Dunning Management: Your Rollout Plan to Increase Retention

Dunning Management is an often overlooked aspect of Customer Success. It happens silently.
Actually, it’s less of what we’re doingand more of what we’re not doing. We effect change by action and inaction.
Where is your churn coming from? What is the breakdown of customers (and their respective dollars):

  • Voluntary churn (requesting to cancel)
  • Involuntary churn (payment method fail)
  • Merchant block (where they have their bank block payment to a specific merchant)

I’ve spoken with some SaaS companies who generally have great luck with credit card payment and very few merchant blocks, but have lots of customers requesting to churn. Others allow their credit card to fail to act as a means of cancelling the account. Some just call their credit card company because it’s easier to put a merchant block than request to cancel. 🤷‍♂️
In this post, I want to address:

  • What is dunning management?
  • Etymology
  • Why should I care?
  • Okay, I care, now what?
  • Whoa, this is a lot of work—maybe I’ll do it later
  • Can’t I just get someone else to do this for me?
  • What’s the ROI?

If you need the TL;DR version, skip down to the Can’t I just get someone else to do this for me? section. 

Disclaimer: I’m not being paid me to write this. I’m simply sharing my experience and what’s worked for companies I’ve worked and consulted for. The experiences below are for B2B SaaS firms.

Dunning management 

Dunning management is all about collecting what’s truly owed to you. It’s less obnoxious than reminding your friend that he still owes you $10.

Losing $10 to a friend — not so big of a deal. However, ten friends that each never repaid their $10 loan, now that’s becoming a problem. And that’s where dunning management comes into play. It’s the art of fixing payment processing issues such as canceled cards (often due to fraud), new cards (old one expired), and insufficient funds.

Etymology

This is a fun one, because whenever I talk to anyone outside of SaaS they look at my like I’m from outer space. “Dun” or “to dun” is to collect payment. It was popularized around the 1600s as debt collectors went house-to-house collecting on loans. 

Why should I care?

Inaction is causing you to throw away money. Needlessly. We all have customers who decide they don’t want our product or service and cancel. That at least I can handle because they made a conscious decision to move on. Payment failure is something different. Sometimes those people didn’t want our services any longer, but most of the time they forgot to update their billing, they didn’t realize their card expired, or something else happened.

For example, years ago I had one customer who tweeted at our company about why he couldn’t access his account. It was an 8pm tweet, interrupted my evening, and I tweeted back to let him know I was looking into it. Sure enough, the account was inactive from failed payment. He didn’t realize it. I couldn’t simply tweet back, “hey, you need to update your billing.” Kindness matters.


Okay, I care, now what?

First, before you sound the alarm bells, go look at your churn breakdown for the last 3-6 months to know whether you really ought to sound the alarm. Using your billing system, reporting system, or whatever tools you have, figure out how much is actually going out the door due to involuntary churn. Is that your top priority? Even if it’s not your number one priority, is it high enough that it warrants you attention? Remember, once you establish a good system, it can run on its own. We’ll get to this down below, but a good tool can help you automate this process so you can put your mental energies elsewhere, like calling those customers who requested to cancel. 

Your steps are:

  1. Calculate ARR or MRR lost due to delinquent churn
  2. Evaluate your current process – is it effective? Could it be better?
  3. Ask yourself the question, “even if I only fix half of the delinquent churn, would that be a major victory for me?”
  4. Spend 4 minutes asking, “how could this be a better customer experience?”

Whoa, this is a lot of work—maybe I’ll do it later

Yeah, there’s a decent amount of work here. But run a quick calculation in your head. Even if it takes a total of 40 hours to research the issue, find a vendor, design the customer experience, and implement, would it be worth it?

Can’t I just get someone else to do this for me?

Yes and no. You can hire a consultant to help, or you can do it yourself. There are plenty of vendors to choose from, methods to set it up, and customer messaging to set up, but if you want to see a basic layout, then buckle up. This won’t work for everyone, but here are some suggestions if you have flexibility:

Billing system

Use Stripe as your billing system. It’s effective, scalable, and extremely reliable. Plus, you can plug in a ton of vendors into it. 

Revenue reporting system

Though we haven’t touched on this, but a great free product is ProfitWell. It’s terrific for tracking your monthly sales, downgrades/upgrades, churn, etc. It seriously saves me at least 20 hours a month — minimum.

