Dunning Services: The Frustrated Founder’s Guide To Failed Payments

Failed payments – i.e the bain of my existence.

Perhaps nothing surprised me more when starting my first software business than just how many payments bounced. It may have been as high as 20%!

I remember sitting down at my desk, logging into Stripe, giddy with the excitement of seeing who had signed up, only to find a ton of grey notifications indicating a bounced payment.

And to be honest, throughout the four years that I ran NinjaOutreach, this problem always persisted, and I came to understand that it’s basically a fact of life.

However, the one thing that did help over time was dunning.

Dunning – you say?

If dunning is a new concept for you – listen up! Because I’m about to drop some knowledge on you that will make you money.

Dunning Services: Cliffs Notes

Dunning allows you to:

Automate the process of chasing your customers for payments.

It’s important because:

It gets you paid on time, and gives you more cash flow.

Dunning tactics (before an account is past due) include:

  • Card expiration emails
  • Card updater technology
  • Payment reminder emails

Dunning tactics (after an account is past due) include:

  • Smart retries
  • Dunning emails

How to increase the effectiveness of your dunning emails:

  • Use trust factors: include your company’s logo or letterhead, have all outbound links be HTTPS (not HTTP) links
  • Vary your content based on urgency
  • Don’t send an nasty sounding email; keep your tone empathetic

Best dunning emails to reference include:

  • Buzzsumo’s email, which has a genuine and authentic tone
  • Skype’s email, which is crystal-clear and easy to understand
  • Mailflow’s email, which draws the customer’s attention to what they have to lose (thus giving them FOMO)

Screenshots of each email are listed below – scroll down to check them out!

Dunning tools and platforms:

Your dunning action list:

  1. Choose a dunning platform from the above list and sign up
  2. Set them up, including the emails and dedicated payment page
  3. Track the extra revenue you’re recovering from the platform, and make sure you have a positive ROI.

So, What’s The Deal With Dunning?

You know how, at the end of every billing cycle, you have to sit down and send emails to your customers whose payments didn’t go through?

And how you have to keep chasing these customers, and following up with them, until they finally sort out their payment methods?

Well, dunning allows you to automate this entire process.

Genius, huh?

There are a few different ways you can configure it, but dunning basically works like this:

The moment your customer’s payment fails, your dunning software will trigger an email to your client, notifying them of what’s up.

For the next 30 days (or however long you want this time period to be), the software will keep retrying the same card. If payment goes through on one of these occasions, then you’re good to go. If not, it’ll trigger more automated emails to your customer based on a predetermined schedule.

If your customer still doesn’t pay after X days (again, this is up to you to determine), then the software will suspend the customer’s account, and send a final cancellation notice.

We’ll get into more details in a bit, but that’s dunning in a nutshell!

Yawn, Why Is Dunning Important?

Wait – why ‘Yawn’? Dunning helps you get paid on time and makes you more money!

Consider this:

Small businesses in America have roughly $825 billion in unpaid invoices at any given point in time, and 81% of these invoices are more than 30 days past due.

Obviously, there’s a huge problem here. The more unpaid invoices you have, the less cash flow you’re left with.

In fact, the average small business only has 27 days’ worth of cash reserves. As a business owner, I’d be crazy worried if I only had enough cash to get me through 27 days. I mean, you’re basically backed in a corner, with just a tiny amount of wiggle room.

So how do we prevent this?

I’m glad you asked!

All you have to do is set up your dunning workflow or campaign once… then sit back and watch the magic happen!

Wait, OK – So How Does Dunning Work?

Alright, let’s dive into the specifics of the dunning process.

First, let’s look at what tactics exist before an account is past due.

Card Expiration Emails

Like they say, prevention is better than cure.

Rather than chase your customers to update their cards only after these have expired, why not send a couple of reminders in advance?

If you haven’t done so already, go ahead and set up your dunning software to trigger these emails on certain dates, for example, on the 14th and 24th day of the month prior to expiration.

Psst: be sure to configure these emails to generate a custom URL that will bring your customers to a payment update page. (If you’re not sure about how to do this, continue reading below on the software that handle all of this for you)

Card Updater Technology

Here’s another way of reducing failed payments and simplifying the dunning process…

…use a billing system that comes with Card Updater Technology!

