What is Dunning Management? Why should you care as a SaaS Company?

Are you having problems managing declined credit card payments for your SaaS business? Are you spending a lot of time manually reviewing and contacting the customers to address the declined charges?

One of the biggest challenges of running a SaaS company is handing billing and payments. As your user base grows, businesses are usually surprised by the large number of accounts that have charge issues. In case of declined credit card payments, businesses have to really think about customer experience and error handling. Freezing a customer’s account too fast can be unfair and being too lenient in collections can also be dangerous.

Credit card payment can be declined for various reasons, such as:

• Credit card limits
• Expired credit cards
• Block made by the credit card company on Customer’s request
• Corporate policies on expenses, and so on

SaaS business managers have to come up with timely ways of communication credit card charge declines to customers before suspending accounts.

What is Dunning Management?

Dunning management refers to the ability of a recurring billing solution to manage complications of credit card payment declines. When the billing solution comes across a charge decline at an account, it will automatically send a notification to the customer informing him or her of the failed charge.

Depending on the billing system that you are using, a charge may be retried again after a number of pre-determined days before the customer’s account is frozen. Dunning management is critical especially if you have or are anticipating a large user base.

Importance of Dunning Management for Your SaaS Business

a) Save time on checking accounts with declined charges

A recurring billing solution with dunning management capabilities will increase the efficiency of your business. Instead of spending hours counter-checking and sending email reminders to customers whose credit cards have been declined, the billing system will do this for you.

Most recurring billing solutions in the market allow users to customize the actions that the billing software will take when a charge is declined at an account. You can customize the email communication that will be sent to the users of the affected accounts.

b) Automatic charge retries lowers your churn and increases revenues

SaaS and other subscription based businesses know that reduced declined credit card errors result to lower customer churn. This is a key metric in any SaaS business and a good recurring billing software should optimizes error/decline “dunning prices” to increase your revenues.

Dunning management enables automatic charge retries of a declined card based on the settings you have chosen. For example, you can have a declined card re-tried after 3 days before you suspend a customer’s account.

c) Professional email communication to your account holders

Drafting an email to every customer with a declined charge can be time-consuming and is prone to mistakes. For example, think of the scenario where you have 100 emails to send and you mix them up? Customers will think you are unprofessional and this can hurt your current and future conversions.

Dunning management will make your SaaS company to appear professional by ensuring emails are delivered to the right accounts and at a time that you have scheduled.

d) Keep records of state of accounts

Dunning management helps you to know the number of declined charges, renewed subscriptions, upgrades or suspended accounts. This helped you in your overall business strategy such as offering discounts or add-ons to customers.

Declined payments are bad for business and can hold hostage resources that would otherwise be spent well in other activities.

To avoid the inconveniences of having to attend to declined credit card charges, a SaaS company needs a recurring billing solution with dunning management capabilities. What billing system do you use? Does it have the dunning management capabilities listed above?