Recurring Payment Guide: Why You Need Recurring Bill Payments For Your Business
Do you need to learn how to set up a recurring payment for goods and services?
If you’re a curious and inventive small business owner who is looking to increase sales and lock in a steady revenue stream through recurring payments, this post is for you. We’re going to show you how recurring billing helps you offer more to your customers while doing less while introducing you to the best credit card processing companies for recurring payments. Let’s get started.
Table of Contents
What Is A Recurring Payment?
A recurring payment is an automatic charge to a customer’s credit card or bank account to pay for goods or services on an ongoing basis. The merchant must enable this option in the payment flow, and the customer must agree to the ongoing charge.
How Do Recurring Payments Work?
Recurring payments are quite simple to understand. Instead of making a one-time purchase of goods or services, the customer signs up for a subscription where products or services are delivered or provided on a recurring schedule.
To establish a subscription, the consumer needs to provide a credit card so that it can be saved as a card on file. In establishing a card on file with a recurring payment, the customer authorizes both the initial payment and all subsequent payments as well.
Most subscriptions are open-ended, meaning that the consumer is charged indefinitely until the subscription is either canceled or the submitted card on file is no longer valid.
You can choose from different types of companies to make this all happen including:
- Payment gateway: You can sign up for a payment gateway to process payments securely online (e.g., Authorize.net), but often you’ll find the payment gateway part covered with a merchant account or third-party processor that specializes in eCommerce. As far as how much it costs, it can vary. Sometimes you’ll pay an additional fee, and sometimes it is included for no monthly fee. Yes, there is quite a lot of variability here among the best payment gateway providers for online businesses.
- All-in-one payment processors: Shopify, Square, Braintree, and Stripe all provide recurring billing and tools for the subscription company within their payment processing platforms. Shopify and Square offer that “out-of-the-box” solution that comes equipped with site templates and lots of extra goodies included, too.
- Accounting software: Accounting software is best for those looking for a bare-bones solution to replace wasteful paper billing. With QuickBooks and FreshBooks, for example, you can automatically send your customer an invoice for payment.
- Subscription management platform: Services like Recurly and Chargebee are subscription management platforms that work between the merchant and the payment gateway to manage all of those issues that are unique to subscription businesses. They typically can handle cancelations, customer card issues, change or adjustments to the subscription, and more. These types of platforms can be relatively pricey, however, and may be more suitable for an enterprise or larger volume businesses.
How Do You Implement Recurring Billing?
You’ll need to choose one of the options listed above and enable the frequency of recurring payments depending on what you offer your customer. To implement recurring billing, your specific next steps will vary depending on the channel you go with.
You may be…
- adding a hosted payment page to your existing web presence via code to your site if you have the technical ability
- integrating with a payment gateway (e.g., Authorize.net) to your site
- adding a subscription management service like Recurly to your existing merchant account
- setting up ACH recurring payments through your payment processor
- enabling recurring payment options at the backend of your payment processor’s dashboard
If you opt for a multi-channel and all-in-one option like Square, it’s just a matter of toggling the option to offer recurring billing in your dashboard to allow customers to approve the recurring option at checkout.
Square has recurring billing and invoices with several flexible options through this platform.
What Kinds Of Businesses Benefit From Recurring Payments?
More businesses than you think are still relying on one-off invoices and paper billing. What can a recurring payment mean for you? We’ll get into the advantages in the next section. First, here are a few types of businesses that automatic recurring monthly payments can make a lot of sense to implement:
- Lessons and tutoring
- Health and wellness
- Food and drink
- Household essential items
- House cleaning services
- Apps and SaaS companies
- Cosmetics and perfume
- Wardrobe and accessories
- Coaching and consulting
- Agencies (e.g., marketing)
- Crafting and art
- Gaming and collectibles
We’ve all heard of wine clubs and snack box delivery companies, but local retailers can offer their customers packages for pickup or delivery, too. In the age of curbside delivery, your customers may thank you for giving them exclusive monthly dibs on a new fun product or an essential package of toilet paper.
The point is recurring payments help not only global commerce but our local mom-and-pop shops, too. Think outside the box and identify things your small business can offer weekly, monthly, or quarterly to boost sales and regulate cash flow.
Advantages Of Recurring Billing For Small Businesses
Recurring monthly payments offer several advantages for a growing or established company. Here are a few ways to make them work for your business:
1) Grow customer loyalty
Creating an opportunity for your customers to commit to purchasing from you on a regular basis is a huge step toward long-term customer loyalty. And that’s just good for business.
2) Nix time spent bill collecting
Time and money spent preparing invoices and collecting payments can be spent a million better ways. Recurring payments automates the process and saves you time, money, and reduces errors.
3) Get your money faster
Recurring payments creates a seamless process so that you don’t have to wait on your customer to pay the bill or worse — deal with late or no-show payments. Connecting a customer’s billing via an automatic ACH debit or recurring credit card payment ensures the money hits your account a lot faster.
4) Cut expenses and save the environment = winning
Paper billing is not only excessive and expensive for you, but it is also unnecessarily wasteful of our natural resources, too. Automating payments saves you on postage, paper, and team power all in one! And that is a winning combination.
5) Expand your business
Lately, we’ve seen all sorts of innovative ways small business owners have adapted to challenges. As mentioned briefly earlier in the post, retailers that start offering customers options in subscription boxes, whether for delivery or pickup, can cash in on the growing trend of the subscription model.
Offering subscription items at a discount, creating a whimsical array of comfort items, or simply helping people stay stocked with the essentials are ways you can lock in that recurring sale and boost profits. The sky is the limit!
How Do I Get Started With Recurring Payments?
If you’re excited about all of the benefits of recurring payments, you may be wondering about the next best step. If you already have a payment processor, make contact and see what already may be available to you and how to implement it easily. You likely also have the option to integrate a payment gateway if you have an existing site, and your current payment processor may have a list of available options for you.
If you are setting up a new business or you have been relying on paper checks, and you don’t have a payment processor at all, definitely research the best online credit card processing companies.
And if all of the subscription-box-business talking has you feeling inspired for more ideas, check out how to start a subscription box.