All About Dunning

posted in:
Best Practices

Tired of chasing down customers for failed payments? Have spreadsheets tracking declines and email communications and promises to pay? Take advantage of Recurly's dunning management to save time, worry, and money! Dunning (or Delinquent User Notification) is a period of time in which a user's payment has failed and both communication attempts and automated retries occur to recapture their revenue and keep them as an active subscriber. On average 13% of recurring transactions fail, and this process handles the recapture without your staff involvement. Many merchants use the default Recurly dunning settings, but did you know this highly customizable area of Recurly can help maximize your recovered revenue? In this blog post, we’ll discuss your various configuration options and how they can help different business models.

Length of Dunning Cycle
The overall length of your dunning cycle determines how long Recurly will attempt our automatic card recycling efforts. This is defined by the sum of the number of emails you wish to send to your customers. Typically, B2B companies should have a longer dunning cycle to allow payment approvals to flow through internal processes, while B2C companies should have a shorter dunning cycle to minimize the time a customer has access with an outstanding payment. A dunning cycle should never be longer than your shortest subscription plan, since it can cause a “waterfall effect” - the subscription will never terminate since an invoice is still in collection when a new one is generated.

Number of Emails
The number of emails determines how long your dunning cycle occurs, as well as how often your customer is reminded to update their billing information. B2B companies find success with around three emails, while B2C companies find success with a few more, depending on their user base. The idea for B2B is to have fewer emails over a longer period of time, and for B2C to have more emails over a shorter period of time.

Subscription Termination
Because the dunning process is designed to recapture engaged customers who wish to stay in good standing, at the end of a dunning cycle a customer’s subscription is terminated and the past-due balance is written off as past-debt. If you find that you have customers wishing to resubscribe after their subscription has been terminated for non-payment, you may find the dunning cycle needs to be lengthened, or more communication sent.

Some merchants choose to “Leave Active” at the end of the dunning cycle. This setting is commonly used for merchants who have external collection agencies working on collecting bad debt. With this setting, Recurly will never automatically terminate a subscription due to non-payment, it will be up to the discretion of the merchant to decide when their capacity for bad debt has been reached and the subscription terminated.

Extra Integrations
The highest recovery rate we see from merchants come from those who integrate with Recurly Web hooks. When these merchants received a failed payment push notification, they place a banner or interstitial in their application notifying their customer of the failing payment and prompting them, in-app, to update their billing information. Some merchants even prevent access until billing information is updated. When the merchant then receives the subsequent “successful payment” web hook, they re-provision the user and continue their access. This, combined with Recurly’s automated dunning efforts, can lead to upwards of 80% recovery on failing invoices.

If you have questions about dunning, or how to tailor it for your business, book a time with us! We’d love to have a 1:1 with you and help configure your dunning settings!

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