When managing a subscription-based business, it is important for companies to maintain a steady cash flow through easy payments. However, there are times when payments fail for reasons like credit card expiration, low funds, or customers simply forgetting to pay. That’s where dunning emails come in.
It works as a gentle reminder for your customers when there’s an issue with their payment. These emails nudge customers to update their billing information or complete a missed payment.
In this guide, we’ll explore dunning emails and discuss how you can use them to collect overdue payments, resulting in a win-win situation for both customers and businesses.
What are dunning emails?
Dunning emails are messages sent to customers to remind them about a failed payment or an issue with their payment method, often related to subscription services or recurring billing models.
Its main goal is to encourage customers to update their payment details or complete pending transactions to prevent service interruption for customers and revenue loss for companies. This is what a dunning email looks like.
Why are dunning emails important?
Dunning emails are more than just reminders. They help to inform and retain customers ensuring financial stability in subscription-based models. Here’s how they help:
1. Reduce involuntary churn: Involuntary churn occurs when businesses lose customers due to payment failures. By promptly notifying customers of failed payments and helping them resolve the issue, businesses can prevent customers from involuntarily churning and losing their services.
2. Improve revenue recovery: Failed payments lead to loss of revenue. By helping customers to resolve payment issues and paying overdue amount, business can increase their monthly recurring revenue and a large portion of otherwise lost sales.
3. Maintain cash flow stability: Regular dunning emails help maintain cash flow stability by ensuring that businesses can collect their subscription fees without interruption and on time.
4. Prevent the risk of service interruptions: Businesses can prevent service disruptions by informing customers of payment issues before their subscriptions expire. This helps them deliver a positive customer experience and reinforces the value of their service.
When should you send dunning emails?
You should consider sending dunning emails to a customer in the following scenarios.
1. Subscription renewal: When there is an upcoming subscription renewal, you must send dunning emails as a reminder of the upcoming payment and to prevent the likelihood of declined payments.
2. Failed payments: When a payment fails, sending a dunning email providing customers with the necessary details to resolve the issue is important. Always include the unpaid invoice, a direct payment link, and alternative payment methods for the customer’s convenience.
3. Expired billing information: If the billing information of customers has expired, you must send a dunning email to remind them to update their payment details so they can update it and resolve the issue from their end.
4. Final notice for outstanding payments: You can send dunning emails as final notice emails to inform customers about the urgency of the situation and urge them to take prompt action before you discontinue your services.
What to include in your dunning emails
To write an effective dunning email, make sure you include the following details:
1. Purpose of the email: Start the email by mentioning the reason why you are reaching out, such as low funds or expired payment details. This helps to set the context of the email for customers.
2. Due amount and due date: Specify the total amount and original due date to encourage customers to take action on or before time.
3. CTA: Include a clear CTA that allows customers to go directly to the payment page and make their payment as soon as possible. Use phrases like “Pay Now" or "Act Now to Avoid Late Fees."
4. Payment options: Specify the payment options they can opt for, including a payment link and payment plans you offer.
5. Support information: Include the contact information of your support team so that the customers can reach out to them for any concerns or queries that they might have.
Dunning email templates you can use
Here are a few dunning email templates that you can use for different scenarios:
1. Upcoming invoice due reminder with payment terms
Subject: Reminder: Your Invoice [#Invoice Number] is Due Soon
Hi [Customer's Name],
This is a friendly reminder that your invoice [#Invoice Number] of [Invoice Amount] is due on [Due Date]. We appreciate your timely payment to ensure uninterrupted service.
Payment Terms:
- Due Date: [Due Date]
- Payment Method: [Accepted Payment Methods]
You can make the payment through this [payment link]. If you have any questions or need assistance, feel free to reach out.
Thank you for your continued support!
[Company Name]
2. Overdue invoice reminder
Subject: Action Required: Overdue Invoice [#Invoice Number]
Hi [Customer's Name],
We noticed that your invoice [#Invoice Number] for [Invoice Amount] is past due date. The payment was due on [Due Date], and we would appreciate it if you could settle the payment at your earliest convenience.
To make things easier, you can complete the payment here: [payment link].
If you have already processed the payment, please disregard this message. For any questions, feel free to contact us.
Thank you for your prompt attention to this matter.
[Company Name]
3. Payment failure
Subject: Payment Failure for Invoice [#Invoice Number]
Hi [Customer's Name],
We attempted to process your payment for invoice [#Invoice Number], but unfortunately, the transaction did not go through.
Please update your payment information or try making the payment again through this [payment link].
If you need any assistance or have any concerns, please don't hesitate to contact us.
Thank you for your cooperation.
[Company Name]
4. Account suspension warning
Subject: Urgent: Your Account May Be Suspended
Hi [Customer's Name],
We have noticed that your invoice [#Invoice Number] remains unpaid despite our previous reminders. As a result, your account is at risk of suspension if the outstanding balance is not cleared by [Final Deadline Date].
To avoid any disruption to your services, please make the payment here: [payment link].
If you have any concerns or need assistance, please contact us before the suspension date to discuss your options.
We value your business and hope to continue serving you.
[Company Name]
Examples of dunning emails from popular brands
Dunning emails are used by popular brands as well for payment recovery. Let’s have a look at how they are doing it with dunning emails.
1. Zyte
This email from Zyte addresses the recipient by name and clearly states the issue—an expired payment method, prompting immediate attention from the recipient. It also clearly states which payment method was being used when it failed. It ends the email on a warm and friendly tone, softening the reminder.
2. Spotify
This email from Spotify addresses payment failure and iterates that Spotify will attempt to charge payment over the next few days, informing users of the next steps. It includes an “Update Details” CTA to help them update their payment information as well. The email copy also is on point and concise.
3. Private Internet Access
This email emphasizes on paying the overdue amount. This creates a sense of urgency, prompting the customer to address the issue immediately. It also provides the customer with detailed instructions on how to complete the payment. Additionally, it also contains the link to contact customer support if required.
How to create dunning emails
For creating automated dunning emails, you can use an ESP that allows you to set up email automation. Mailmodo, for instance, is an ESP that allows you to set up automated emails to simplify payment recovery. By setting up a series of emails based on different triggers, you can consistently send dunning emails without manual intervention.
You can set up an email sequence depending on triggers such as payment due date, payment overdue, payment reminder, reminder for account suspension warning, and account suspension.
To learn more about setting up email automation, refer to the guide below.
Set up your automated dunning email today
Conclusion
Dunning emails are the most effective way of getting payments quickly and help to maintain good customer relationships. Make sure to automate your dunning emails to make the most out of them. Always remember that clear communication and personalization are extremely important to ensure your customers respond to your emails and help you recover potentially lost sales.