They’ve got a great, friendly team willing to help and invest in you. Their base product is free, but they have several upgrades that charge a fee. However, many, many companies stick with the free version and really love it! 

Dunning management system

First, I would first turn on Stripe’s automatic credit card retry system (click of a button). This will retry their credit card up to 4 times over a span of several days. If this is the only thing you do and learn from this article, do this. 

Second, send email reminders to your customers when their credit card fails. If you don’t have time or need something for free, Stripe’s delinquent churn email reminders can work well. It’s basic and lacks extensive tooling and reporting, but can help get your off the ground. Make sure you push at least your customers’ first name and email address to Stripe!

If you want something sophisticated and more personalized, I highly recommend Churn Buster. There are several other vendors (Stripe, ProfitWell, Stunning, etc.) you should also look into. Note: there’s always the consolidation of certain players (i.e., billing systems) expanding their borders. Over the last two years I’ve seen most billing systems expand into areas like dunning management. Since that’s not their bread and butter — billing is — it’s up to you to decide if a single system is sufficient, or if best of breed is better for you.

I’ve helped SaaS companies implement different systems. One in particular was extremely frustrating and difficult to implement, and it’s no wonder people shy away from billing/dunning management! However, Churn Buster has a great, friendly team with a terrific product. They’re also affordable and have an easy cancellation policy if it doesn’t work for you. 
Their product shines because you can quickly link to Stripe and do a lot from there. Setup will take some time, depending on the size of your organization. It’s not plug-in-play, but don’t let that scare you off from saving recurring revenue.

Best practice: once a customer’s credit card fails, have Stripe run their repayment attempts for several days. If that doesn’t fix it, then have Churn Buster email the customer. You can build a cadence over a period of time (frequently 30-60 days, depending on the customer). This is critical as consumers tend to max out their credit cards around the holidays and payments fail because of that. Giving it 30 days can mean the difference of losing and saving a customer. It’s also important to send multiple emails in increasing levels of urgency.

A few other important things, set automatic retries before you send the next email to the customer. Nothing is more annoying than getting an email to update my payment info when I’ve already done that. With Churn Buster, that next customer email only goes out if the credit card failed. Here’s what the cadence looks like:

  1. Stripe retry (3-4 days)
  2. Churn Buster 
    1. Day 5 card retry 
    2. If above failed, then Day 5 Email customer (after card retry)
    3. If above failed, then Day 8-10 card retry
    4. If above failed, then Day 8-10 email customer 
    5. Repeat through day 30-60

It may sound like a lot, but I’ve been on vacation or traveling when something comes through. Like most people, I can’t read and act on every email within a few days (or even a week!), so don’t expect your customers to be any faster. Give them time.

Another key benefit is you get to write the messaging, make the branding your own, and white label the emails so they come from you (technically, you’re setting up the DKIM/SPF email records for authentication). 

Messaging

Most dunning management software vendors will have their own default messaging, though you can often update it to be your own, in your voice. Some allow you to white label your emails, put your own logos on, and take off their branding (note: Churn Buster allows 100% whitelabeling). 

That said, if you need help with messaging, the cadence, or need someone to bounce some ideas off of, send me a message.

What’s the ROI?

The best is saved for last — so, really now, is this actually worth it? 

For the multiple companies I’ve helped implement a dunning management process, yes! Here are several outcomes I’ve personally witnessed. That said, remember mileage may vary — these are only averages from various companies, not what you will attain. Each company is different: some just use the smart card retry, some use the smart card retry and dunning emails, some have short or long collection periods, etc.
Outcomes

  • Reduced delinquent churn by 40% within 3 months of launch (a conservative estimate)
  • Recovery rate: 60-80% delinquent revenue
  • Smart card retries: accounted for 40-60% of saved revenue (see, just wait a couple days and retry the card!)

Ultimately, implementing these systems saved these companies money, but also paid for the vendors within several months. If you’re serious about company growth, you cannot ignore delinquent churn. It’s not a “nice to have.” Grow your company not just through your sales reps, but here, too.

On Becoming a Thought Leader

I’ve been thinking a lot about the concept of hard work and on becoming an expert.

Unsurprisingly, there is a lot to it.

Hard Work

Last summer I read Malcolm Gladwell’s Outliers. A fascinating book for anyone to read. One of his points is that it usually takes us 10,000 hours to become an expert in a field. Whether a pianist, third-baseman, wine sommelier, or an expert in some area of SaaS, hard work is required. No substitutes. 

