6 Dunning Best Practices to Reduce Churn & Boost Revenue Recovery

Key takeaways:

Dunning management is an essential part of reducing churn and improving both user and revenue retention
Dunning processes help you prevent churn due to expired credit cards or other failed payments
Dunning tools like Baremetrics help you identify failed payments before they happen, improving revenue recovery and preventing accidental churn

Churn can undoubtedly limit the growth of a SaaS or subscription business. It’s often much more costly to acquire new customers than retain existing ones, so reducing churn as much as possible is important to scale. Luckily, tackling involuntary churn can be an easy win for many companies.

Dunning is a great, low-effort way to reduce churn, particularly SaaS churn. By proactively identifying and recovering failed customer payments, you can resolve issues before they lead to subscription cancellations. This is essential for maintaining and growing consistent revenue over the long term and inching closer to that dream goal of negative churn.

In this guide, we’ll discuss the importance of dunning and pre-dunning for SaaS companies and give you other tips for implementing an effective dunning process.

Dunning Explained

Dunning is a process used by businesses to recover failed payments from customers. Payments can fail due to insufficient funds, incorrect billing information, an expired credit card, and many other reasons. Dunning involves preventing failed payments beforehand and resolving payment issues after they occur improving churn-based LTV metrics and revenue retention.

Dunning management is particularly important for SaaS companies as one of the primary advantages of a subscription model is recurring revenue. However, failed payments and subsequent involuntary churn can negatively impact monthly recurring revenue (MRR).

How Dunning Reduces Churn & Improves Revenue Recovery

Reducing churn is an important goal for many large SaaS companies and startups. By implementing an effective dunning process, companies can identify failed payments and resolve them before they lead to customer cancellations.

Involuntary churn usually occurs because companies aren’t proactively recovering failed payments. We’ve found that SaaS and subscription companies lose an average of around 9% of monthly recurring revenue (MRR). Dunning is a great way to reduce churn and increase revenue for enterprise companies and startups.

Unsure of how involuntary churn is impacting your SaaS business? Check out our resources on calculating churn and analyzing churn to learn more.

6 Dunning Management Best Practices to Improve Revenue Retention

Ready to use dunning management to identify users at risk for churn and ideally reduce both customer and revenue churn?

1. Perfect Your Pre-Dunning Process

Before we get into tips for optimizing the dunning process itself, there are also ways to prevent the need for dunning, which is often called pre-dunning.

So, what is pre-dunning?

Pre-dunning is a way to warn customers about expiring credit cards and other things that could lead to a failed payment or involuntary churn.

This is an efficient way to reduce churn, as you prevent issues before they occur.

Involuntary churn timeline

Involuntary churn doesn’t happen overnight, but if you’re not paying attention, it can seriously impact your revenue.

We recommend automatically sending customers a heads-up 30 days before their credit card expires so they have plenty of time to update their information.

2. Develop Effective Dunning Emails

Dunning has a bad rap because it’s often implemented with boring and generic email blasts. These emails typically have poor results because they look like spam, and customers won’t take action or even open them.

An effective dunning process requires writing compelling dunning emails that encourage customers to update their payment information. A simple way to do so is by using a tool like Recover. It offers nearly a dozen turn-key templates you can use to craft effective dunning email sequences in just a few clicks. Here is an example of customizable emails in Recover::

Customizable emails in Recover

3. Automate Dunning Emails

Although we recommend customizing dunning emails, sending them can (and should) still be automated. While many credit card processors like Stripe send a limited number of emails, you’ll need more extensive custom email campaigns to build an effective dunning process. This requires automation to scale.

The best approach for recovery is a series of automated dunning emails spaced out during the days and weeks after a failed payment. Recover makes it easy to set up and automate customer email campaigns so you can immediately begin recovering revenue. You can also track the effectiveness of each email to optimize this process even further.

4. Optimize Billing Capture Tools

A simple but often overlooked aspect of dunning is collecting accurate payment information. If there’s any friction when it comes to entering payment information, customers might be slow to provide an update when necessary. You can eliminate many failed payments due to incorrect credit card data by improving your billing capture forms.

Using a tool to customize credit card capture forms to match your company branding can help improve your recovery rate. Combining this with in-app paywalls ensures customers have a seamless payment experience, which can also help reduce failed payments.

5. Track & Use Your Data

Tracking customer and billing metrics is a great way to see if your dunning process works and how it can be improved. For example, an analytics dashboard that tracks metrics such as customer churn and recurring revenue helps you see if you’re trending in the right direction.

User churn dashboard in Baremetrics

User churn dashboard in Baremetrics.

You can also track in-depth information about customers to uncover any failed payments or other transaction issues. And by surveying customers during cancellation, you can discover whether they left voluntarily or because of a simple mistake. These insights allow you to take a data-driven approach to optimizing your dunning process.

