Also known as subscription-based billing, this payment arrangement offers several benefits, both to you and your customers. Although you might want to jump in and change your entire payments process once you hear all about it, there are a few things to keep in mind before you take the plunge.
Recurring billing explained.
A Recurring Billing Program allows you and your customer to agree on a set amount of money that will be withdrawn from the customer’s bank account on a certain day, for example, $100 on the first day of each month, in exchange for certain products or services. You specify when the withdrawals will end (or whether this arrangement will continue indefinitely). Then, you obtain the buyer’s checking account or credit card information for PCI-compliant safeguarding. From there, you can pretty much “set it and forget it.”
It won’t take long to realize the benefits of a Recurring Billing Program. Instead of chasing down late payments and getting irritated with customers, you’ll instead know exactly how much money to expect and when it will arrive, making your cash flow much easier to predict and leverage. By the same token, your customers can rest assured that their products or services will continue to be accessible to them, uninterrupted by the hassles that come with billing errors and tardy payments.
At this point, you’re probably thinking that recurring billing sounds like a perfect situation, one that you should embrace right away. Before you offer recurring transactions at your business, however, consider the following factors.
Your products or services should fit well with a subscription model.
Ongoing payments make a lot of sense for many, but not all, businesses. Take some time to think about the product you are interested in selling via subscription-based billing? Is it something that customers are going to want over and over again? (We suspect, for example, that a Mattress of the Month campaign probably would not go over well.)
That being said, it is possible to use recurring billing not only for subscriptions but also to soften the blow of paying for high-ticket items. Regarding the aforementioned mattress, consumers might not want a new one 12 times per year, but they might appreciate the lower cost of card-on-file payments spread out over several months or even years.
Setting up recurring billing isn’t easy for everyone.
If you’re a tech whiz or a software genius, this warning might not apply to you. For the rest of us, the process of implementing recurring billing can be time-consuming and costly. Fortunately, there are numerous companies who, for a nominal fee, would be more than willing to assist you in getting your Recurring Billing Program off the ground.
Keep the following tips in mind as you investigate recurring billing solutions.
• Find one that accepts the types of payments your customers use, whether that’s credit cards, debit cards, ACH, and so forth.
• If you plan to accept credit cards or echecks, you will need a merchant account. Many companies offer integrated solutions that include these.
• Many vendors also offer customizable hosted online payment forms that allow your customers to set up their own recurring billing independently.
• If you have add-ons or setup fees that fluctuate, be sure the Recurring Billing Program you choose makes it easy to implement these charges.
• Look for a recurring billing solution that gives you proactive notifications of upcoming expirations and lets you know right away about failed payments.
Your customers want a seamless payments experience.
At their most basic level, subscriptions can be pretty boring. You set them up, products come, the customer uses them, and the process repeats. However, that vanilla version of subscriptions is not what is offered by the most successful businesses.
If your goal is to set up recurring transactions, your first job is to understand your customers. That involves answering questions such as who they are, what they want from your business, and why the product or service they receive from you is worth purchasing again and again.
When you’ve arrived at a sense of who your customers are and what excites them about your brand, you’re ready to put your Recurring Billing Program in place. Your priority should be to keep your buyers engaged and excited about your offerings with a billing process that is totally transparent. In the end, they should look forward to getting that exciting box of products or be happy that they are ongoing members of your weight loss or physical fitness center, etc.
Many entrepreneurs are finding subscription-based payments to be a game-changer that streamlines the billing process, engages customers, and increases cash flow. The keys to success with this model are ensuring that it fits with your particular products and services, and setting it up properly. Once you’ve done so, you’ll be providing a valuable service to your customers that offers big benefits to your business as well.