Dunning > Basic Settings for Dunning > Define Dunning Areas

Img pth

On Change View "Dunning Areas"; Overview screen, you will see a list of all the dunning areas defined in the system.

List

Next in order to create a new dunning area, click on the New Entries button.

New Enteries

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.

Details

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

DA

Next, select your Customization Request id and press enter key to proceed

CR

A message Data was saved will appear on the bottom of your screen.

Data was saved

You have successfully define a new dunning area.


Comments

  • 23 Mar 2015 2:15 pm Nitesh Singh Best Answer

    Concept of Dunning area: The standard procedure for configuring and carrying out the process of dunning is at company code level, we generally assign dunning procedures, dunning levels and other configuration steps at company code level. There is a concept called dunning area which is used when the dunning configuration is to be done below company code level for example at business area or segment level or at an organizational unit level. This is generally used for the organizations which are involved in production of complex or bulk products generally fertilizers, bulk drug chemicals or pharma products. Dunning area helps you to configure the settings below company code level.

    The path for defining a dunning area: is financial accounting new---- accounts receivable and accounts payable----business transactions----dunning----basic settings for dunning---define dunning areas.

    After creating the dunning area one has to define the dunning procedure in the above specified path and then assign the dunning procedure to the dunning area. Once this configuration is complete the dunning procedure key is to be assigned to the customer master records in the correspondence tab page which are to be considered for dunning.


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