What Is Dunning? Benefits of Dunning Management of Payments

Dunning processes involve communicating with customers to ensure the timely collection of accounts receivables or money owed for a good or service. The term “dun” originated in the 1600s as a verb to coordinate a debt collection. People might pay for goods and products via check, cash, or credit card. Providers send dunning letters when they receive incomplete or insufficient funds. Automatic dunning management programs can identify failed transactions due to network issues or expired forms of payment and send digital reminders.

Historically, businesses sent dunning letters to remind consumers of missing payments, inciting more retries as time passed and the payment became later. A few formal letters became in-person visits from a collection agency, sometimes threatening legal action. More contemporary practices utilize chatbots, phone calls, and emails. The purpose of the process remains consistent: to claim unpaid debts via escalating communication techniques.

When consumers buy a good or service, they might only partially pay for it. This means the consumer will owe money on a payment plan, and if they do not stick to the schedule, the provider is within their right to demand payment. Today, many providers use automated processes to communicate late or failed payments.

For subscription and membership-based services, providers typically ask for a single payment method, usually a credit card, to charge the customer regularly. Dunning software programs can flag failed payments due to incorrect credit card information, expired forms of payment, or insufficient funds. Dunning programs can send automatic emails to communicate payment failure to customers and initiate payment retries to ease the process.

Employing an automatic dunning system can have benefits. Consider the following advantages:

1. 1. Improved customer experience: Communication is key to the customer experience. Sending polite reminders of payments before the due date can help reduce payment failures and increase customer satisfaction.
2. 2. Increased revenue: Dunning management programs typically feature the ability to retry failed payments automatically. This process can prevent revenue from decreasing due to technological issues.
3. 3. Reduced involuntary churn: For subscription-based services, involuntary churn due to failed payments can be detrimental to the business model. Dunning management systems can notify payment processors of billing issues to prevent service interruption and boost customer retention.

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