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To set up dunning notices for past due invoices in SAP Financial Accounting, the correct answer is the dunning procedure. A dunning procedure is a structured approach that defines the terms and conditions under which reminders and dunning notices are sent to customers for overdue payments. This procedure establishes the series of steps that will be followed, such as the time intervals between notices, the text used in each notice, and the escalation path for further collection efforts if necessary.

Creating a dunning procedure is essential because it automates the collection process, ensuring that customers are informed of their overdue invoices logically and systematically. This not only helps in improving cash flow management but also enhances the organization's ability to manage customer relationships through timely communication.

The other options do not fulfill the function of setting up dunning notices directly. Credit memos relate to adjustments made to customer accounts for returns or discounts but do not initiate dunning processes. Invoice adjustments involve changing the details of invoices but do not serve to automate dunning processes. Finally, while a customer account holds all the necessary data related to transactions and outstanding balances, it is the dunning procedure that dictates how and when notices will be generated for past due invoices.