What is Subscription Dunning? Definition, Best Practices, & More.

May 19, 2023

Jonathan Charpentier

What exactly is subscription dunning?

Subscription dunning or delinquent user notifications is the process of handling failed or declined credit card payments in order for your SaaS business to recapture lost revenue. It involves sending dunning emails when transactions decline at regular intervals until the client settles the outstanding debt. 

Dunning originates in pre-SaaS times when companies would employ aggressive and unending pressure to collect past-due amounts. Although companies using subscription dunning no longer use such nightmare tactics, Wikipedia still defines dunning as “the process of methodically communicating with customers to ensure collection of accounts receivable.” 

Credit cards decline for various reasons, like insufficient funds, terminal connectivity issues, and expired credit card information. In this article, learn why dunning is essential for SaaS businesses and dunning best practices to maximize lost revenue recovery. 

Is dunning essential for SaaS businesses?  

The short answer is yes, dunning is absolutely crucial for SaaS companies, as dunning helps reclaim revenue that would otherwise escape with clients who unsubscribe. A methodical approach to dunning has several benefits that SaaS business leaders and founders can leverage for an improved financial standing, such as:

  • Reduce customer churn – You can experience two types of churn — voluntary or involuntary. Involuntary churn happens when a client doesn’t know a payment was unsuccessful and never updates their information, leading to disconnection. Likewise, voluntary churn occurs when you don’t use agile dunning practices, pushing customers away with bad experiences. 
  • Improves revenue recovery – Collecting every dollar is vital to the success of your operation, and dunning helps you capture lost revenue through failed payments. Pre-dunning can also help prevent revenue loss from happening in the first place. 
  • Increases customer engagement – Each dunning email or outreach attempt is an opportunity for your customers to engage with your business. Well-written dunning emails and flawless execution gives customers confidence in you as a provider. 

Dunning management is a must-have component of your SaaS company, especially if you collect payment via credit and debit cards. Solid dunning practices reduce the dual burden of losing customers and revenue, as a loss in MRR compounds over time while taking a toll on profitability. 

Dunning best practices for revenue recovery

It’s tempting to revert to aggressive collection practices when a client’s payment method fails, especially if your business needs the cash flow. However, implementing a few dunning best practices can help forge positive customer relationships and result in more successful payment collection than combative alternatives. Here are the dunning best practices you should be using (if you’re not already). 

Automate your dunning process

Automation isn’t about stealing jobs but eliminating time-consuming manual-entry tasks and repetitive duties that frequently result in human error. An automated tool can help keep you up to date on your dunning efforts by automatically sending reminder emails, retrying credit card payments, and tracking success rates. 

Invest in a tool that allows you to customize your email campaigns, credit card capture forms, and payment reminders to automate your dunning process. Your dunning solution should be capable of pre-dunning tasks, which include reminding customers about pending expiration dates and self-service links to update payment methods. 

Automate your SaaS metrics and view your KPIs from a single source of truth with a benchmarking platform like Facta Insights.

Personalize your messages 

The rise of the internet is a blessing and a curse for SaaS businesses. Because of our connected world, Software as a Service is possible, but it also serves as the perfect platform for scammers. 

The increase in credit card scams worldwide makes dunning efforts more challenging, as customers are weary of providing payment information through virtual platforms they may or may not recognize. That’s why building trust is essential, and the best way to do that is through personalizing your messages. 

In your dunning emails, implement customer names, job titles, and company names whenever appropriate. Your emails should also have attractive copywriting that is consistent with the rest of your brand’s messaging, such as social media or company websites. 

You can further build trust by sending emails from addresses your customers will recognize. For example, sending an email from a random collection of hyphens will trigger caution, but a message from an email like “” will feel more legitimate. 

Don’t be afraid to be persistent

Automatic credit card retries are only successful a fraction of the time. That means the majority of your dunning will require additional follow-up to ensure your collection efforts are successful. 

Failed payments often need multiple outreach attempts to capture lost revenue. Your automated dunning system should have a consistent schedule to send reminder emails, which tracks open rates allowing you to keep track of open invoices. 

Additionally, you should establish a standard operating procedure (SOP) for non-responsive accounts or high-value, high-risk clients. This SOP can include steps for tracking down points of contact (POCs), manual collection processes, and how to reach out personally. 

Remember, there’s a fine line between receiving the payment you need and becoming a nuisance to your customer. Keep your communications professional and work with customers whenever possible to maintain positive subscriber relationships. 

Closely monitor payment trends

Payment trends and customer data are invaluable tools for identifying which subscribers are past due and implementing successful strategies for collecting on unresponsive accounts.

A comprehensive SaaS metrics platform can help you track payment trends, telling you where each customer is in the dunning funnel. It can also display how long, on average, it takes to resolve overdue payments, your email delivery and open rates, and web page and link statuses.

Monitoring your payments trends can also help identify customers who have consistent issues with payments, allowing you to adjust your dunning strategies, outreach methods, and what options you can provide. 

Keep your system up-to-date

As you already know, updates are vital to keeping things moving smoothly and preventing malicious users. The same goes for your tech stack, as outdated software can cause payment processing issues, or worse-still a customer data breach. 

Enable automatic updates, or assign your IT teams to manually configure websites, APIs, payment processing pages, links, and other vital payment collection systems on a regular basis. You can also implement automated alerts to help you and your team track down issues that should occur and deploy backup systems so you can still collect payments during downtimes. 

It’s vital that you ensure your systems are compatible with your chosen payment processing methods. API and integration issues can cause delays or problems in collecting payments. Using platforms with proven integration support or all-in-one systems can help solve compatibility headaches. 

Accurately measure subscription revenue with Facta

Subscription dunning is a vital process for collecting past due, missed, and failed payment attempts. Without a solid dunning process in place, you’re setting your SaaS business up for lost revenue. 

Luckily, there are several best practices you can implement to ensure you have the best chance possible for collecting revenue. Whether it’s building trust through consistent brand copywriting or keeping track of payment trends, you can always find ways to boost your dunning methods. 

Keeping track of SaaS metrics has never been easier, thanks to Facta. Facta Insights is your single source of truth for SaaS reporting. Or, you can maximize your financials with Facta Pro, our proprietary blend of consulting and software solutions. Contact us today to learn more. 

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