Dunning emails are messages that businesses send customers to remind them about overdue payments or to notify them of failed transactions, particularly in subscription-based or ongoing billing scenarios. These emails play an important part in accounts receivable management.
Dunning emails are a straightforward way to notify customers they must take action regarding their billing, but these messages can vary in the way businesses write, deliver, and manage them. Below, we’ll cover what businesses need to know about dunning emails: what they should include, how and when to send them, and how to raise their chances of a successful payment outcome.
What’s in this article?
- When do you need to send a dunning email?
- Why dunning emails are important
- How to write dunning emails: A step-by-step guide
- Dunning email best practices
- How Stripe can help
When do you need to send a dunning email?
Here are some reasons why a business would send a dunning email:
Failed payment transactions: One of the most common triggers for a dunning email is a failed payment transaction. A failed transaction can happen for a variety of reasons, such as insufficient funds in the customer’s account, expired credit cards, or bank declines.
Expired credit card information: Sometimes, customers forget to update their credit card information. When an old card expires, any recurring payments set up with that card will fail and result in a dunning email to request updated payment information.
Bank declines or authorization issues: Sometimes, banks decline transactions because of suspected fraud, insufficient funds, or when a customer reaches their credit limit. These declines require communication with the customer to resolve the issue.
Payment method errors: Errors in payment method details, such as incorrect account numbers or card verification value (CVV) codes, can lead to transaction failures. In such cases, a dunning email asks the customer to verify and correct their payment information.
Subscription renewals: Businesses with a subscription model often send dunning emails as a reminder for upcoming renewals, especially if they need to confirm payment details or notify customers of any changes in subscription fees.
Technical issues with payment processing: When technical glitches occur, on the business’s end or the payment processor’s end, it can result in failed transactions and require communication with the customer to retry the payment.
Changes in payment terms or policies: If a business updates its payment terms or policies, it may send dunning emails to inform customers of these changes. This is particularly important if the change requires the customer to take action, such as accepting new terms or updating billing information.
Why dunning emails are important
Dunning emails might not seem important at first glance, but they are key to a business’s success. Here’s why:
They recover lost revenue: When a payment fails, that potential revenue is lost. If that happens too often, it can severely harm your bottom line. Implementing effective dunning campaigns can recover a substantial portion of past-due payments.
They prevent involuntary churn: Missed payments often lead to service disruptions or account suspensions, which can result in customer dissatisfaction—and churn. Dunning emails gently remind customers of their outstanding balance and provide accessible instructions to resolve the issue. For example, Chargebee’s smart dunning email strategy recovered more than $75 million in revenue for its customers in 2021. These types of communications save businesses the cost of acquiring new customers while preserving valuable existing relationships.
They improve customer experience: Well-crafted dunning emails can improve the customer experience. With timely and informative messages that provide easy payment options, businesses can avoid unnecessary hurdles and maintain positive customer interactions.
They automate the collection process: By automating dunning emails, businesses can free up valuable staff time for other tasks. Setting up a series of emails with increasing urgency lets businesses handle a large number of past-due accounts effectively, without requiring manual intervention for every case.
They provide a safety net for human error: Sometimes, a missed payment is a simple oversight. Dunning emails are a gentle reminder that prompts customers to rectify the situation before it escalates. This can be particularly helpful for businesses with complex billing systems or those with customers on recurring payment plans.
How to write dunning emails: A step-by-step guide
Here’s what you need to know about writing dunning emails:
Prewriting
Identify and segment: Pinpoint overdue accounts, and categorize them based on factors such as amount, duration of delinquency, and payment history. This helps tailor messages and escalation timelines.
Gather information: Pull up customer details such as contact information, invoice specifics, previous payment attempts, and any prior communication related to the overdue amount.
Choose timing and frequency: Determine the optimal time to send the first email (e.g., early morning, weekdays). Schedule subsequent emails at increasing intervals based on the segment (e.g., 3 days, 7 days, 14 days).
Writing the email
Subject line formula: A simple yet effective formula for writing dunning emails follows this pattern: “[Action Required] - [Invoice/Payment Issue] - [Business Name]” (e.g., “Action Required: Update Payment for [Invoice Number] - [Business Name]”).
Greeting and context: Address the customer by name, and briefly remind them of their relationship with your business.
State the issue: Explain the overdue payment, and include the invoice number, amount, and due date. Focus on facts, and avoid accusatory language.
Urgency and consequences: Highlight the potential impact of nonpayment (late fees, service suspension, account limitations, etc.). Use phrases such as “avoid service interruption” or “update your account to ensure continued access.”
Call to action (CTA): Make it easy for the customer to resolve the issue. Include a visible button or link to their online payment portal or provide alternative payment options.
Offer support and resources: Show empathy and willingness to help. Provide additional support channels such as phone or live chat and relevant resources such as FAQs or payment guides.
Positive closing: Reiterate your value proposition, and express your desire to maintain the relationship. Use phrases such as “We appreciate your business” or “We look forward to resolving this quickly.”
Postwriting
Track and analyze: Monitor email open and click-through rates, payment resolutions, and any customer feedback to refine your dunning strategy and messaging.
Escalation protocol: Define escalation steps for accounts that remain delinquent after the final email. This could involve phone calls, letters, or legal action.
Dunning email best practices
A successful dunning email makes your customer notice and take action. You need to deliver the key information—“Here’s the issue, and here’s what action we need you to take”—while choosing the right combination of how and when. Here are some best practices that can help:
The email itself
Subject line
Clear and concise: State the action required and the business name (e.g., “Action Required: Update Payment for [Invoice Number]”).