Focus

It’s not just hard work. I can do the same thing over and over again, and not learn why something works the way it does. I may know how gravity works (things fall), but if I don’t understand why it works, then it makes it harder to make predictions for something new (like filling a balloon with helium). In the same way, focus is required. It’s not simply enough to expect after years of hard work that you will be recognized as an expert. 

Without focus, the winds will blow you in many directions. Read Shane Parrish’s article on Understanding Speed and Velocity: Saying “NO” to the Non-Essential. Cut out non-essentials.
We’ve been told that learning to say “no” frees us up to do more. We’ve been told “less is more.” If you don’t learn to say no, then your thought leadership quality will be watered down. It’s not simply the 10,000 hours. It’s a ruthless pursuit of the goal. We can share all of the quotable lines from big names, but until we do this very simple thing, we won’t get far.

Develop it into a habit. Add it to your to do list (yes, right now). Review your project list and delete what doesn’t make sense. Then move everything you’d like to do to a “someday” or “back burner” list. Get it off your priority list — you’re only stressing yourself out. 

Another word for focus is sacrifice. You must cut out things that you like for the things you love. Saying yes to everyone outside my house inevitable means no to my health, my rest, or my family — all of which should be at the top of the list, not the bottom. Learn to say no. Focus on what matters. It’s difficult for us to say no to coworkers, friends, and even ourselves. Saying “yes” to all these things means “no” to your dream.

Communication

You can be amazing at something but not be able to communicate well. Communication requires a significant investment in reflection. 

“If a tree falls in a forest and no is around to hear it, does it make a sound?” is an interesting philosophical question, and also insightful for the parallel of communication. If you work hard and are focused on the true results, will you be an expert in the field? Well, yes. Because you will be an expert in your field, but may not be recognized. This is where you make the choice. The answer isn’t simply “yes” to learning to communicate your thoughts. For instance, that can detract from a lot of research you’re doing — but it can also help frame concepts you’ve been thinking on, but couldn’t articulate till you put pen to paper. Even if you do that, there’s no reason it must be in a public forum rather than your private journal. Writing does not necessitate public discourse.

There are many avenues to becoming a thought leader. There’s the obvious ones — blogging, vlogging, podcasting, speaking, social media — and there are others that are not as obvious. Don’t allow the “sexy” methods to pull you from the effective ones. They are often mutually exclusive.

Conclusion

There are a lot of us who want to specialize, become experts, and contribute at a higher level. We don’t settle for mediocrity or simply copying content from others (besides the ethical reasons). All of these are worthy endeavors and ought to be pursued. 

The next step is a tough one. It is this: to evaluate the merits of this list not because of who wrote it or was referenced in it, but on the ideas, the concept, and the truth. By shortcutting the process and evaluating it on any other measures (author recognition, friend’s reference, etc.) is merely proving you have a long way to go in being a leader in thought. 


Additional Resources

Efficiency: A Letter to My Younger Self

Oftentimes and many years later we have realizations on how silly we were, how short-sided we thought, or simply how wrong we were. This is one I wish I could write to my younger self. As I journaled, I realized it wasn’t simply a letter to my younger self, but to many, many people today. A lesson widely needed.


I understand you want to be as efficient as possible. In fact, you want everything in your life to be as efficient as possible.

I think that is to your downfall and here’s why: efficiency is not the goal, effectiveness is.

Peter Drucker in his masterpiece The Effective Executive talks about this specifically. We need to be effective, that is the goal. And one concern I have with what you’re trying to do is you’re trying to squeeze every last penny out. You need to leave some money on the table. That is not a bad thing to do.

For example, if you onboard employees as quickly as possible with as little training as possible then you will get what you paid for. You will get a bad product. And you will have to pay for that for months and possibly years to come.

If you try to write up a big process real quick, give it one quick glance, and hit “send”, then you will find things you should have considered.

When you need to reconcile the accounting books and you “just want to get through it” because you have many other clients to work on, don’t be surprised when your errors get caught in review — and you look bad.

Don’t be shortsighted by the “wins” of today at tomorrow’s costs. Instead, invest today for tomorrow’s gains. Just like we need to get enough sleep each night in order to be effective, if we chew into tonight’s sleep to get a bit more done today we will waste the entire tomorrow. There’s no such thing as a free lunch.