6. Use a Dunning Management Tool

Since failed payments can significantly impact MRR, every SaaS and subscription business should use a dunning management tool. This is the best way to ensure you’re taking action to overcome failed payments and involuntary churn.

For example, Baremetrics Recover is an automated dunning solution that goes beyond other dunning management platforms by offering customizable email campaigns, in-app reminders and paywalls, and other tactics for combating failed payments.

Besides Recover, the Baremetrics analytics platform itself allows you to track the results of your dunning efforts as well.

Keep your hard-earned revenue with Recover by Baremetrics.

Keep your hard-earned revenue with Recover by Baremetrics.

Improve Revenue Recovery With Baremetrics

As you can see, dunning is essential for SaaS businesses of all sizes. By following the dunning best practices outlined above, you’ll be able to improve your dunning process, dramatically reduce involuntary churn, and grow your SaaS business.

Baremetrics Recover allows you to put dunning on autopilot reducing both gross and net churn. If you’re already using Baremetrics for analytics, all you have to do is enable Recover in your dashboard to begin recovering revenue. You can then optimize Recover by setting up automated drip campaigns, implementing in-app paywalls, and tracking everything along the way.

Tired of wasting time on spreadsheets? Get a free trial of Baremetrics today!

Expired credit cards shouldn't mean lost customers

FAQ

What is dunning in SaaS and why does it matter for subscription businesses?

Dunning is the process of recovering failed payments from subscribers before those failures result in involuntary churn and lost recurring revenue. In a subscription business, payments fail for predictable reasons: expired credit cards, insufficient funds, or outdated billing information. Left unaddressed, each failed charge quietly erodes MRR without the customer ever making an active decision to cancel. A structured dunning process combines pre-dunning alerts, which warn customers before their card expires, with automated recovery sequences that trigger after a payment fails. For SaaS companies where even a 1% improvement in revenue retention compounds significantly over time, dunning management is one of the highest-return, lowest-effort levers available.
What is the difference between dunning and pre-dunning for subscription businesses?

Dunning and pre-dunning target the same problem, involuntary churn, but they operate at different points in the payment lifecycle. Dunning is reactive: it kicks in after a payment has already failed, using automated emails and in-app reminders to prompt the customer to update their billing information and recover the revenue. Pre-dunning is proactive: it identifies subscribers whose credit cards are approaching expiration and sends a heads-up before any charge is attempted, preventing the failure entirely. For SaaS operators, pre-dunning is generally the higher-value practice because it eliminates friction before it affects MRR, while dunning is the safety net that catches what pre-dunning misses.
How do I measure and reduce involuntary churn caused by failed payments?

Reducing involuntary churn starts with separating payment-failure cancellations from deliberate subscriber cancellations in your churn analytics, because the two problems require completely different responses. Once you can see your failed charge rate and the MRR at risk in real time, you can quantify exactly how much revenue is slipping through without any customer intent to leave. From there, activating an automated dunning process, such as Baremetrics Recover, lets you retry failed payments and trigger a timed sequence of recovery emails and in-app paywalls without any manual intervention. Tracking recovered MRR over time then gives you a direct revenue figure to attach to your dunning efforts, and cohort analysis helps you identify which plan tiers or billing intervals carry the highest payment failure rates so you can prioritise accordingly.
What are the most important dunning best practices for reducing churn in a SaaS business?

The most effective dunning best practices for SaaS companies combine prevention, automation, and data-driven iteration. Start upstream with a pre-dunning process that alerts customers 30 days before their credit card expires, which eliminates a large share of failures before they occur. When payments do fail, an automated email sequence timed across the days and weeks following the failure consistently outperforms a single notification, because it reaches customers at different moments and gives them multiple low-friction paths to update their billing information. Optimising your payment capture forms to reduce input errors removes another common failure source. The dunning process should also be tracked as a revenue metric in its own right: monitoring recovered MRR, failed charge rates, and customer churn trends in a subscription analytics platform lets you continuously improve the process rather than setting it and forgetting it.
What platforms offer automated failed payment recovery for subscription businesses?

Baremetrics Recover is an automated dunning solution built specifically for subscription businesses running on Stripe, Braintree, or Recurly. It goes beyond basic retry logic by combining customisable email sequences, in-app reminders, and paywalls into a single recovery workflow that runs automatically after a payment fails. Because Recover sits inside the Baremetrics platform, recovered MRR flows directly into your subscription analytics dashboard, so you can track the revenue impact of your dunning process alongside your core metrics like MRR, churn rate, and LTV without switching tools. For SaaS founders and finance leads who want to reduce involuntary churn without building a custom dunning procedure from scratch, Recover can be enabled directly from the Baremetrics dashboard with no additional setup required.

6 Dunning Best Practices to Reduce Churn & Boost Revenue Recovery

Table of Contents

Dunning Explained

How Dunning Reduces Churn & Improves Revenue Recovery