Use urgency: Highlight the overdue status without being aggressive (e.g., “Final Notice: Avoid Service Disruption”).
Personalize if possible: Include the customer name or invoice number.
Greeting
Friendly and professional: Address the customer by name, and acknowledge their business.
Avoid generic openings: Go with, “Hi [Customer Name],” and ditch “Dear Customer.”
Body
State the issue: Explain the overdue payment, including amount and due date.
Emphasize consequences: Briefly explain potential impacts such as late fees or service interruption.
Provide multiple solutions: Provide direct and easy ways to make a payment (e.g., online portal, phone call).
Personalize the message: Tailor the tone and content based on delinquency duration and customer history.
Use bullet points or short paragraphs: Keep it scannable to avoid overwhelming the reader.
Call to action
Prominent and clear: Include a strong CTA button or link to the payment portal.
Use action verbs: Encourage immediate action (e.g., “Pay Now” or “Update Payment”).
Closing
Positive and future-oriented: Express appreciation for their business and hope for a quick resolution.
Leave the door open for communication: Provide further assistance if needed.
General tips
Segment your audience: Curate different messages and escalation timelines based on delinquency duration and payment history.
Track and analyze: Monitor email performance, payment resolutions, and customer feedback to fine-tune your strategy.
Automate where possible: Use email scheduling and customer relationship management (CRM) integration for efficiency.
Test and refine: Experiment with different subject lines, CTAs, and messaging to find what works best.
Maintain a professional tone: Avoid accusatory language or aggressive tactics.
Focus on direct communication: Use simple and concise language to avoid confusion.
Here are some best practices about managing dunning emails more holistically:
Pre-email optimization
Early detection: Implement automated systems to identify overdue accounts quickly, allowing for timely intervention before large-scale delinquency occurs.
Data enrichment: Maintain accurate and up-to-date customer data, including preferred communication channels and payment behavior. This helps you personalize and target your outreach.
Segmenting delinquencies: Categorize overdue accounts based on factors such as amount, duration, and reason for nonpayment.
Email optimization
Personalization: Personalize email content based on customer history and preferences, not just names. Use dynamic tags for invoice details, payment options, and personalized greetings.
Automation and scheduling: Automate email sequence triggers based on delinquency milestones. Schedule emails for optimal delivery times and days, considering customer location and time zones.
A/B testing: Continuously test different subject lines, CTAs, and content variations to identify the most effective messaging for your audience.
Multichannel communication: Use a variety of communication channels beyond email, such as SMS or in-app notifications. This captures the large segment of customers—41%, according to Adobe’s 2022 Digital Trends report—who shop on their mobile phones daily or weekly and are more likely to see alerts there. Depending on demographics, other communication methods such as phone calls or postcards may also be useful to recover revenue.
Post-email
Payment tracking and reporting: Monitor email open rates, click-throughs, and payment resolutions to measure campaign effectiveness and identify areas for improvement.
Escalation protocol: Define escalation steps for accounts that remain delinquent after the final email. This could involve phone calls, letters, or legal action, depending on the severity of the case and customer communication history.
Compliance and regulations: Make sure your dunning process adheres to relevant regulations and industry best practices, especially around debt collection and customer communication.
Relationship management
Focus on customer experience: Maintain an empathetic manner in all communications, with the ultimate goal of collecting payment while maintaining positive customer relationships.
Offer support and resources: Provide resources and support channels to help customers quickly resolve their payment issues.
Post-resolution: Send a thank-you message after successful payment, and provide incentives for future timely payments to encourage positive payment behavior.
How Stripe can help
Dunning emails are just one tool at your disposal. Working with Stripe to support payments and billing gives businesses access to valuable customer payment data that can inform a more precise dunning strategy. Stripe also provides built-in features that can reduce the workload on your own team around dunning management. Here’s how Stripe can help:
Data-driven insights
Granular payment data: Stripe provides detailed insights into customer payment history, including failed attempts, preferred payment methods, and past delinquency patterns. This data empowers you to segment customers by risk and tailor dunning strategies accordingly.
Automated reporting: Real-time updates on outstanding payments help you track progress and identify accounts that require immediate attention. This data-driven method allows for proactive intervention and prevents unnecessary escalation.
Streamlined workflows
Smart retries and dunning automation: Stripe automatically retries failed payments based on intelligent algorithms, maximizing success rates without overburdening your team. You can also configure automated email sequences triggered by specific delinquency milestones, saving valuable time and resources.
Easy payment updates: Stripe simplifies the process for customers to update their payment information. Customers can do this within the platform without needing to contact your team, which reduces support workload and accelerates payment resolution.
Customizable controls
Flexible email templates: Design and personalize your dunning emails based on your brand voice and customer segments. Stripe’s platform provides prebuilt templates and customization options for subject lines, content, and CTAs.
Configurable escalation paths: Define your own escalation protocols for persistent delinquencies. Stripe lets you set specific triggers for phone calls, letters, or external debt collection agencies, making sure appropriate action is taken based on the situation.
Beyond these features, Stripe’s secure and scalable infrastructure provides reliable delivery of dunning communications and smooth integration with your billing system. This lets you:
Focus on core business operations: By automating routine tasks and using data insights, you can free up your team to focus on high-value activities.
Maintain positive customer relationships: Precisely targeted and timely dunning communications minimize friction and preserve customer trust.
Maximize revenue recovery: Effective workflows and data-driven strategies lead to improved collection rates and increased cash flow.