Once mostly found with fitness centers and day care providers, offering customers the option to make automated payments has become a popular strategy for businesses of all types and sizes. Recurring billing and invoicing now provide enhanced predictability and control over cash flow to a wide spectrum of retailers and their customers. If you are thinking of incorporating recurring payments into your business, take some time to learn what you should and should not do.
A quick definition.
Before we dive in, let’s get our terminology straight. “Automated payments” refers to a practice wherein a merchant and customer agree to have a specific amount of money withdrawn from a credit card or bank account on a set date for a predetermined period of time. For example, a furniture company and customer might agree that $50 be withdrawn on the third day of every month from the buyer’s bank account for 36 months until the debt for a purchased sofa has been satisfied.
Recurring payment dos.
There are several steps you can take to ensure success with your subscription billing program.
- Shop for a payment provider with care, remembering that the cheapest is not always the best. Pick one that simplifies compliance with the Payment Card Industry Data Security Standard (PCI DSS), thus helping to ensure that your precious cardholder data is not compromised by cybercriminals.
- Carefully examine the features your prospective payment provider offers. Select one that can grow with your business if you have good reason to believe that you will be expanding, especially if this involves potentially accepting international currency types.
- Recognize that recurring billing will reduce what you need to pay to collect delinquent payments. That being said, this is not a perfect system, and you will certainly encounter closed accounts and changing card numbers that you need to chase down.
- Choose a provider that offers multiple payment options. Don’t hire a vendor unless they accept all major credit cards and have relationships with major banks so that the automatic payments process runs smoothly.
When administered by a company that provides security, choice, and quality, your recurring payments can happen smoothly and make for happy customers and a more reliable cash flow.
Recurring payment don’ts.
Despite its advantages, the subscription model can also have its downsides. Keep the following cautions in mind.
- Don’t forget about your churn rate. This is the annual percentage rate at which customers opt out of your subscription program. If you are to succeed, you must bring more new customers into the program than you lose. To keep your churn rate low, choose a payment processor that can give you valuable insights that are relevant to your industry.
- Don’t take high costs for granted. Although you should not opt for the cheapest payment processor by default, you also shouldn’t have to take on exorbitant expenses to offer recurring payments.
- Don’t ignore your platform’s reporting capabilities. These can give you insights into your churn rate, inventory, customer preferences, and other crucial factors that will facilitate intelligent ordering and enhanced personalization for your customers.
Perhaps the most compelling advantage of recurring billing is customer retention. People love the consistency and predictability that subscriptions allow and enjoy getting products and services in an uninterrupted stream. Frictionless payments lead to better rapport between employees and consumers and even add to the credibility of your business. Bring them onboard, and you will soon see how they can please your customers and make your accounting staff happy in the bargain.