Simply put, these billing systems liaise with credit card companies, and they automatically update your customer’s card details when these details expire or change.

It’s a complete win-win. Your customer doesn’t need to go through the hassle of updating their details, and you get paid as per normal.

One billing system that comes with this feature is Stripe – as long as you save a customer with them, they’ll automatically update said customer’s card details whenever necessary.

Technology is awesome, isn’t it?

Payment Reminder Emails

Card expiration emails aside, you also have your payment reminder emails.

These are fairly straightforward – they’re triggered roughly 3 days before payment is due, and they serve as a reminder for your customers.

A word of caution, though…

…don’t get too enthusiastic with these emails, and put off your customer for good.

If you trigger 3 credit card expiration emails and 2 payment reminder emails to the same customer within a span of two weeks, you’ll probably have a pissed off customer on your hands, because often people that need to update their card also need time to work through the process and chat with the card company – more emails don’t necessarily make it go faster and can just add stress.

In the best case scenario, your customer unsubscribes from all future communications. This means you won’t be able to email them about sales and promotions in the future, which will probably eat into your Customer Lifetime Value.

In the worst case scenario, your customer gets so fed up that they cancel their subscription, and take their business to your competitor instead 🙁

The bottomline?

Make “less is more” your mantra, and don’t annoy your customers! Instead you could motivate them by offering an “early bird” discount and make them save money for paying your bill before the deadline.

Smart Retries

Okay, let’s say your customer’s account is officially past due. What do you do?

First, set up Smart Retries so that you can retry failed or incomplete payments.

If your customer’s payment was denied due to factors such as temporary credit limits or network outages, then this will probably do the trick.

Once your system retries the payment, it’ll go through, and you’ll get your money without having to hassle your customer.

In setting up Smart Retries, you’ll have to specify the following:

  • How often the system retries the payment (every 12 hours? Every 24 hours?)
  • The maximum number of retries

Here’s where things get tricky:

You can’t just set a crazy high limit for the maximum number of retries (say, a thousand retries) and be done with it. Why? Because every time you retry an invalid credit card, you get slapped with transaction fees by the payment gateway.

Oh, also…

Assuming you encounter too many failed transactions on the same credit card, this might also trigger fraud warnings from the credit card network. When that happens, the network might flag your account as “high risk”, and put it on hold. Yikes!

At the end of the day, your priority should be to safeguard your account from being blacklisted. In order to do this, make sure you stick to the default number of retries specified by your billing system.

If your customers do exhaust the maximum number of retry attempts, you can always have the system follow up with dunning emails. Read on to find out more!

How Do I Make My Dunning Emails Effective?

A newbie business owner might assume that all dunning emails are more or less the same.

In these emails, you tell your customer how much they owe you, how many times you’ll retry their card, and how they can update their payment methods. That’s all there is to it, right?

Well, not quite. There’s a lot more finesse that goes into dunning emails… and the more well-executed these are, the more effective they’ll be at convincing your customers to take action.

So what makes a great dunning email?

Trust Factors

There are about a gazillion phishing email scams out there today, so it’s important to show your customer that your email is legit.

How do you do this?

First, make sure your customer can tell that the email is from your company (and at a single glance!) To do this, include a small logo or letterhead in your email, and stick to your standard brand colours.

On top of that, communicate to your customer that they’re being redirected to a page that’s secure with SSL encryption. This means that the outbound links included in your emails should be “https://” links.

Variation In Content

First up, let’s talk subject lines.

Now, it’s not a good idea to use the exact same subject line in multiple dunning emails. Why? Gmail “threads” these emails, which means that there’s a greater chance of your customer missing out on subsequent emails featuring a previously used subject line.

On top of that, you’ll also want to vary the content of your dunning emails based on the urgency.

In the first email you send, for example, you might simply want to highlight the fact that your customer’s card has been denied, and that they need to update their payment method. (You’ll also want to state when their account will be shut down, but there’s no need to go into too much details as of now!)

But if this is your third email that you’re sending to the same customer, then that’s a different story altogether. At this point, it’d be wise to devote the majority of your email copy to dealing with when your customer’s account will be shut down (and the consequences that will arise from this). The key is to communicate urgency!

