What is Subscription Dunning?

Subscription dunning, also known as delinquent user notifications, refers to the process of managing failed or declined credit card payments within your SaaS business to recover lost revenue. It involves sending dunning emails at regular intervals when transactions are declined until the client resolves the outstanding debt.

Historically, dunning involved aggressive and relentless tactics to collect overdue amounts, but contemporary approaches are more customer-centric. Wikipedia still defines dunning as “the process of methodically communicating with customers to ensure the collection of accounts receivable.”

Credit card payments can fail for various reasons, including insufficient funds, connectivity issues, or expired card details. In this article, we’ll explore why dunning is crucial for SaaS businesses and outline best practices for maximizing revenue recovery.

 

The Significance of Dunning for SaaS Businesses

Dunning is undeniably essential for SaaS companies as it helps recover revenue that might otherwise be lost when clients unsubscribe. A systematic dunning approach offers several benefits that SaaS business leaders and founders can leverage to improve their financial standing:

1. Reduce Customer Churn: Dunning helps prevent involuntary churn by notifying customers of payment issues and avoiding disconnections. It also minimizes voluntary churn caused by poor payment experiences.

2. Improve Revenue Recovery: Dunning ensures the collection of payments that would otherwise be lost due to failed transactions. Implementing pre-dunning can help prevent revenue loss from occurring in the first place.

3. Increase Customer Engagement: Each dunning email or outreach attempt provides an opportunity for customers to engage with your business. Well-crafted dunning emails and flawless execution can enhance customer confidence in your services.

Dunning management is a crucial component of SaaS companies, particularly those that rely on credit and debit card payments. Effective dunning practices help mitigate both customer and revenue loss, which can have a compounding negative impact on profitability over time.

Best Practices for Successful Dunning

1. Automate Your Dunning Process: Implement automation to streamline dunning efforts, including sending reminder emails, retrying payments, and tracking success rates. Look for a tool that allows customization of email campaigns, payment reminders, and supports pre-dunning tasks.

2. Personalize Your Messages: Build trust with customers by personalizing dunning messages. Use customer names, job titles, and company names when appropriate. Ensure your emails align with your brand’s messaging and come from recognizable email addresses.

3. Don’t Be Afraid to Be Persistent: Recognize that automatic retries succeed only a fraction of the time. Establish a consistent schedule for reminder emails and define an SOP for non-responsive accounts or high-value clients, emphasizing professional communication.

4. Closely Monitor Payment Trends: Use a comprehensive SaaS metrics platform to track payment trends, customer statuses in the dunning funnel, resolution times for overdue payments, email delivery rates, and web page/link statuses. Identify recurring payment issues and adjust strategies accordingly.

5. Keep Your System Up-to-Date: Regularly update your tech stack to prevent payment processing issues or security breaches. Enable automatic updates or configure systems manually. Ensure compatibility with chosen payment processing methods to avoid integration problems.

Accurate Subscription Revenue Measurement with SAiF

Subscription dunning is a critical process for recovering past-due payments and avoiding revenue loss. Implementing best practices in dunning can significantly improve your chances of collecting revenue effectively.

SAiF offers an easy way to track SaaS metrics. SAiF Insights provides a centralized platform for SaaS reporting, while SAiF Pro offers a blend of consulting and software solutions to maximize your financials. Contact us today to learn more about our services