How SaaS Should Manage Dunning

by Richard


As SaaS your business is built on a recurring revenue model, right? The chances are you’d like that revenue to keep recurring with as few interruptions as possible.

It all sounds quite simpleattach a payment gateway, get subscriptions and (besides your app upgrades and maintenance) wait for the cash to keep rolling in. In reality, things tend to get much more sticky.

What do you do when a customer payment doesn’t go through for whatever reason?

What should you have in place pre-dunning? Grab our checklist here.

What Is Dunning?

“Dunning” is the term used to describe the process of communicating with clients whose transactions have failed prior to their accounts being cancelled.

The primary objective of dunning is always going to be to preserve your revenue sources, but as the whole thing is a communication process, it can serve other purposes too. For example, it can help you promote your app so the customer understands what they’ll miss out on, find out from customers if there is any problem you can help them with and generally help you to foster a relationship with them.

Remember, they’re not necessarily “bad” customers…

Have you ever had to have a credit card cancelled for any reason? What about simply an update to the account details associated with the card? There are a number of reasons why a credit card transaction may be declined and many of them don’t involve “the customer didn’t pay their bill.”

For example:

  • Change of billing address with associated credit card.
  • The credit card expired.
  • The card was cancelled due to fraudulent activity.

It’s worth remembering that you could have many good customers who have a payment issue come up on their credit card and that the dunning (or pre-dunning) process can be worth the effort.


Yep. Sometimes you know ahead of time that there’s going to be an issue with the payment, right? Like when the expiry date of the card on record is coming up due. Pre-dunning involves sending out emails reminding the customer to update their credit card details ahead of time. It tends to be easier to pre-empt a problem and get the new details rather than chase up failed payments.

There are some tools you can get which automate the pre-dunning and dunning process (such as Stunning for Stripe users). These save you the time and trouble of manually chasing up expiring credit cards or credit card declines by sending out automated emails.

Tips For Managing Dunning


As mentioned, we highly recommend that you find an automated software to take care of dunning for you. The thing is, unless you’re constantly poking into the accounts side of your business (who has time?), you won’t know someone’s credit card is about to expire ahead of time.

A primary measure of SaaS is churn, and failed payments can be a substantial cause of that churn. The thing is though, just because a customer’s payment has failed doesn’t mean they’ve already churned. For now, they still have an active account which could still be salvaged, which is why it’s important to have that dunning process in the first place.

Give the benefit of the doubt first

Remember all those possible reasons a card can decline? Sometimes it even happens at random and can be resolved simply by trying again later. This means you don’t want to be dealing with the customer in any way which might ruin the relationship.

Hold off on actions such as freezing accounts until you’ve give the customer plenty of opportunity to rectify the situation. Many SaaS are using a period of up to 21 days grace to make contact with the customer and give them the opportunity to get payments going again first. It’s about striking that balance between too lenient and too tough.

What to look for in a dunning system

You already know you want the process automated. It makes sense that you put more focus into growing the business and serving your customers well rather than doing a task which can be handled on autopilot with a few emails.

Here is what you should be looking for in a dunning system:

  • Automatic retries – For all those times when a card declines one minute, but will be accepted the next. You want a system which retries intelligently at times which give you the best chance of recovering revenue.
  • Pre-dunning intelligence – The system should look for things like upcoming credit card expiry and automatically send out emails to remind the customer to update their details.
  • Payment reminder emails – You want customers to be reminded that they have an upcoming payment. If they’ve just cancelled the old credit card, this may be enough of a reminder for them to update their details.
  • Customizable emails – You want to be able to add your own branding and “language” to the emails.
  • Automated dunning emails – When there is a credit card decline, the system should automatically kick in to trigger emails.
  • Automated follow-up – The system should be intelligent enough to know whether the customer responded to the first email and should only send out emails based on need.

This is a minimum list of requirements – you will find that some apps available have a whole lot more features which are useful to add on.


Best practices for email

Half the battle with sending any kind of email is ensuring it gets opened and read in the first place. If your SaaS wants to manage dunning well, we have a few suggestions for those emails:

  1. Send them from an address which customers are able to reply to if needed. This way you open the dialogue easily for any questions.
  2. Have an obvious subject line (for example: [Name of SaaS] Please update your billing information).
  3. Tell the customer why the transaction failed – it can save the mini-panic moment if you’re telling them it was simply due to an expired card.
  4. If possible, use a direct link to get them to update their billing information. You want to make the process as seamless as possible, so cutting out clicking around and logging in where you can.
  5. Stick to empathetic, professional language. Be clear about what’s happening, but don’t take the tone of “making a demand.”
  6. Let them know when you’ll attempt to collect payment again and what will happen if it is unsuccessful.
  7. Remind them of the value your app delivers for them. You don’t want a customer thinking “meh” after reading your email, you want them to have a sense of urgency about not losing the fantastic benefits you provide them. You could even introduce them to new or upcoming features: “we wouldn’t want you to miss out on …”
  8. Send out more than one email. Crowded inboxes have a habit of burying emails, so your chances are better with multiple communications. We usually send out three across the space of a week.
What should you have in place pre-dunning? Grab our checklist here.

Final Thoughts

Dunning is actually one of the most simple revenue-rescuing strategies you can put in place, especially if you choose the right kind of automated software.

We’d consider dunning activities to be a basic requirement for SaaS who are keen to reduce churn and preserve that recurring revenue.
Remember, your customer hasn’t actually churned yet just because their payment hasn’t gone through. There are a number of legitimate reasons credit card payments fail, so give them the benefit of the doubt, treat them with respect and give them the chance to get back on track.

Kill your churn. Keep more of your customers. Get an invite to Retained.

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