What is dunning?

Dunning is a way for companies to remind customers of bills and debts they still owe automatically. Some other names for this process are debt collection or credit control. It can include more than just writing emails; it can also include calling customers.

The dunning method is used in accounting to keep track of and proactively manage accounts receivable so that more money is guaranteed. You might need to send account notices or call people whose bills haven’t been paid yet.

In billing processes, dunning helps businesses keep track of their cash flow by ensuring customers pay as much as possible on time. It means reminding customers of their unpaid bills daily and ensuring they pay on time.

The point of dunning in both situations is to ensure the customer knows how much they owe and push them to pay it off as soon as possible.

Most businesses handle the dunning process so that it can be done quickly, correctly, and with little human effort. Automated dunning systems take care of customers who still owe money and tell them to make timely payments.

Synonyms

• Collections Process: A process for reminding customers about their unpaid balances and collecting payments.
• Credit Control: controlling a company’s credit-based transactions with customers to ensure that all debts are paid on time.
• Debt Collection: A process of contacting customers who have outstanding debt and negotiating payment arrangements.
• Dunning Process: Reminding customers about their unpaid balances and collecting payments.
• Payment Collections: Collecting payments from customers for outstanding payments.

The process of dunning

There are six main steps to the dunning process:

• The accounting or billing team keeps track of customer information, such as current and past invoices.
• This information is then used to send automated messages to customers who still owe money.
• A dunning letter is sent to customers to tell them the amount they still owe and ask them to pay it on time.
• If the buyer doesn’t answer the dunning letter, an accounts receivable or collections agent calls or emails them. Someone will also contact the customer if they have any problems with their payment or can’t make a full payment. After that, the worker will devise a reasonable payment plan with the customer.
• If payments aren’t made for too long, the group that issued the debt may hire a debt collection agency to get the money back.
• A business can update its records and close the accounts outstanding once it has received payment from its customers.

Advantages of a Good Dunning Process

A suitable dunning method makes it easy for businesses to close their books, increase their cash flow, and spend less time managing their accounts receivable.

Making sure that all bills are paid on time also helps businesses keep good relationships with their customers. Customer happiness and loyalty can increase if they know they will be reminded when payments are due.

Increase the number of people you keep (discuss at-risk customers and customer churn).

A 5% rise in customer engagement can bring in 25–95% more money for a business. Plus, it costs six to seven times more to get a new customer than to keep an old one.

Companies can keep customers who are about to leave if they have an excellent dunning process in place. Companies can handle customer debt and keep customers behind on payments by regularly reminding them about their balances.

Don’t let payments fail.

Involuntary churn, or “involuntary customer turnover,” is when the source cancels a customer’s service or subscription because they didn’t pay.

It happens when payment methods stop working, expire, or are removed from the account without notice.

Several things that are different from company to company can cause this to happen.

• The business might not accept the way the customer wants to pay. This often happens when you pay with a credit card, a foreign transfer, or a payment service like PayPal.
• The payment information might not be correct or up-to-date. This can lead to failed payment attempts if customers forget to update their billing information or change their credit card numbers without telling the business.
• A payment fell through the cracks because of a mistake in accounting or management (revenue leaks). This happens often in places where hand or payment rounds for billing clients aren’t regular.

An automatic dunning process can reduce the risk of failed payments and forced churn.

Companies can make sure that no payments are missed by sending regular messages to customers to make sure that they update their payment information on time.

Getting to know customers better

Companies can choose how often they talk to their customers by using dunning levels, which are rules for how often customers are called when payments are due.

This helps customers know when to pay without getting too many emails or texts.

It also lets businesses change the words and tone of different dunning levels to fit the needs of each customer. For example, they can clarify to customers what their payment terms are and how much they will be charged for being late.

Dunning letters also give customers practical payment details, like when and how much they owe and how to contact the accounts receivable team.

Best Practices for Management by Dunning

Companies that handle bills for clients and customers should follow all laws and rules, keep good relationships with customers, and make as much money as possible.

To reach these goals, businesses should think about the following best practices for dunning management:

Cut down on failed transactions

One of the easiest and fastest ways to improve churn in a company is to cut down on forced churn.

A study from Recurly found that the average rate of customer loss is 5.57 percent. The average rate of forced turnover is 1.98% of that.

Companies can lower the number of employees who leave without their permission by using an automatic dunning system to ensure that payment information is always correct, and all bills are paid on time.

For subscription-based businesses, the cancellation process should also be automated so customers can quickly end their services on time without calling the business directly.

Set up automated dunning emails.

Dunning emails are an excellent way to tell customers when they need to pay and give them the information they need.

When you set up email themes, keep these things in mind:

• Set up alerts or notes to let customers know when payments are late or don’t go through.
• Include the due amount, date, and how to reach customer service.
• Make sure the email is clear and professional.
• Make it clear what fees or fines you will face for paying late.
• Attach payment choices that are safe and easy for customers to use to your emails.

Dunning levels let you set schedules based on a customer’s payment history. Customer segmentation lets you make texts unique for each customer.

By automating dunning emails, businesses can ensure that all customers get timely reminders and lower the risk of unpaid bills.

Automate the process of collecting accounts.

The billing and collection process is sped up by automating the accounts payable process.

It lets businesses set payment terms, send repetitive emails automatically, keep track of payments in real-time, quickly and correctly change customer information, and make reports for financial analysis.

Using today’s technology, about half of accounting tasks can be automated. An excellent place to start is with accounts payable tasks like collecting owed money and matching up customer payments.

Send the Right Message

When you email or write a letter to a customer to dunno them, make sure the message grabs their attention without turning them off.

• Don’t use accusatory language. Instead, talk about how valuable it is to inform the customer of their payment due date.
• Be sure to give customers clear directions on changing their payment information or paying online.
• Let your buyers know they can talk to your accounts receivable team if they need help or have questions.

The same goes for phone calls you make by hand: be polite, friendly, and professional. If a customer is consistently or wildly late on payments, try to talk to them about it in a way that shows care and understanding.

Make things better for your customers.

Any business needs to make sure their customers have a good experience. People are more likely to pay their bills on time and keep doing business with a company if treated with respect and kindness.

Businesses need to focus on the customer to make things better for everyone. For example, they could set up a customer payment gate so that customers can handle their accounts, see their invoices, and pay. Ensure that customer service reps are well-trained and have the proper knowledge and skills to answer payment questions and provide helpful reminders and messages.

They offer discounts to customers who pay on time or use their chosen payment method.

Companies can lower the number of customers who leave without their choice and improve the bond between the company and the customer by improving the customer experience.

Automated dunning with software for billing

Billing software is business software that makes bills and collecting money easier. It can make, send, and track invoices, keep track of payments, monitor customer accounts, send follow-up emails, make income reports, and connect to accounting systems.

Billing platforms let users pay, and most accept many different payment methods. This makes it easier to get late payments paid.

Companies that charge customers a monthly fee should also use software to manage their different billing plans, prices, and client data.