Just because it’s easier to measure efficiency doesn’t allow you to take the lazy and less productive way. Go the more difficult and rewarding path. Go for effectiveness and win.

The Two Pennies

I went on a jog a few days ago. No earbuds. No screens. No music, audiobooks, podcasts—just my thoughts. I enjoyed the beauty of January, though we often think of it as dead and decaying. We long for spring.

Around 3 miles in I looked down and saw two pennies. I picked them up for my kids (I knew they’d be excited at the prospect of “having money”). Typically, jog for me means catching up on podcasts, listening to that audiobook, etc. It’s often about checking another thing off the list. Arguably this jog was 0% productive since I couldn’t check anything off my list. However, it cleared my mind. I thought at a different pace since I was focused on what was around me, such as noticing two pennies that I would never have seen before. I reframed worries and doubts that had grown colossal. I thought through opportunities that seemed out of reach. I realized many projects were neither important nor urgent, so I could put them to the back burner.

So while I’ll continue to listen to podcasts and audiobooks while jogging, I won’t do it all the time. Sometimes you need to spend an hour to reflect and absorb what you already know, to make those connections to things you’ve never made before. In short, don’t only ever put on your headphones to block the outside world, sometimes sit (or jog) and listen to that around you and your own thoughts.

Just my two cents.

If All You’re Doing Is Surviving…

Below is an example from my life about parenthood, but the principles to this story can be applied to all areas of life—work, school, volunteer, or whatever. If you’re struggling as a parent, it’s okay. We all are. Secondly, reach out for help—I do the same. We are that village that takes to raise all of our kids.

It must be a popular statement, or else it simply sticks out in my mind because I’ve begun to notice it everywhere. Here’s how the conversation usually goes:

Friend: “How old are your kids again?”
Me: “Their ages are…”
Friend: “Oh wow. Yeah. You’re just surviving. That’s all you’re doing right now.” (emphasis mine)

While I appreciate my friend’s compassion and validating my attempt at being a good parent, I’ve begun rethinking this line.

It’s not just one friend, either. It’s family. It’s many friends. It’s coworkers. The difficult thing is just that: so many people tell you this as a parent with young kids that you just accept that’s how life is.

But then what are you supposed to do? Bide your time until your kids grow up a little bit? Then you’re busy because you’re running them from school to soccer practice—oh, shoot! Then picking up the other one for ballet and then a quick bite to eat, home for homework, and finally exhausted on the couch! Then repeat the next day.

If you need to get past that period of life, then what? Teenagers? Ugh. I don’t even need to go there!

So if you’re just surviving with young kids, frazzled with being a soccer mom, and finally teenagers, then what? Wait till they’re out of the house? By then you’re in your 50s and thinking of retirement, grandkids, and if your bones weren’t hurting in their 30s (mine are) then your 40s and certainly your 50s.

There are no easy answers, only deep, soul-searching questions. But for those of you who are just surviving, I must ask the question, “what are you surviving for?” Are you surviving so that you can work to make the world a better place? Just to get by and hope bad vibes stay out of your way? So that you can live to see a concert, achieve a goal, unlock a quest, or see your kids attain _________? Is that it? Is that all?

We each have varying levels of hope for the future. Some are distraught, some are depressed, and some are optimistic—and some are in between. The purpose of this thought isn’t to be a depressant, but to awaken our souls to these questions. I’d rather go through life asking difficult questions that I may never get the answers to, than to idly sit by too afraid to open the door.

So, to those who have a family member with cancer. To those of us who are workaholics. To those of us who are in over their heads with debt. To those of us who can never seem to catch up. Who feel as if they aren’t even a half-way decent parent. Who feel like failures as parents. Who are cancer survivors. Who can’t catch a break. Who have recently lost a child, parent, spouse, or close friend. To those of us who simply feel like we’re only surviving. Here is the message: there is hope—we just spent a month sharing the Christmas story. Read it (the real version, not the fluffed up Santa version).

However, even if you’re not religious (or don’t want to discuss it), spend time with a close friend or family member. Deepen the bonds you have—or feel like once had—with that person. Shed your toxic relationships. Get away and reflect on your last year. It’s not going to be easy. But go on a walk, let it out (cry, if needed!). You can’t move forward in life if you disallow yourself to share with others and yourself. Be willing to reflect on your past, current situation, and dreams for the future. If you do that, you may find that all you’re doing is surviving, but maybe, just maybe, you’ll begin to find hints of meaning.