You can't improve what you don't measure. Payment recovery has specific metrics that tell you whether your dunning is working and where to focus optimization efforts.
This guide covers the essential metrics, how to calculate them, benchmarks to aim for, and how to use data to improve.
The core metrics
1. Payment failure rate
What percentage of payment attempts fail?
Payment Failure Rate = Failed Payments / Total Payment Attempts × 100
Example: 70 failures out of 1,000 attempts = 7% failure rate
Benchmarks:
- Below 5%: Good
- 5-8%: Average
- Above 8%: Needs attention
Why it matters: This is your exposure. Higher failure rate = more recovery work needed. If this number is climbing, investigate root causes.
2. Recovery rate
What percentage of failed payments do you recover?
Recovery Rate = Recovered Payments / Failed Payments × 100
Example: Recovered 49 out of 70 failures = 70% recovery rate
Benchmarks:
- Below 40%: Poor — basic or no dunning
- 40-55%: Average — simple dunning in place
- 55-70%: Good — optimized dunning
- Above 70%: Excellent — best-in-class
Why it matters: This is your dunning effectiveness. The gap between your current rate and best-in-class is recoverable revenue.
3. Net loss rate
What percentage of payment attempts ultimately fail after all recovery efforts?
Net Loss Rate = (Failed Payments - Recovered Payments) / Total Attempts × 100
Example: (70 - 49) / 1,000 = 2.1% net loss
Why it matters: This is your actual involuntary churn rate from payment issues. Combines failure rate and recovery rate into one bottom-line number.
4. Recovered MRR
How much monthly recurring revenue did dunning save?
Recovered MRR = Sum of MRR from all recovered payments
Example: 49 recovered customers × $75 average MRR = $3,675 recovered MRR
Why it matters: This is the dollar value of your dunning. Use it to justify investment in recovery tools and optimization.
5. Lost MRR to involuntary churn
How much MRR was lost despite recovery efforts?
Lost MRR = Sum of MRR from unrecovered failures
Example: 21 unrecovered × $75 = $1,575 lost MRR
Why it matters: This is your opportunity cost. Better recovery would capture some or all of this.
Breaking down recovery
Recovery by failure type
Not all failures recover equally. Track separately:
Soft declines (insufficient funds, temporary errors):
- Typically recover at 60-75%
- Multiple retries are appropriate
- Timing optimization matters most
Hard declines (expired card, invalid):
- Typically recover at 40-55%
- No point retrying — customer must act
- Dunning message quality matters most
If your soft decline recovery is below 60%, focus on retry timing. If hard decline recovery is low, focus on email/SMS effectiveness.
Recovery by channel
What's driving recovery?
Track:
- Auto-retry recovery: Payments that succeeded on retry without customer action
- Email-driven recovery: Customer clicked email link and updated
- SMS-driven recovery: Customer clicked SMS link and updated
- Organic recovery: Customer updated on their own (no attributed touchpoint)
Example analysis:
- Total recovered: 49
- Auto-retry: 20 (41%)
- Email: 15 (31%)
- SMS: 10 (20%)
- Organic: 4 (8%)
This tells you SMS is driving 20% of recovery. If you're not using SMS, you're leaving money on the table.
Recovery by sequence day
When do recoveries happen?
Track what day of the dunning sequence each recovery occurs:
| Day | Recoveries | % of Total |
|---|---|---|
| 0 (auto-retry) | 15 | 31% |
| 1-2 | 12 | 24% |
| 3-4 | 10 | 20% |
| 5-6 | 7 | 14% |
| 7+ | 5 | 11% |
Insights:
- Early days have highest recovery — speed matters
- If day 5-6 has a spike, urgency messaging is working
- If day 7+ is significant, your grace period length is justified
Recovery by customer segment
Different customers recover differently:
By price tier:
- Enterprise ($500+/mo): Often 70%+ recovery
- Mid-market ($100-500/mo): 60-70% recovery
- SMB ($20-100/mo): 50-60% recovery
By tenure:
- < 6 months: Lower recovery (less invested)
- 6-24 months: Higher recovery
- 24+ months: Highest recovery (loyal customers)
By failure history:
- First-time failure: Higher recovery
- Repeat failure: Lower recovery (chronic issues)
Use segments to prioritize or personalize. Maybe enterprise customers get a phone call, not just emails.
Email and SMS metrics
Track engagement at each touchpoint:
Email metrics
For each email in your sequence:
| Sent | Opens | Open Rate | Clicks | Click Rate | |
|---|---|---|---|---|---|
| #1 | 70 | 35 | 50% | 14 | 20% |
| #2 | 45 | 20 | 44% | 8 | 18% |
| #3 | 30 | 18 | 60% | 9 | 30% |
| #4 | 21 | 14 | 67% | 7 | 33% |
Insights:
- Open rates increase as urgency increases (expected)
- Click rate also increases — urgency drives action
- If email #2 has a drop, test different subject line
SMS metrics
- Delivery rate: Are messages reaching phones? (Should be >95%)
- Click rate: Are recipients clicking? (10-25% is good for dunning SMS)
- Opt-out rate: Are you annoying people? (Keep below 2%)
ROI calculation
Is your dunning investment paying off?
Dunning ROI = (Recovered MRR × 12 - Annual Dunning Cost) / Annual Dunning Cost × 100
Example:
- Monthly recovered MRR: $3,675
- Annual recovered: $44,100
- Dunning tool cost: $200/month = $2,400/year
- ROI: ($44,100 - $2,400) / $2,400 = 1,737%
Even at modest recovery rates, dunning tools have enormous ROI.
For DIY dunning, factor in engineering time. If 40 hours of engineering at $150/hour = $6,000, plus ongoing maintenance, the ROI calculation changes.
Setting goals
Based on benchmarks, set realistic improvement targets:
| Current Rate | 3-Month Goal | 6-Month Goal |
|---|---|---|
| 35% | 45% | 55% |
| 45% | 55% | 60% |
| 55% | 62% | 68% |
| 65% | 70% | 73% |
The first 10-15 points of improvement are easiest (add SMS, optimize timing). Above 65%, gains are incremental (personalization, A/B testing).
Building a dashboard
For ongoing monitoring, track:
Daily:
- New failures today
- Recoveries today
- Current recovery rate (rolling 30 days)
Weekly:
- Failure rate trend
- Recovery rate by day of sequence
- Channel performance
Monthly:
- Total recovered MRR
- Lost MRR to involuntary churn
- Recovery rate by segment
- ROI calculation
Quarterly:
- Trend analysis
- Benchmark comparison
- Strategy adjustment
Using data to improve
When metrics reveal problems:
Low open rates? → Test subject lines → Check email deliverability → Try different send times
Low click rates? → Improve CTA visibility → Simplify the message → Make the value proposition clearer
Low SMS recovery? → Check delivery rates → Test message content → Verify links work on mobile
Declining recovery rate? → Check if failure mix changed (more hard declines?) → Review recent changes to sequence → Audit email/SMS deliverability
High failure rate? → Implement pre-dunning → Enable card updater → Review billing timing
Data-driven iteration separates good dunning from great dunning. Measure, hypothesize, test, repeat.