5 Benefits of Using A Dunning Management System For Businesses

Dunning is the process of collecting payments from customers who owe you money. It's something that a business can automate with the help of a reliable subscription or recurring billing software.

We have seen many subscription-based businesses using recurring billing platforms that do not have a dunning management system for missed or declined payment collection services.

Regardless of which recurring billing system you use, it is crucial for a subscription business to have a Dunning Management system for missed payment reminders to the customers whose payment is overdue.

In this article, we will discuss how Dunning Management System can help your subscription business grow your revenue and take it to the next level.

What is the Dunning Management System?

Dunning Management System is a tool that a recurring or subscription billing software uses to notify customers about failed payments, credit card validity, and send regular email notifications to customers for updating their billing information before or after the recurring payment due date.

Unfortunately, in the subscription-based business model dunning is bound to happen, and there could be many reasons such as:

• Expired credit card
• Payment gateway errors
• Insufficient credits
• Canceled card
• Deactivation of the service

More often than not, customers usually forget to renew their credit cards or update their billing information. A reliable Dunning Management System will notify them early or after the payment failure about any issues related to their credit card and billing information. The whole process is automated, and you don't need to hire somebody to send individual emails to the customers, notifying them about the failed payment.

How can a Dunning Management System help your Business Grow?

As you already know, the Dunning process includes sending notifications to customers for declined payments. A Dunning Management System can record a customer's past "payment behavior" and other details such as cardholder name and expiration date to automatically inform customers of any billing or credit card related issues.

Payment providers like Stripe, PayPal, and Braintree use a card updater which directly works with credit card companies such as Amex, Visa, and Master. The card updater detects credit card expiry dates and other vital information, including cardholder name, CVV, etc. If you are using Stripe as the provider of your recurring payment, you don't need to have a separate Dunning Management Tool to manage declined payments. Stripe's Dunning Management System can handle it for you. Apart from this, there are several other essential things that a Dunning Management System does that help your subscription business grow.

1. Retain Existing Customers with Dunning Tools

One of the biggest challenges to run a successful subscription-based business today is retaining existing customers. Besides product, service, quality, and customer service, subscription payments play a vital role in successful customer retention.

A subscription business typically sees 10-15% payment failures due to credit card issues. Most of them are unintentional and caused by a variety of reasons. The good news is that about 90% of these failed transactions are recoverable with the help of a Dunning Management System.

Dunning Management System continues to notify your customers about missed or failed payment via email, texts, or other communication methods. They also alert customers regularly to update their latest billing information, if there are any issues with it. Not only a subscription business can recover the declined payments, but also increase their recurring revenue.

2. Reduce Involuntary Churn with Pre-Dunning Notifications

Involuntary churn is one of the most annoying things in Subscription Business. You spend all the time, money, and effort acquiring a customer, and they leave you for credit card limits, payment failures, or server errors.

Involuntary churn happens when a customer does not intend to leave you. Still, they don't have an option to renew their billing or update their information to continue with your subscription plans. In most cases, a business can't do anything about it because it's related to the customer and his/her bank.

Earlier payment processors like Stripe, Braintree, and many others work directly with credit card companies and get a significant amount of information about customer's credit card issues. Some of the common problems are wrong billing information, credit card renewals, and insufficient funds. With the help of their Dunning Management Tool, these payment processors inform customers to resolve those issues before the billing date so that they can enjoy the subscription without any interruption.

3. Reduce Failed Payments with Retries

Most of the recurring billing platform's Dunning Management System has this unique feature called smart retries – It automatically retries failed due-date credit card payments. When a customer's credit card declines the transaction, the automated retries attempt to charge the credit card up to four times with a customizable period for collecting the payment.

Has your company ever experienced revenue leakage from credit card declines for any reason that is mostly addressable from a technology standpoint? If yes, your recurring or subscription billing platform must have automatic retries to reduce those credit card declines. The feature can help you minimize subscription interruptions, increase overall revenue from successful payments, and decrease involuntary subscriber churn.

4. Improve Customer Experience with Communication

Dunning means communicating with clients to inform them that their subscription or recurring payment has been overdue and ensure the swift collection of debt. The communication can be in several ways, the most common being emails in the Dunning Management context; without proper communication with your customers, you are ensuring a decline in your revenue and low customer retention rates.

Make sure to follow specific communication guidelines with your customers to make them aware of the payment failures. Don't harass them through endless emails, text messages, or any other means of communication; this may hurt your customer, and they might never renew your recurring product or service. Follow these rules to ensure a good relationship with your customer:

Do's:

1. Send reminders with subsequent emails.
2. Use only one type of communication (Emails, Messages, or Letters).
3. Remind them about the payment due-dates in advance.
4. Inform them about the next payment retry date.
5. Show politeness and professionalism during the whole communication process.

Don'ts:

1. Don't retry failed payments collection for more than 5-6 times.
2. Don't use more than one communication channel.
3. Don't bombard your customers with notifications.
4. Don't use aggressive language in your email, letters, or messages.
5. Don't give up on your customers after a single unsuccessful attempt.

The customer experience plays a vital role in all areas of your subscription or recurring Business. The happier your customers are with your brand, the longer they'll continue their subscription plans. Make sure to follow the dos & don'ts while trying to recollect the failed or overdue payments from your customers.

5. Increase Revenue with Payment Recoveries

Apart from focusing on marketing or sales, a subscription business should also focus on retaining existing customers from the involuntary churn. A reliable Dunning Management System can reduce the number of failed or declined credit card payments that generate more revenues for the subscription business.

The key to increasing revenues for your subscription business is to maintain a proper automated Dunning process to update customers regularly to update billing information, renew credit or debit cards, and add funds to continue enjoying your subscription-based product or service. You can try a little longer payment retries because every successful transaction after a failed payment recovers that week/month/year's revenue and prevents customers from churning out.

Conclusion

With the help of a Dunning Management System, subscription-based businesses can now adapt several intelligent subscription payment rules, and actions targeting the sources for the hundreds of credit card declined payments at a single time and reduce them significantly.

Remember that each failed payment that becomes a success with the help of Dunning essentially increases your revenue and more than one-third of those customers stay with you for a long time. These are some of the ways a Dunning Management System can help your business grow. You can also start to maximize failed payment collections and offer more flexibility to your customers in the collection process.