If you’re doing business in the highly competitive industry of subscription marketing, you know that monthly recurring revenue is your lifeline. So, if you have yet to set up your recurring payment system, it’s about time you do.
This post will tell you what you need to do to set up and start accepting recurring payments. That way, you won’t have to keep asking your clients for payment whenever their due date is around the corner.
What is Recurring Billing?
Recurring billing is a payment method that allows customers to pay for goods or services regularly. This type of billing can be helpful for customers who want to avoid having to remember to make a payment each month, and it can also help businesses by providing a steadier stream of income. There are several different recurring billing arrangements, and companies should choose the one that best meets their needs.
The most common type of recurring billing is subscription billing. With this arrangement, customers pay a set amount each month to access a particular product or service. This type of billing can be used for music streaming services, magazine subscriptions, or cloud storage plans.
- Subscription billing is also standard for web-based businesses. For example, a software company might charge customers $15 each month to access its service.
- A variation on subscription billing is usage-based pricing (also known as metered or pay-per-use). With this type of recurring billing, the customer pays only for what he uses and is charged a different rate for each usage tier. For example, a phone company might charge customers $0.50 per minute for calls made within the United States and $0.75 per minute for calls made to other countries.
- Another common type of recurring billing is installment billing. With this arrangement, the customer pays for the product or service in installments, typically over a period of several months or years. This type of billing is often used for large purchases such as cars, appliances, or home renovations.
- Finally, some businesses use lump-sum billing to charge customers one sum for goods or services provided in the future. This type of recurring billing is often used by businesses such as landscaping services or construction companies.
Recurring billing can benefit both businesses and customers, but it is essential to choose the right type of arrangement so that all parties are happy with the agreement.
The Importance of Recurring Billing
If you’re planning to incorporate recurring payments into your online business, there are a few things you need to take into account.
- First, there’s the convenience factor: recurring payments make it easy for customers to pay their bills without having to go through the hassle of writing out a check or finding an online payment portal. This can be especially helpful for busy people or those who prefer not to deal with financial matters.
- Second, recurring payments allow you to earn steady income over extended periods. This may be particularly important for online businesses that depend on a large number of smaller transactions, such as subscriptions and paid newsletters. With traditional non-recurring payment methods (such as credit cards), your business ends up having to handle much more significant sums at the end of each payment period, which can create a cash flow problem.
However, this isn’t an issue with recurring payments because you’ll be paid continually, and the money won’t pile up in your account. Recurring billing is also convenient for customers who will not remember to make their monthly or yearly payments. If they forget about one of them, they can always be billed for the amount later.Overall, recurring billing is an essential tool that allows customers and businesses to interact seamlessly and without hassles. When used correctly, it can benefit everyone involved. So if you’re interested, head over to ReliaBills now to learn more about what our platform can do to help you create recurring payment plans.
Benefits of Recurring Payments
There’s a reason why most subscription-based businesses rely on recurring payments. It’s a system that automatically collects payments from your customers on whatever date you set. Payment collection can be at regular intervals of time – e.g., weekly, bi-weekly, monthly, or even quarterly. Even from the customers’ perspective, recurring payments are a quick and convenient way to pay their bills. It’s also one less invoice they have to worry about among other payment obligations.
On the other hand, recurring payment from a business’s perspective offers the following advantages:
- Predictable cash flow: when a business can predict their potential cash flow, they will be more informed on present and future expenditures and investments.
- Scales well with customers: your customers won’t have to pay for a new version. Instead, all they need to pay is to either choose the upgrade or a higher plan. This level of flexibility helps create solid relationships with customers. Your customers will also be more loyal to your business.
- Predictable revenue: a business that has predictable revenue is attractive to potential investors. When you’re in the growth phase, a recurring revenue serves as your buffer for any possible fluctuations in earnings that your business might face along the way. Present and future recurring revenue predictability will help when you’re looking to take your business to a new level by raising your funds.
What You Need to Do to Start Accepting Recurring Payments
In its most basic sense, accepting recurring payments involve two blocks:
- Billing logic: calculating prices for purchases made, grandfathering, taking proration into account, requesting payment, etc.
- Payment processing: the process where your customer’s card is charged with the amount is then credited to your merchant/business account.
It is also possible to accept recurring payments with only a payment processor, as long as you have a self-built billing engine. You can also make use of the basic billing engines provided by popular payment gateway systems available online.
However, not when you’re in the hyper-growth phase. It will get progressively harder to get paid as your services, products, customer, and even pricing start to scale. Whether it’s free trials, evolving price tiers, discounts, extensions, taxes, or upgrading customer plans, every block you add means someone has to tell the payment processor what payment to take and when.
