As consumers, we all appreciate being given a variety of choices when it comes to where and how we shop and even in the methods we use to pay for our purchases. If you’re running a business, you probably realize that accommodating your patrons’ needs and demands must be one of your highest priorities. Since recurring payments are gaining in popularity among consumers, isn’t it time to learn more about how these secure payments can help increase your cash flow?
What are recurring payments?
When you think of how people make payments, you probably have several different methods in mind. They can provide all the money at the time of purchase using cash or a check, or they can check out using a credit card and pay at the end of the month or over time. Another type of arrangement is recurring payments, which happen automatically on a specified date: monthly, bi-monthly, quarterly, annually, etc.
To set up recurring transactions, you need to know exactly how much you will be billing your customer. You must next come to an agreement with them about the payment processing terms: how much will be withdrawn from a specified bank account, at what intervals, and for how long. As you initiate the recurring payments process, all parties must know and agree to the terms so as to avoid problems in the future.
What industries use recurring payments?
Not so long ago, only a few sectors utilized the subscription-based payments model. These included companies that rented DVDs and sold newspapers, as well as fitness centers and daycare providers. Now, however, the sky's the limit.
These days, recurring payments can be found everywhere. Consumers can receive regular deliveries of curated clothing, snacks, personal care items, and educational materials for their children just to name a few examples. This model also works well with digital subscriptions for music and movies.
The benefits of offering recurring payments to your customers.
Although it can be a relatively complex undertaking to set up recurring transactions, the advantages are compelling.
- This increased choice enhances the customer experience and promotes loyalty.
- The automated payments process makes record-keeping more efficient by storing all payment data, saving you time and money.
- You can provide tailor-made services to your entire customer pool without a huge time investment.
- You’ll have fewer problems with missed payments and declined credit cards.
- Because you’ll know the precise time and amount of the payments coming into your account, you can more accurately predict your cash flow.
That being said, you’ll still need to have processes in place to notify customers of upcoming card expiration dates and to contact customers if their payments are declined for any reason.
Incorporating recurring payments into your business.
If you are now convinced that providing your customers with this payment choice can provide both you and your buyers with advantages, you’re probably wondering how to go about making it happen. Follow the guidelines below to get started.
- Choose a payment gateway that allows you to set up recurring or subscription-style payments.
- Select your recurring payments software carefully. At a minimum, it should offer features such as account integration, invoices, self-service, a user dashboard, a customer service portal, the ability to send emails that confirm transactions, and developer-friendly APIs. In order to ensure secure payments, you should also require that your software complies with the Payment Card Industry Data Security Standard (PCI DSS). If the company is vague or cagey in their answer to this question, keep shopping.
- Find a subscription service that accepts all forms of payment. (This should include all major credit cards.) The company should have good working relationships with all of the leading banks to handle recurring bill payments.
- Customize the tools to match your business’ and customers’ unique needs. This may require that you hire professional help. While that may seem like an extravagant cost, setting up your systems properly and to their maximum effect will result in software that is easier to use, saving you time and money in the long run.
- Before going live with your recurring payments system, test it in your payment technology partner’s sandbox. This procedure will alert you to any glitches so that they can be worked out before offering the program to your customers.
- Create email templates that will be sent to customers to notify them of transactions, explain the recurring payments process, and describe the next steps that need to be taken. Doing so will keep you from needing to reinvent the wheel every time you want to get in touch with subscription holders regarding their plan.
Along with these tips, keep the following cautionary advice in mind.
- Be aware of your churn rate. This is the annual percentage rate at which your customers stop your subscription service. If your recurring payments model is to succeed, your growth rate (new customers) should be higher than your churn rate.
- Avoid subscription services with high upfront costs.
- Don’t choose a service that lacks reporting capabilities that help you keep track of churn and growth rates as well as other important factors.
Today’s retail climate requires companies to be nimble and creative in numerous ways, including in the array of choices they offer throughout all steps of their shopping and purchase journey. When you expand your software to allow for set-it-and-forget-it payments that are automatically withdrawn on a predetermined basis, both you and your buyers can look forward to a smoother sales relationship, greater transparency, and increased satisfaction on all sides. It’s no wonder that recurring payments are becoming one of the most popular ways to complete purchases for all manner of industries.