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FICO Accounts Receivable Part 5: Dunning, Credit Management and Dispute Handling

Key takeaway

Collect overdue receivables: dunning procedures, levels, charges and the dunning run; how credit management (credit limits and blocks) protects exposure; and dispute cases for short payments — with the process flow from overdue invoice to resolution.

Explanation

📌 KEY POINTS
✅ Dunning procedures (FBMP) define intervals, levels, grace days, charges and texts.
✅ The dunning run (F150) selects overdue items, assigns levels and prints/sends notices.
✅ Credit management sets limits per customer and blocks new orders when exposure is too high.
✅ Disputes (short payments, claims) are tracked as cases with reasons and owners.
⚠️ Dunning customers for disputed items damages relationships — set dunning blocks on disputed items.

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▶ WHERE WE ARE
Part 4 covered architecture. Now collections.

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▶ 1. DUNNING PROCEDURE

Interval, grace days, levels, charges, forms.

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▶ 2. DUNNING RUN

Parameters, proposal, edit, print; dunning history.

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▶ 3. CREDIT MANAGEMENT

Credit segment, limit, score; SD credit checks and blocks.

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▶ 4. DISPUTES

Case per short payment; reason codes; resolution (credit memo or write-off).\n\n━━━━━━━━━━━━━━━━━━━━\n▶ 5. KPIs\n• Overdue %, DSO, dispute cycle time.

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▶ STEP BY STEP

Define a dunning procedure with 3 levels.
Run F150 for overdue items.
Create a dispute for a short payment.

✅ CHECKPOINT: disputed items are excluded from dunning and have an owner.

Code example

ABAP Code

===== CONFIG MAP =====Dunning procedure ........ FBMP (levels, days, charges, texts)Dunning run .............. F150 (parameters → proposal → edit → print)Credit management ........ UKM_BP (credit segment, limit) | SD credit check in sales orderDispute management ....... FSCM Dispute Management (case types, reason codes) ===== EXAMPLE =====Level 1 after 7 days overdue (reminder) → Level 2 after 21 days (second notice + charge) → Level 3 after 35 days (final notice)

Real project scenario

A manufacturing client dunned customers for short-paid invoices that were under dispute. Complaints rose. Linking dispute cases to dunning blocks and a weekly dispute review improved customer satisfaction and cut dispute cycle time.

Common mistakes

Dunning disputed items.
Unreviewed credit limits.
No dispute ownership.
Forgotten dunning blocks.
No KPIs.

Best practices

Block disputed items.
Review limits periodically.
Assign dispute owners.
Review blocks weekly.
Track overdue and DSO.

Interview angle

Questions: "How does dunning work?", "How does credit management block orders?", "How are disputes handled?"
Strong answer: dunning procedure and run, credit limits and blocks, dispute cases, blocks and KPIs.

Practice this lesson

Quick check

1. A customer disputes a short payment. How should dunning treat the disputed item?

2. During a dunning run, how does the system determine which dunning level to assign to a customer's open items?

3. Which correspondence type is typically used to send a customer a periodic listing of all open and cleared items within a specified date range?

Interview questions

1. A customer underpays a tax-relevant sales invoice due to a pricing dispute, and AR posts this using residual payment, generating a new residual open item for the shortfall. Walk through how the residual item is created, how the original tax amount posted on the invoice is treated on this new item, and what happens when SD later issues a credit memo to formally resolve the dispute, from a tax reconciliation standpoint.

Answer it in your own words first, then compare.

2. What standard reports or tools would you use to review a customer's dunning history and current dunning level, and how does an SD-driven credit or delivery block interact with the dunning process for that customer?