What is Recurring Billing, and How Does It Work?
Does your business feature clients regularly renew their accounts to avail of your services again? Do you need your customers to keep acquiring your services to gain profit? If so, then you may already be aware of recurring billing. It’s a payment platform that’s useful for merchants who automatically charge their customers for goods or services on a prearranged schedule.
If you’re not familiar with this concept, you’ve come to the right place! This article will talk about what recurring billing is and how it works.
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What is Recurring Billing?
Recurring billing is a payment system that uses an invoicing platform to automatically send invoices and receive payment on a predetermined schedule (billing cycle). After a span of, say, a month, you will bill your customers for them to continue acquiring your services. Once a billing cycle is complete:
A new statement will be sent to each of your customers via a digital invoice – in most cases, an email. This electronic invoice serves more as a notification than something actionable.
Using an invoicing platform, the invoice statement will automatically trigger a payment. It will instantly deduct from the client’s account -usually through credit card, wire transfer, or ACH.
You might ask yourself, “why would I want myself and my customers to go through all of this?” How do merchants like yourself benefit from recurring billing in the first place? That’s what we’re going to answer in the next section.
Advantages of Recurring Billing for Your Business
There is a multitude of reasons why you should consider exploring the realms of recurring billing. Here are just some of the advantages that you’re going to get:
If it fits your business, recurring billing can be the ideal billing system that will increase convenience. With recurring billing, you won’t have to manage your billing cycles manually. Using an invoicing platform, you can automate the entire process. That way, you can send out invoices and receive payments without having to do anything. It will also free up more time to do other essential activities like conceptualizing new products or service features or improving your marketing strategy.
Better Forecasting and Cash Flow
With customers signing up for recurring billing, you won’t have to worry about following up on delayed payments as frequently as before. With this billing system in place, the money will come into your bank account like clockwork. As a result, workflow within your business will improve drastically. Also, long-term financial planning will become much easier and worthwhile.
Grow Your Sales Consistently
Traditional billing was a problematic method as customers are forced to send payments deliberately. This direct method doesn’t always work since customers dislike being coerced to do something – explicitly making payments. However, with recurring billing, all future payments are already guaranteed. When your customers sign up or register to acquire your services, they’ve also agreed to pay you for as long as they acquire your services.
You can also guarantee that the customers who acquire your services understand the nature of recurring billing and will be more than willing to provide payment every time their subscription is due for billing. So, unless the customer explicitly opts out, you can guarantee that all future payments are secured. Through this method, your sales will grow consistently.
With recurring billing, you can transform your products and services into a subscription-based billing model. This model is especially useful for ‘big-ticket’ items. So rather than charging your customers with a one-time fee of $100, you can offer your customers much more attractive pricing (like $9 a month over the course of a year).
A subscription-based approach will also provide you with more detailed analytics. If your customers choose to opt-out of their subscription, you can pinpoint exactly when and why they decided. Afterward, you can implement any changes if necessary.
Advantages of Recurring Billing to Consumers
One of the reasons why recurring billing is an attractive billing system is because it benefits the consumers as much as the merchants. For one, they don’t have to look for checkbooks or postage to settle their accounts. They don’t even have to sit in front of their monitors once a month to monitor their finances. The main benefit of recurring billing to the consumer is that everything is a hundred percent hands-free – at least, after the initial setup. Best retail billing software for Retail Stores makes purchasing inventory, payments, expenses and customer management easy, alongside billing and invoicing. Everything is automated – billing, discounts & GST tax calculations. Reduces the cost of maintaining your retail store. An additional bonus to this is that your customers will pay fewer sub-charges and late fees.
Getting Started with Recurring Billing
As you may have noticed by now, almost every payment borrows a concept from recurring billing. In the fast-paced world that we live in today, electronic transactions are the best way to set up. It’s even possible to have paper-based invoiced mailed automatically, and paper-based checks are collected and deposited automatically.
The golden rule of recurring billing is that it’s always best to make this billing method your default payment option. That means that you should always require your customers to actively opt-out if they don’t want to use it (rather than force them to opt-in). Recurring billing gives customers the option to use your product and stop using it whenever they want to, as long as they pay for every time they are in subscription of your services.
Using Invoicing Platforms
Finally, always keep in mind that recurring billing will only be effective when using the right applications. That’s why you should always take advantage of invoicing systems that are available in the market today. There are various invoicing platforms, such as ReliaBills. For one, you can automate all of your invoicing so that you can set them all and receive payment on time.
ReliaBills also lets you create unique and professional invoices straight from their platform. Most of all, ReliaBills is 100 percent FREE! Of course, other invoicing systems have a price in place for you to use their services. Fun fact, most of these invoicing platforms also incorporate recurring billing to their payment system.
So, there you have it – a quick and concise guide to recurring billing. Now that you know the benefits of this billing method and how it works, you now have everything you need to get started. If you haven’t incorporated recurring billing today, we highly suggest that you do.