A payment reminder is a letter that a company sends to a customer if he has not paid for a rendered service. As the name implies, it should remind the customer of the due payment, because with a payment reminder, the company assumes that the customer has simply forgotten to settle the account. Therefore this letter is very polite in tone. The customer should never be offended or annoyed by the payment reminder.
The payment reminder has no legal consequences. In Germany, in case of an outstanding, due receivable, it is common practice to send three letters before taking any further action, such as filing a legal dunning procedure or appointing a collection agency. The first letter, in its polite form, is often referred to as a payment reminder, because at that time the company still assumes that the customer did not purposely leave the account outstanding. This reminder letter does not yet have any legal consequence. Usually, it is only in the second letter that a linguistically more matter-of-fact request is made to settle the outstanding account. This second document is then called "dunning". A third letter is usually titled "final reminder". There are no prescribed rules for this. Each company decides for itself which escalation steps to take in the dunning procedure and whether it presents a second letter as another payment reminder - without legal consequence - or a dunning letter, with the result that the debtor is thereby put in default (if he is not already in default according to § 286 German Civil Code).
There is no obligation for the procedure to include three different letters. The debtor is in default of payment no later than the first dunning letter. On the one hand, this justifies further measures. On the other hand, the debtor is obligated to compensate the creditor for the damages caused by default (§§ 280, 286 BGB) from the moment he defaults. Incidentally, a debtor can default even without any dunning (§ 286 BGB). This applies if a payment period is specified on the invoice or has been contractually agreed upon. If the debtor has not paid the full invoice due for services rendered before the deadline, he is already in default of payment. The debtor is in default of payment no later than 30 days after the due date and receipt of an invoice or equivalent payment schedule with a corresponding note. From a legal point of view, no dunning is required in this case.
The referenced damages caused by default include dunning costs. If the debtor only defaults with dunning, no costs may be charged for this first dunning ("default-based dunning"). However, damages caused by default also include other items, such as interest on the principal claim. All costs arising from the collection of the receivable also count as damages caused by default and must be compensated to the creditor by the debtor. Also, the costs of hiring a collection service provider must ultimately be borne by the debtor. The same applies to all costs arising from a legal dunning procedure. The creditor must first pay the court costs himself (he pays an advance). However, these are later fully incorporated in the ancillary claim.
In this light, it is much better to respond to the friendly payment reminder from a business partner and settle the outstanding account. When a creditor sends a payment reminder, it is purely a gesture of goodwill.
A dunning always contains the following information: outstanding amount of the original invoice and the service rendered. In addition, the invoice number, the date, the recipient, and the sender should be stated. Often, the claiming company also grants its customer a new deadline for the due payment. A polite but definite claim for settlement of the due invoice is also part of a dunning. A dunning does not necessarily have to be sent by post. It can also be send by email.