If your customers are slow to pay, you do not need to chase them manually with emails and spreadsheets. Dynamics 365 Business Central has a complete built-in process for this: Reminders and Finance Charge Memos. Reminders politely (or firmly) tell customers that an invoice is overdue. Finance Charge Memos go one step further and add interest or late fees to what they owe.
In this guide, I will walk you through the full setup and daily process, based on my 18+ years of experience implementing Dynamics NAV and Business Central for finance teams. By the end, you will be able to set up reminder terms, create and issue reminders in bulk, and charge interest on overdue balances, all inside Business Central.
Table of Contents
What Are Reminders and Finance Charge Memos?
Let us keep it simple:
- Reminder: A document you send to a customer to notify them about overdue invoices. You can define multiple levels, for example a friendly first reminder, a firmer second reminder, and a final notice with a fee.
- Finance Charge Memo: A document that calculates and posts interest (and optionally additional fees) on overdue amounts. This actually increases the customer balance in the ledger.
Note: You can use Reminders and Finance Charge Memos together or separately. Many companies send 2 or 3 reminder levels first, and only issue finance charge memos to chronic late payers.
Both features live under the Receivables area of Business Central, in the same menu group as sales invoices and customer payments.
Step 1: Set Up Reminder Terms
Reminder Terms control when reminders are created and what happens at each stage. To set them up:
- Choose the Search icon (Alt+Q), enter Reminder Terms, and open the page.
- Click New and enter a Code (for example, DOMESTIC) and a Description.
- Set Max. No. of Reminders. This is how many reminder levels a customer can receive, typically 3.
- Turn on Post Additional Fee if you want reminder fees posted to the customer account when the reminder is issued.
- Turn on Post Interest if reminders should also calculate interest on overdue amounts.
Define Reminder Levels
With the reminder term selected, go to Levels. Each level represents one reminder in the sequence. For each level, set:
- Grace Period: How long after the due date (or after the previous reminder) Business Central waits before this level applies. For example, 7D means 7 days.
- Due Date Calculation: The payment deadline printed on the reminder itself, for example 14D.
- Additional Fee (LCY): A fixed late fee for this level. Many companies keep level 1 at zero and add fees from level 2 onward.
- Calculate Interest: Tick this if the level should include interest based on the finance charge terms assigned to the customer.
Tip: A proven 3-level setup: Level 1 after 7 days with no fee (gentle nudge), Level 2 after another 7 days with a small fee, and Level 3 after 14 more days with a higher fee and interest, worded as a final notice.
Add Beginning and Ending Text
For each level, use Beginning Text and Ending Text to control the message printed on the reminder. You can use placeholders like %7 for the document date and %9 for the total amount. This is how level 1 stays friendly (“This is a kind reminder…”) while level 3 gets serious (“Despite previous reminders, your account remains overdue…”).
Step 2: Set Up Finance Charge Terms
Next, search for Finance Charge Terms and create a new code. The important fields are:
- Interest Rate: The percentage charged, for example 2 for 2%.
- Interest Calculation Method: Usually Average Daily Balance, which charges interest based on how many days the amount is overdue. Balance Due charges the full rate regardless of days.
- Interest Period (Days): The period the rate applies to. A 2% rate with a 30 day period means roughly 2% per month.
- Grace Period and Due Date Calculation: Work the same way as on reminder terms.
- Additional Fee (LCY): Optional fixed fee added to every finance charge memo.
- Post Interest and Post Additional Fee: Turn these on so amounts actually hit the customer ledger when the memo is issued.
Warning: Interest and fee amounts need G/L accounts to post to. Open Customer Posting Groups and make sure the Interest Account and Additional Fee Account fields are filled in for every posting group you use. If these are blank, issuing will fail with a posting setup error. This is the number one cause of first-time issuing failures I see in implementations.
If you are new to posting groups, see my guide on posting groups in Business Central.
Step 3: Assign Terms to Customers
Open a Customer Card, expand the Payments FastTab, and fill in:
- Reminder Terms Code: The reminder terms this customer should follow.
- Fin. Charge Terms Code: The finance charge terms for interest calculation.
Tip: Update many customers at once using Edit in Excel. And customers without a reminder terms code are simply skipped when you create reminders, which is a clean way to exclude key accounts you never want to dun automatically.
Step 4: Create Reminders
Now for the daily (or weekly) routine:
- Search for Reminders and open the list.
- Choose Process, then Create Reminders.
- On the request page, set the Posting Date and Document Date (the document date drives the overdue calculation).
- Optionally tick Only Entries with Overdue Amounts so open but not-yet-due invoices are left off the reminder.
- Filter customers if needed, then choose OK.
Business Central creates draft reminders for every qualifying customer at the correct level. Nothing is sent or posted yet, so review them freely. You can open any draft, delete lines, or delete the whole reminder if a payment is already on the way.
Note: Leaving Only Entries with Overdue Amounts unticked shows the customer’s full open balance on the reminder, not just the overdue part. Many customers actually find this helpful, so decide based on your communication style.
Step 5: Issue and Send Reminders
When you are happy with the drafts, select them and choose Process, then Issue. Issuing does three things:
- Moves the document to Issued Reminders (it becomes permanent history).
- Posts any additional fees or interest to the customer ledger, if your terms say so.
- Increments the reminder level on the invoices, so next time those entries qualify for the next level.
Caution: Issuing is a posting action. Once issued, fees and interest hit the customer ledger and the reminder level increases. Review your drafts carefully before issuing in bulk. If you make a mistake, use the Cancel action described below rather than manual corrections.
On the issue request page you can choose Print or Email to send documents immediately. If your outgoing email is not configured yet, set that up first. I have a full walkthrough here: how to set up email in Business Central.
