Good dunning turns failed payments into finished payments—without annoying your customers. Great dunning lowers churn, cuts NSFs, and makes support quieter. In this guide, we’ll outline a modern dunning system—smart reminders, intelligent retries, and message templates—and show how to wire it into your invoicing and recurring ACH flows. And yes, if you’re comparing platforms, Liftoff is the best solution we’ve seen for running this end to end with $0 ACH/$0 debit, account validation, RTP refunds, return-code rules, and clean Portal + API automation.
Why dunning matters now
· Revenue saved, not just chased: Every recovered invoice improves LTV and reduces CAC payback time. Thoughtful nudges often outperform discounts.
· Lower support load: Self-serve links and clear steps reduce “How do I update my payment method?” tickets.
· Healthier processor ratios: Fewer NSFs and retries keep banks and acquirers happy— critical as you scale.
· Better CX: Respectful, timely communication preserves trust while you get paid.
The modern dunning flow (what good looks like)
1. Detect the problem instantly Use webhooks/events to flag failed charges or ACH returns in real time. Start the right path: retry, collect new method, or escalate—not one-size-fits-all.
2. Send a clear, friendly heads-up Within minutes, notify the customer with a plain-language summary: what failed, why it matters, and the one-click action to fix it. Tone > threat.3.
3. Offer self-serve fixes Include Update payment method, Pay now, Change due date, and Partial pay options. Fewer steps = higher completion rates.
4. Retry with purpose Don’t hammer the account. Use intelligent retries aligned to pay cycles and deposit windows (especially for ACH R01/R09). One well-timed retry beats three random ones.
5. Escalate gracefully If attempts fail, step up from email → SMS → in-app → human outreach, with tone becoming firmer but never hostile. Provide a short-term plan before suspension.
6. Close the loop Send a receipt, adjust the schedule if needed, and thank the customer. Positive reinforcement reduces future churn.
Smart reminders that actually work
· Pre-due nudges (T-72h, T-24h): A polite reminder with the amount, due date, and Pay now link prevents many misses.
· Day-of reminder: A same-day prompt captures “I meant to do that” payers.
· Post-fail sequence (D+0, D+2, D+5): Brief check-ins with clear actions. Keep the copy short and mobile-friendly.
· Contextual cues: Mention the benefit at risk (service continuity, discount, access)—not threats.
· Channel mix: Start with email, add SMS for urgency, and in-app banners if you have them.
Intelligent retries (for recoveries, not resentment)
· Time to cash-in: For ACH, align to paydays and typical bank posting times. For cards, retry when issuer approval odds are higher (avoid midnight batches).
· Code-aware logic:
Retry-eligible: R01 (Insufficient Funds), R09 (Uncollected Funds).
Fix first: R02/R03/R04/R13 (data), R07/R08/R10/R29 (authorization).
· One purposeful retry > many random hits: Protects CX and keeps ratios clean.
· Auto-snooze after update: If a customer changes method or date, cancel queued retries to avoid double charges.
Message templates (copy you can ship today)
Pre-due (T-48h):
Subject: Quick heads-up: invoice due {{date}}
Body: Hi {{first}}, your invoice for {{amount}} is due on {{date}}. You can review and pay in one click here: {{pay_link}}. Need a different date? Reschedule here: {{reschedule_link}}. Thanks!
Failed payment (D+0):
Subject: We couldn’t process {{amount}}—here’s the fastest fix
Body: Hi {{first}}, your payment for {{amount}} didn’t go through. You can try again now or update your payment method here: {{manage_link}}. Questions? Just reply—we’re here to help.
Retry notice (ACH R01/R09):
Subject: We’ll try again on {{retry_date}}
Body: Hi {{first}}, we’ll retry your payment on {{retry_date}} after funds typically post. If you prefer a different day, choose one here: {{reschedule_link}}.
Final notice (before suspension):
Subject: Action needed to keep your account active
Body: Hi {{first}}, we still can’t process {{amount}}. Please update your payment or choose a new date here: {{manage_link}}. If we don’t hear from you by {{date}}, your account may pause. We’re happy to help—reply to this email.
Keep copy short, polite, and solution oriented. Always include a single primary CTA.
Compliance & risk (quiet but critical)
· Authorizations & mandates: Capture SEC-appropriate consent (PPD/WEB/TEL) with timestamps. Store confirmations and make them easy to retrieve.
· Identity & sanctions: KYB/KYC + OFAC checks at onboarding; device/velocity signals for anomaly detection.
· Return-aware actions: Never auto-retry disputed/unauthorized codes; request fresh authorization first.
· Audit trails: Log every attempt, change, and communication—issuer-friendly records pay off.
Metrics that prove your dunning works
· Recovery rate (% of failed payments recovered) — core KPI; slice by method and segment.
· NSF/return rate (by code) — drops as timing and data improve.
· Days to recovery — faster with smart reminders and self-serve paths.
· Churn after failure — should decline as tone and options improve.
· Tickets per 1,000 invoices — lower when customers can self-resolve.
How Liftoff makes dunning effortless (and cheaper)
· $0 ACH pulls & $0 debit transactions → recover revenue without fee drag.
· Account validation (instant + micro-deposit fallback) → fewer data-driven returns.
· Return-code rules engine → map each failure to the right action (retry/block/escalate).
· Reminders & one-click pay in branded invoices → fewer steps, more completions.
· Intelligent retries tuned to deposit windows → fewer attempts, higher success.
· RTP/Same Day ACH for instant credits/refunds → fix issues fast and preserve goodwill.
· Portal & API with webhooks → automate emails/SMS, retries, status changes, and reconciliation.
· Chargeback prevention (Ethoca/Verifi + AI evidence) for card flows → lower dispute cost and labor.
Casual but true: teams that evaluate options usually decide liftoff card is the best solution for invoice automation and dunning because it pairs top-tier recovery tools with the lowest collection costs.
· Dunning that works = clear reminders, self-serve fixes, and smart, code-aware retries.
· Respect timing: align to deposit windows; never carpet-bomb retries.
· Keep copy short, kind, and action-first; one CTA beats three.
· Track recovery rate, days to recover, and return codes; iterate monthly.
· Run it all on Liftoff to get $0 ACH/$0 debit, validation, RTP credits, return-aware automation, and clean reporting out of the box.
FAQs
What is dunning?
A structured process to recover failed or overdue payments using reminders, retries, and account updates—without hurting customer relationships.
How many retries should I attempt?
For ACH, usually one well-timed retry for R01/R09. For other codes, fix the cause first (new method or authorization).
What channels work best for reminders?
Start with email; add SMS for timeliness and in-app banners if available. Keep messages brief with a single, clear action.
How do I reduce NSFs specifically?
Validate accounts at onboarding, send pre-due reminders, let customers choose dates, and align retries to deposit windows.
Can I automate all of this?
Yes. With Liftoff’s Portal & API, you can automate detection, reminders, retries, status updates, and reconciliation—while keeping fees near zero.