Failed payment rate shows how much of the money you bill does not arrive on the first try.

It matters because a failed charge becomes lost revenue unless you collect it later.

Every failed charge is a customer who meant to keep paying and, for now, has not. Some of those charges are collected on a retry or after the customer updates the card. The rest become involuntary churn.

Failed payment rate is the size of the problem before any recovery, so it tells you how much work your retries and reminders have to do. It also grows with the business: if the rate holds while MRR doubles, the dollars at risk double too.

Divide the charges that failed by all the charges you attempted.

failed payment rate = charges that failed on the first attempt ÷ charges attempted × 100
revenue at risk = value of the charges that failed

Count first attempts only. A charge that fails and then fails twice more on retries is one failed payment, not three. Work the rate out by count and by value, because a few large annual invoices can matter more than many small monthly ones.

If none of those payments were ever collected and the rate held, $9,000 a month would add up to $108,000 over a year. How much of it you win back is your payment recovery rate.

You lower it by catching bad cards early and charging cards that are ready.

• Check the card before the trial starts. An authorization at signup turns away a card that cannot cover the price, instead of letting it fail at the first charge weeks later.
• Keep stored card details current. Card updater services, offered through most billing systems, pass new expiry dates and reissued card numbers to you before you charge.
• Warn customers before a large renewal. An email a week before an annual charge gives the customer time to update the card or move funds.
• Read the decline reasons. Each failure comes back with a reason, such as insufficient funds, an expired card or suspected fraud, and each reason has a different fix.

1Capture works on the first charge after a free trial. It authorizes the full first payment when the trial starts, so a card that cannot cover the price is declined at signup, and it collects the payment in the last two hours of the trial with up to 10 retries if the charge fails. See payment capture.

These mistakes hide how many payments really fail.

• Counting retries as new failures. One charge that fails three times is one failed payment. Counting every attempt inflates the rate.
• Reporting only what was finally lost. The share you never collect is involuntary churn. Failed payment rate is the step before it, and you need both.
• Mixing first charges and renewals. A first charge after a trial and a renewal for a two-year customer fail for different reasons. Track them apart.
• Looking only at counts. Measure the value of failed charges too, since a few annual plans can outweigh many monthly ones.