Writing Effective Dunning Letters: Tips & Tricks To Get Results

From the subject line to the necessary call to action, writing effective dunning letters is crucial to your business for a couple of reasons. Without a dunning process you risk involuntary churn and a loss of revenue. And without a strategically thought out process and carefully worded message, you even risk losing a customer (and possibly their referrals).

In this blog we’ll review some basics about the dunning process and offer 8 tips for writing effective dunning letters–the kind that nudge the customer to promptly make a payment and feel good about you as a supplier while doing so.

Why Do Dunning?

Dunning is methodically communicating with your customers to make sure they remit payment. The written communication can be sent through the postal system or via email. In either case, a dunning letter is not to be confused with the letter that accompanies an invoice or a payment notice. After several attempts on your part to reprocess the payment, dunning letters are sent to ask customers to pay because their account is past due.

Keep in mind, a failed payment may not always be the customer’s fault. Customer accounts can become delinquent for a number of reasons. Maybe there was a problem within your own system. Or the customer’s credit card company automatically declined it because of suspected fraud. Here are some additional common reasons:

• The customer forgot to cut a check and it truly is “in the mail.”
• The customer reached their credit limit for the day or month.
• The customer reported the credit card as lost or stolen.
• The customer got a new card and neglected to inform you.
• The credit card expired.

As you can see, most of the reasons are connected to credit card issues which leads us to the question of pre-dunning–which is when you alert a customer that their credit card is nearing its expiration date. Pre-dunning used to be a best practice, but now many payment service providers update credit card information behind the scenes. If so, a notice from you is unnecessary and can send a false alarm which can be annoying at the least. However, because not every card gets updated automatically, you may still want to send a friendly reminder to ensure timely payments.

Whatever the reason, once an account is past due, the dunning process must begin. But it doesn’t have to be a dreaded task, especially if you follow these tips.

8 Tips for Writing Dunning Letters that Get Results

Believe it or not, you can write effective dunning letters that recover the debts you’re owed and turn the whole process into a positive experience for you and your customer as well. Although most of the tips below are geared toward emails, the principles work for mailed letters too.

1) Readjust Your Attitude About Dunning 

Whether you call it debt collection or payment recovery, dunning is not a dirty word. Effective dunning letters start from a place of empathy and a genuine desire to help your customer. Having this attitude from the outset will keep the task of writing dunning messages from being awkward or unpleasant. Even though your goal is to collect on the past due account, it doesn’t mean your letter needs to be cold and all business. Remember your overall objective is to keep that customer–and not engender any negative feelings in the process.

Begin by reminding yourself of three things. First, it’s very likely that the customer isn’t even aware of the problem. Second, think of all the possible explanations for the failed payment. This way you’ll avoid blaming the customer and communicate a spirit of collaboration. Reading the letter, your customer should sense you want to work with them, not point a finger at them. And third, the dunning letter is an opportunity for revenue, much like a sales call, so treat the customer the way you would a prospect, not a debtor.

2) Set the Stage with Your Subject Line

Like any subject line, the goal is to get the recipient to open the email. It must stand out and catch your customer’s attention. Words like “failed” or “declined” will get an immediate reaction. Add a phrase like “Action required.” This may seem like you’re being aggressive, but you’re pointing to the importance of the email–it’s not just a notification. This email requires your customer to respond.

At the same time, you don’t want to make them think your email is a scam or phishing attempt. 

Give the subject line credibility by including your company name and try your best to make the tone align with your brand.

3) Send Emails from a Real Sender

Coming up with a great subject line may be challenging, but this next tip should be easy to implement. You should send dunning letters from a real person. The sender’s name needs to be human and recognizable, like the name of someone who works on your accounting or customer support team. When a customer sees a specific and possibly familiar name, they feel like they can trust the email and are more likely to open it.

Also, it needs to come from an active account that gets checked because customers sometimes reply. That means no dummy accounts or NoReply as the sender.

4) Choose a Friendly Yet Professional Tone

As you write the dunning letter, think about how you would feel if you were on the receiving end of it. Your choice of words will convey either a threatening tone or a cooperative one. You want the latter. For example, “Your payment was declined” sounds accusatory, whereas “We tried several times to charge the card we have on file, but weren’t successful” doesn’t. It’s a subtle difference, but an important one.

5) Keep it Short and Simple

Compose a letter that’s brief and on point. The letter should explain why you’re writing–the payment failed–and tell them what to do next in about 100 words or less. A short letter has a singular focus and gives a sense of urgency. Here’s what to include:

• The problem–The customer’s payment failed or didn’t arrive.
• Possible reasons–A list of common causes for failed payments.
• Payment retry date–This shows you’ve made an effort to collect more than once.
• Dunning charge–Include any late payment fees.
• Further instructions–Include a link so the customer can easily update their information.
• An easy way to respond–A clearly displayed “Reply” button or phone number to customer support.

6) Remember Only One Call to Action

You’re writing the dunning letter for only one reason, so make sure you communicate that reason and emphasize it with one straightforward call to action. Resist the urge to include messages about following your business on social media or checking out your latest blog.

7) Make Sure It's Easy to Pay

Dunning emails that require the customer to sign in, remember a password, click multiple times, and locate their account information can be just enough hassle that the customer doesn’t complete the call to action. That’s why it’s important to ensure that the task of making payment or updating credit card information is simple and convenient.

Rather than put your customers through an obstacle course, make the process easy. Provide a direct payment update link in the email.

8) It's Okay to Add Some Personality

The most effective dunning letters will be professional but still fit within your brand’s personality. If your brand uses humor, a lighter tone is appropriate. Don’t be afraid to veer just a bit from the standard debt collection letter.

How Many Dunning Letters Do You Need to Send?

As you improve the effectiveness of your dunning process, you should see a decrease in the number of letters you are sending. But accept the fact that you will probably be sending multiple emails. 

Some customers will respond to the first one. Others will need another email. Another is the key word here. Subsequent emails should not be the same email word for word. As the account ages, the emails need to convey more urgency.

Let Customers Know About Your Grace Period

Grace periods can create positive feelings about your company and improve your customer retention rate. So instead of suddenly cutting off your customer’s access to your services, give customers a chance to fix their payment situation. Be transparent about the deadline and other details of your grace period policy. 

What to Do When Dunning Emails Don’t Get Any Response

No matter how personal, professional, friendly, short, simple and compelling your dunning emails are, you’re going to have some customers that simply don’t respond–for any number of reasons. Once they’ve reached the end of the grace period, you’ll need to send a final email letting them know that they no longer will have access to your services. Sometimes this is the letter that finally gets a result.

Payference Can Write Effective Dunning Letters For You

Writing effective dunning letters is easier if you follow the tips we suggested, but it’s still a task that some AR teams don’t want or have time to do. The good news is that Payference has templates built into the platform and automates the dunning process for you. If you’d like to learn more about powerful ways an AI-driven cash management tool can transform your accounts receivable, why not set up a short demo?