Dunning management: everything you need to know about dunning

Dunning Management

Dunning Management

In the subscription-based business model, Dunning is inevitable; because in recurring transactions, payments are charged automatically on a monthly, yearly, or weekly basis, and customers usually forget to update their payment information leading into the churn.

Imagine working tirelessly to grow your subscription or recurring based business and losing customers to failed credit card transactions. The failed payments can have a massive impact on your SaaS or subscription-based business and can inevitably lead to failure if not handled correctly or at the right time.

This is where "Dunning Management" can help you. It can help your business decrease the volume of monthly customer churn by reminding your customers about their failed payments. Without Dunning, subscription plans may be canceled, this can negatively affect both you and your customer, especially when your customers wanted to continue its weekly, monthly, or yearly recurring service with you.

In this article, we are going to discuss Dunning Management and its importance for subscription or recurring-based business models.

What is Dunning Management?

In the subscription business context, Dunning Management refers to the collections process. A subscription business communicates with customers who have fallen behind in paying their subscription or recurring payments for a product or service.

Top Reasons for Missed or Failed Payments:
• Expired card
• Payment gateway errors
• Insufficient credits
• Canceled card
• Deactivation of the service

The degree of Dunning that a subscription-based business may resort to depends on several factors, such as the amount of the debt or overdue length. While the receivable department generally processes payments from customers for recurring products supplied or service, late payments may be given to the collections department.

The Dunning Management process would then involve the collection department issuing several reminders to a customer or several customers for failed or missed payments. Dunning Management enables you to create and send reminders to customers that have missed their subscription payments over a given time (Weekly, Monthly, Yearly) and reminds them of their overdue payments.

Advantages of Using a Dunning Management System for your Subscription-Based Business Model

A failed or missed payment due to outdated card details is a big issue for subscription-based businesses. With a Dunning Management System, one can keep track of a customer's past "payment behavior" and other details such as cardholder name and expiration date saved in the database to make this vital information available to the appropriate customers their card is going to expire anytime soon.

Many payment processing companies such as Stripe and Braintree have a system called 'Card Updater.' These companies work directly with the popular credit card companies such as Visa, Master, Discover, and Amex to detect card expiry dates, fraud payments, and many other things that can help your customers keep using your subscription products or services without any interruptions.

If you are using Stripe as your subscription billing management system, you don't need to have a Dunning management system as Stripe automatically handles that. Stripe Dunning system includes several features such as smart retries and failed payment emails, which can help in collecting payments that may have declined.

"We highly recommend using Payvoice – A Stripe Subscription Management Platform built on top of it. It can help you create customizable embeddable pages, self-subscription management, multi-plan subscription pages, and other features that can help your subscription business."

Benefits of Using Dunning Management System

1. Decrease Churn Rate

As a subscription business owner, you must know how difficult it is to maintain customer churns. On the other hand, acquiring new customers is time-consuming, expensive, and hard, so it is essential to focus on protecting the existing customers.

A Dunning Management System can send Dunning notifications to your customers to reduce customer churn by opening a transparent communication channel between you and your customer.

2. Maintain Revenue

With an automated Dunning Management System, the customer retention rates will improve. There will undoubtedly be no disruption to your subscription-based product or service as payment information is kept in check. As long as your business provides an outstanding solution to the clients, the subscription will possibly continue.

3. Failed Payment Notification

The Dunning Management System allows a business to send an instant notification for a failed payment to the user when their card has been declined for any reason. You can also customize the subject, text, look, and feel of the Dunning notification or email to fit with your brand.

4. Smart Retries

Smart Retries is the process of intelligently access when to retry payments. A sound Dunning Management system is capable of smart retries for failed payments based on a combination of factors. The smart retries feature works on pull-based payment methods, and it retries to charge a customer for a failed payment up to four times within a customizable period.

5. Upcoming Renewal Reminder

The upcoming renewal reminder allows a subscription business to notify customers via email about their forthcoming subscription payment automatically and prompt them to verify the correct card details and valid payment information stored on the system.

6. Save Time and Money

Imagine hiring someone in-house to manually send an email reminder for failed payments to all the customers. What happens when the employee responsible for sending emails falls sick or can't process an invoice? This will not only waste your time but also cost you money.

A right Dunning Management System sends automatic reminders to accounts that have missed payments, or their card has been declined. The Dunning process can save you a lot of time, money, and resources, which you can put to other core areas of your business.

7. Fight Involuntary Churn

Involuntary Churn refers to losing customers for failed payments despite them ready to continue using your subscription products or services. Dunning can help you fight involuntary Churn by applying several renewal processes such as pre-Dunning emails, customer card/account updater, in-app notifications, and more.

8. Build Stronger Relationship

Regular communication is a great way to build a stronger relationship with your customers. With Dunning emails and notifications, your customers can keep update about their subscriptions and also create trust in them for your subscription-based business.

These are some of the reasons you shall implement a Dunning Management System as soon as possible into your subscription or recurring based business. The amount of positive impact it can have on your revenue and customer churn is immeasurable.

Final Words

A Dunning Management System can help you quickly resolve failed payments problems and drastically increase your revenues. One more thing, a business should remember that instead of harassing your customers with endless emails, messages, and notifications, give them some time to update their card information.

Regardless of what subscription management platform you use, it is essential to have a Dunning System that keeps track of all the failed or declined payments and keeps reminding your customer (not aggressively) about it. Moreover, when you are selecting a subscription management system, you may want to see whether they offer an offline subscription cycle that can help you create an offline subscription for customers who don't prefer recurring payment methods.