Voice And Tone

Look, I know it’s super frustrating when your payments don’t go through…

…and there will be times when you just want to send your customers a nasty-sounding email that tells them to cough up the money, OR ELSE (queue godfather theme song).

But think of it this way: it’s not like your customers are withholding payment on purpose, for the sole reason of making your life difficult.

Most of the time, you’re not getting paid because of a slip-up or a mistake.

Maybe your customer’s card expired. Maybe they lost their card. Maybe they just paid for an engagement ring or a wedding banquet, and their card has insufficient funds. Maybe they changed their card, and forgot to update their information. Maybe they’re wanted by the FBI. The list goes on.

So take a deep breath, think about the fact that companies which use polite language on their invoices enjoy 5% faster payment from clients, and stop yourself from crafting that overly aggressive, nasty-sounding email.

Instead, keep your tone empathetic.

And in case you were wondering… yes, you can convey the severity of an issue while still being polite and empathetic. Scroll down, and check out the dunning email examples I’ve compiled for you in the next section!

Best Dunning Emails To Steal

Buzzsumo

This is one of my favorite dunning emails, hands down.

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Image from LiveChatInc.com.

First, BuzzSumo acknowledges that calling the bank is a sucky chore, and they even mention how much they hate it themselves. That’s two points for authenticity and not sounding like a robot, right there.

Then, BuzzSumo communicates the consequences of not taking action in a clear, unambiguous way: “we’ll have to cancel the account immediately if we can’t resolve it”.

But they also go on to soften the blow by saying: “we don’t want to have to do that”, and following it up with “thanks for being a BuzzSumo customer, we couldn’t do it without you.” Now that’s how you do it.

Skype

Another great dunning email to draw inspiration from is this one by Skype.

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Image from Customer.io.

With this email, Skype really delivers on clarity. It’s super simple for the customer to understand, and the Call To Action (CTA) really stands out as well.

Also, keep the friendly tone in mind – Skype’s keeping it light and casual, and they’re not blaming their customers in any way.

Mailflow

Last but not least, check out this dunning email by Mailflow.

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Image from LiveChatInc.com.

Again, this email is friendly and non-judgmental, but it does an awesome job of drawing the customer’s attention to what they have to lose. (Basically, they’re giving their customer FOMO).

This strategy is simple, but effective. Try it out for yourself, and see if your conversion rates improve!

Yelp, Who Can Do All This For Me?

You now know all there is to know about dunning… and the last part of the puzzle is figuring out which platform to use.

ProfitWell’s Retain

ProfitWell is a platform that provides metrics for SaaS companies; this comes with a tool, Retain, which helps you to reduce involuntary churn and was my tool of choice at NinjaOutreach.

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Among other things, Retain features automated recovery emails, landing pages, annual upgrade options and even in-app messages (for companies who have their own apps).

The best part? You get a 100% ROI guarantee, so if your customer doesn’t stick around, you don’t get charged.

BareMetrics’s Recover

BareMetrics is a suite of metrics, forecasting and engagement tools for teams using Stripe, Braintree and Recurly.

Again, BareMetrics has a tool that helps you follow up on those failed payments, and reduce churn. This is called Recover.

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With Recover, you can create custom drip email campaigns, configure pop ups for failed credit cards, and create in-app reminders for customers.

Most of these functions are plug-and-play, so it’s super easy to get started!

ChurnBuster

Finally, ChurnBuster is a tool that helps you renew subscriptions and retain customers more effectively.

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According to ChurnBuster, their Retry Schedule is so effective, their clients send out 21% fewer “past due” notices every month.

Like ProfitWell, these guys have a 100% ROI guarantee. If you don’t recover more revenue than your Churn Buster fees within the first 90 days, they’ll refund you the difference!

Your Dunning Action List (Do This NOW!)

Since you’ve made it all the way to the end of this article, I think it’s safe to assume that your business is suffering from failed payments, and you’re looking for a way out.

Well, it’s super simple to get started. All you have to do is:

  • Choose a dunning platform from the above list and sign up
  • Set them up, including the emails and dedicated payment page
  • Track the extra revenue you’re recovering from the platform, and make sure you have a positive ROI.

Like I said, most of these platforms come with an ROI guarantee. If the dunning set-up doesn’t work for you (for some odd reason!), you’ll be able to get your money back. You really have nothing to lose!

What’s been your experience with dunning?