Processing and accepting payments are a business necessity. However, keep in mind that they’re also a chance for your business to provide a convenient payment experience to your customers and built trust. Next, let’s discuss some must-have features for you to start accepting recurring payments.
What is a Payment Gateway
A payment gateway is a safe and secure connection between a merchant’s website or mobile app and the bank. This type of process encrypts sensitive card details and ensures that they are passed securely from the customer to the bank via the merchant.
Here are some essential factors to consider when choosing a payment gateway:
- What billing logic do they support?
- How much time does it take for them to transfer funds from your customer’s bank account to yours?
- Do they let your customers complete the checkout process on your website, or do they redirect your customers to their platform instead and complete the checkout process there?
- How many different currencies and payment types do they support? (This is important if you also have international clients).
Some popular payment gateway platforms for global transactions are the following:
These payment gateway tools are used by many small and big-market companies around the world. You can do some research to find and compare payment gateways in your country.
Payment Methods Used for Recurring Payments
A subscription-based business model allows you to go global even if you’re starting. To broaden your footprint and expand your reach, your business should start accepting various payment methods. That way, you customer can choose the method that’s most convenient for them. At the same time, it also helps retain your existing customers. With that said, here are some popular payment options that your subscription business should support:
- Online debit or credit card payments (Mastercard, Visa, American Express, etc.)
- Digital wallets, also known as e-wallets (Google Pay, Amazon Pay, Venmo).
- Direct debit
- ACH (automated clearing house)
- Offline payments
Setting Up Payments with your Recurring Billing Software
Setting Up and Accepting Recurring Payments with Stripe
Stripe is one of the leading online payment processing systems available in the market right now. It supports a wide range of online payment options worldwide, and you can even integrate it with your preferred recurring billing software to start accepting recurring payments. Here’s how you set up and accept recurring payments with Stripe:
- Step 1: Click “Settings” > Configure > Payment Gateway > Add Payment Gateway > Stripe
- You can also configure Stripe either from your test or live account.
- Step 2: Create and log in to an existing account.
- Step 3: The Configure Stripe page will now open, displaying a green circle that indicates it’s already active.
Setting Up and Accepting Payments with PayPal
PayPal is a secure global payment gateway service. It’s been around for quite a while now yet continues to see relevance among agencies, businesses, freelance workers, digital marketers, and more. You can integrate PayPal with your preferred recurring billing software to avail the following services:
- Express Checkout
- PayPal Payments Pro
- Pay Flow Pro
- PayPal via (your preferred recurring billing software)
Setting Up and Accepting Payments with ReliaBills
ReliaBills is one of the top-performing invoicing platforms available on the internet. With ReliaBills, you can completely automate the creation of your invoices. You can even automate your installment billing, variable billing, and of course, recurring billing. Here’s what you need to do to set up and start accepting recurring payments using ReliaBills:
Step 1: Start at the “Invoices” tab > “Recurring Invoices.
Step 2: Creating a recurring invoice isn’t different from creating a single invoice. First, select the Customer.
Step 3: If you haven’t created any yet, go to the “Customers” tab and create a new customer there. Only “Active Customers” are displayed in the drop-down for you to select.
Step 4: If you don’t see the customer you created, search for them in “Customers” and make sure their status is active.
Some of the several terms that you need to get familiar in the “Recurring Invoice” Tab
- Recurring Profile: defines when and how frequently invoices are to be granted.
- Invoice Details: defines the invoice that’s to be generated.
- First Invoice: the option of having your invoices generated based on either a due date or a create date. Use the drop-down to have your invoices due on the same day each period or created on the same day.
- Days to Pay: if you selected to have invoices generated based on the create date, you will select how many days after the invoice would be due. However, if you selected to have your invoices generated based on the due date, you should choose the number of days before the due date invoice would be created.
- Repeat Every: Use the drop-down to have your invoices generated based on a defined number of days, months, or even years.
- The total number of invoices to be created: Leave this field blanket if there’s no fixed number of invoices to be created and payments to be made. If you’re setting up a fixed number of payments (e.g., installment plan), enter the number of invoices that you will create over the span of a particular period.
- Details: This section should be filled with all of your information.
- Notifications: This section defines whether or not you want to send each invoice to your customer when generated. Some business prefers to bill their client. In that case, choose “No.” However, if you want ReliaBills to send the invoice automatically after generation, select “Yes.” If your business has add-on fees in addition to the normal, recurring fee, ReliaBills allows you to benefit from automated invoicing. However, you can also delay the automation by a few days if you want to. That will give time to make any modifications or additions.
That’s it! You’re all set to start accepting recurring payments. These are all the information you need to know to take your subscription business to the next level by accepting recurring payments. Good luck!