What does dunning mean in Accounting?
For subscription-based businesses everywhere, churn is the ultimate enemy. And its no wonder, with cancelled subscriptions leading to a range of negative consequences, including lost revenue and ramped up customer acquisition costs (CAC). Explore SaaS dunning in greater depth, right here. Dunning refers to the process of asking customers for money that they owe to the company. This usually happens when a customer doesnt have enough funds in their account to make a purchase or their credit card has been declined. Dunning has a bad reputation with both customers and businesses. Customers find it invasive, and even threatening, while businesses often experience difficulty when trying to collect payment from uncooperative customers. Ultimately, however, the dunning process is simply a way to recover lost revenue, which means that its important for SaaS businesses to understand how it works. There are many different reasons why a transaction may have failed, including card expiry, lost/stolen cards, and insufficient funds in the account. Dunning is an automated process that allows you to take several types of action whenever you encounter a failed card payment, including:  Send reminders about outstanding payments from declined cards  Alert customers via email about issues with a transaction  Implement smart retries for failed transactions  Request permission to collect up-to-date credit card information from providers  Getting your dunning letters right  While dunning can be difficult to implement, its important to remember that as the chaser (rather than the person being chased), youre the one whos setting the tone of the discussion from the get-go. Thats why its beneficial to implement these dunning best practices when chasing up a debt:  Choose your language carefully  When youre composing a dunning letter or email, tone and language matter. Its also important not to obfuscate or use confusing language. Explain who you are, why youre getting in touch, what the issue is, and the steps that they can take to rectify the problem. Empathise with your customers  If youre accusatory and imply that the customer is attempting to hoodwink you in any way, youre only going to succeed in driving them away for good. After all, in most cases your customer wont even know that their payment hasnt gone through. Remain friendly and professional throughout the dunning process. And remember, the original meaning of the verb dun meant to harry someone for unpaid debts. Thats a great way to develop a bad reputation as a business. At some point, you may be better served by simply cutting ties with an uncooperative customer. Be concise  Theres no need to drag your dunning letter out over pages and pages of dense text. Aside from the fact that this is more likely to discourage your customers from making payment, its simply not necessary. Use bullet points to make the copy easy to read and bold any particularly important pieces of information, such as amounts due or deadline dates. Alternatives to dunning  Of course, dunning notices arent the only way to deal with failed transactions. Sometimes, it pays to tackle the problem at its source, and the only way to do that is to reduce your businesss reliance on credit card payments. Thats why it may be a good idea to think about using bank to bank payment methods like BECS payment. With a payment provider like GoCardless, you can completely cut down on the risk of involuntary churn by taking payment directly from your customers bank account, bypassing the SaaS dunning process entirely. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.