Step 6: Create and Issue Finance Charge Memos
The finance charge process mirrors reminders:
- Search for Finance Charge Memos.
- Choose Process, then Create Finance Charge Memos.
- Set the dates, filter customers, and choose OK. Business Central calculates interest on each overdue entry using the customer’s finance charge terms.
- Review the drafts, then Issue them. Interest and fees post to the customer account, and the memo moves to Issued Finance Charge Memos.
The interest amount appears as a new open entry on the customer ledger, so it flows into statements, aging reports, and the next reminder automatically.
Important: Check your local regulations before charging interest. Many countries cap late payment interest rates or require specific wording on dunning documents. Set your Interest Rate and reminder texts accordingly.
Canceling an Issued Reminder or Memo
Sent a reminder by mistake? Open the issued document and use the Cancel action. Business Central reverses posted fees and interest and rolls back the reminder level on the affected invoices. This works for both issued reminders and issued finance charge memos, and it is far cleaner than manual credit memos.
Pro Tips from Real Implementations
- Automate creation with the Job Queue. Schedule the Create Reminders report to run weekly, so drafts are always waiting for the AR team to review and issue.
- Keep level 1 free of fees. A fee on the first reminder annoys good customers who simply missed an invoice. Save fees for level 2+.
- Run finance charge memos on a fixed monthly cycle separate from your reminder cycle if you have strict credit policies.
Caution: Additional fees on reminder levels are defined in LCY (local currency). For foreign currency customers, you must define fees per currency using the Currencies action on the reminder level, otherwise foreign customers get no fee at all.
Ready to Use Reminder Email Text (Copy and Paste)
The beginning and ending text controls what prints on the reminder document, but many people also want wording for the email that carries the reminder. Below are three ready-to-use email texts you can drop into the Customer Communication action on each reminder level, escalating from a gentle first nudge to a firm final notice. Just replace the bracketed parts with your own details.
Note: To set these up, open Reminder Terms, select a level line, and choose the Customer Communication action to edit that level’s email subject and body. You can set a different message for each level, which is exactly how you escalate the tone.
Level 1 Email: Friendly First Reminder
Subject: Friendly reminder: invoice(s) now due, [Your Company Name]
Dear Customer,
We hope you are well. This is a friendly reminder that the invoice(s) listed in the attached document are now past their due date. It is possible this has simply been overlooked, which is completely understandable.
We would be grateful if you could arrange payment at your earliest convenience. If you have already paid, please disregard this message and accept our thanks.
If you have any questions about your account, please do get in touch. We are happy to help.
Kind regards,
[Your Company Name] Accounts Team
Level 2 Email: Firm Follow-Up
Subject: Second reminder: payment outstanding, [Your Company Name]
Dear Customer,
We wrote to you recently regarding the overdue invoice(s) shown in the attached document, and our records indicate that payment has not yet been received.
We would appreciate your prompt attention to this matter. Please arrange payment of the outstanding balance within the next few days to keep your account in good standing.
If there is a reason the payment has been delayed, or if you would like to discuss your account, please contact us so we can help find a solution.
Kind regards,
[Your Company Name] Accounts Team
Level 3 Email: Final Notice
Subject: Final reminder: immediate payment required, [Your Company Name]
Dear Customer,
Despite our previous reminders, the invoice(s) listed in the attached document remain unpaid. This is our final reminder regarding the outstanding balance.
We ask that you settle the full amount due without further delay. Any applicable fees or interest have been added to your account as shown. Should payment not be received, we may need to review the next steps available to us in line with our terms.
If you have already made this payment, please contact us so we can update our records. Otherwise, we look forward to receiving your payment promptly.
Kind regards,
[Your Company Name] Accounts Team
Tip: Keep the first email genuinely friendly. Most late payments at level 1 are honest oversights, and a warm nudge protects good relationships while still getting you paid. Save the firm tone for levels 2 and 3, and keep even the final notice professional, since it is far more effective than an aggressive one and protects you if the matter ever escalates formally.
Frequently Asked Questions
Do reminders post anything to the general ledger?
Only if Post Additional Fee or Post Interest is enabled on the reminder terms. A plain reminder with no fees is just a communication document and posts nothing.
What is the difference between a reminder with interest and a finance charge memo?
Functionally they can both charge interest. In practice, reminders are the communication and escalation tool, while finance charge memos are the pure interest billing tool. Companies with strict credit policies often run finance charge memos monthly regardless of the reminder cycle.
Can I exclude specific customers?
Yes. Simply leave the Reminder Terms Code blank on their customer card, or apply a filter when running Create Reminders.
Which license do I need for this?
Creating and issuing reminders and finance charge memos requires a full Business Central Essentials or Premium license. Team Members cannot run these processes. For a full breakdown, read my Business Central licensing guide.
Can I use different email text for each reminder level?
Yes. On the Reminder Terms page, select a level line and choose the Customer Communication action to set an email subject and body just for that level. This lets you send a gentle message at level 1 and a firmer one at level 3, all automatically.
What should a payment reminder email say?
Keep level 1 warm and assume an honest oversight, ask politely for payment, and thank them if they have already paid. Make level 2 firmer with a clear deadline, and level 3 a professional final notice that mentions any added fees or interest and the possible next steps. Copy-paste wording for all three levels is provided above.
Wrapping Up
Reminders and Finance Charge Memos are one of the most underused features in Business Central, yet they can seriously improve your cash flow with almost no extra effort once configured. Set up your reminder terms and levels, define finance charge terms, assign them on the customer cards, and let Business Central do the chasing.
For the official field-level reference, see Microsoft’s documentation on collecting outstanding balances. And if you want to modernize the rest of your receivables process, check out my post on bank reconciliation in Business Central.
Have a question about your reminder setup? Drop it in the comments and I will help you out.
