Transaction failures and payment declines occur frequently in subscription businesses. Any subscription business's lifeblood is recurring money and losing that due to payment issues can stifle growth. Therefore, serious intervention is essential to get these matters under your control.
What is dunning?
Dunning is the method of handling declined credit cards and failed payments to recover lost revenue. However, with the arrival of SaaS, dunning procedures have evolved into something considerably different.
When a credit card payment fails, it is not immediately obvious to a business that their customer’s payment hasn’t gone through. Then once the payment failure has been identified, there is a process of following up with customers to retrieve the amount due. This may be manageable for small businesses with a limited number of customers, but when your business prospers and the number of your customers increases, then the identification of card failures and the subsequent customer follow-up becomes time-consuming and increasingly difficult. In such circumstances, an automated dunning process will help reduce the time taken to manage payment failures.
The dunning process automatically manages payment failures as they occur and immediately alerts customers with on-time and accurate information through text messages, emails, or in-app notifications. The process is designed to help customers to easily correct a failed payment and thus continue using your service without interruption. The dunning mechanism helps reduce involuntary churn, improves cashflow and business efficiency. Importantly, it helps customers to maintain a consistent service with you in the event of a payment failure.
Why is there a need for dunning?
Dunning is all about aiding customers in making timely payments, with an emphasis on ensuring that customers do not lose out on the services they value and enjoy. There are a number of benefits:
1. A reduction in involuntary customer churn.
Involuntary churn, also known as unintentional churn, happens when due to payment failure, a subscription is cancelled. It can occur due to diverse reasons like expired cards, network issues, stolen cards, etc.
Often a timely email reminder or update to the customer is required. Then, if they value your service, they will take adequate steps to provide alternate payment methods and keep the subscription alive. Hence by automating these dunning emails or messages, you can significantly reduce your involuntary churn rate.
2. Saving resources and time.
When payments fail, resource and administration time is wasted when an administrator has to manually sends messages and emails to the customer. In addition, your business will suffer if your in-house administrator becomes sick and cannot immediately follow up with customers.
Billsby offers the perfect solution in the form of an easy-to-use automated dunning management system which, apart from saving you the potential cost of human errors, will also save you a considerable amount of time. Automated dunning might only take several seconds to several minutes to administer.
3. Providing a more promising customer experience
Customers keep companies in business. They are the ones paying for your product and choosing to continue doing that for the future. Hence making their experience satisfying should be your primary goal.
Dunning is an integral part of a customer's experience with a company.
It is recommended you use emails when reaching out to your customers to inform them about failed payments. Failed payments are not your customers' fault, and they will be open to resolving any issues if you pro-actively provide them with the correct information.
4. Reducing failed payments with retries
The Dunning Management System has a unique feature called smart retries that automatically retries failed due-date credit card payments.
The recurring or subscription billing platform must have “automatic retries” to decrease those credit card declines. This feature can help you decrease subscription interruptions, improve revenue collection from successful payments and reduce involuntary customer churn rates.
Dunning management is a process that will ease your way of managing payment declines and failures. It will automatically begin a recovery process that will reduce churn rate, save your resources and time, and help run your business smoothly.
Billsby’s own Dunning Management System delivers timely reminders and updates about upcoming and failed payments to customers. Now you know what dunning is, and its primary purpose, please talk to our in-house specialists who will help advise on the best implementation model for your business.
You can also read our other blogs on how to reduce customer churn and how to start a subscription business.