Over the years, the collection of payments for goods and services has posed its challenges. Today, several businesses deliver their products based on receipt of payment. Not only that, but many industries also heavily rely on the method of invoicing and other accounts receivable techniques to collect payments from clients or customers.
The process of invoicing may cause stress and consume a lot of time. Even after the purchase has been made, payments may get delayed for months, resulting in income loss. As a result, businesses may have to approach customers and ask them to make the payment for their purchase. This might further decrease cash flow to a great extent and also consume precious time.
Fortunately, with the development of payment technology, several new methods have been introduced, one of which includes the use of a recurring billing platform. It enables businesses to have better revenue predictability, increase customer engagement, handle inventory more efficiently, and more.
In this post, we will discuss in detail the different reasons why a business should use a recurring billing platform. So keep reading…
What is Recurring Billing?
Before learning about the benefits of a recurring billing platform, let us first understand the meaning of recurring billing.
Recurring billing is a payment method that gives business owners the ability to manage payment schedules and bill the customers for the goods and services they purchase at predefined periods (weekly, monthly, yearly, or at customized intervals).
This payment model is mostly used by subscription businesses, where the customers usually subscribe to a particular service or product. Customers are then asked to submit their payment details and give consent to the business owners to deduct an appropriate sum from their account automatically at predefined intervals.
What Types of Businesses are Best Suited for Recurring Billing?
Any business that provides its services or products on a recurring basis can use the recurring billing system. Here are a few common examples of businesses best suited for recurring billing:
- Magazine and newspaper subscriptions.
- Gym Memberships
- Telecom businesses that have metered or usage-based billing.
- SaaS businesses like Netflix, Google apps, Spotify, Disney+, Canva, Dropbox, and Slack.
Reasons Why Your Business Should Use a Recurring Billing Platform
Have you ever thought about how a recurring billing platform could help your business? Here are some of the benefits of a recurring billing system that you must look into:
- Increases Cash Flow
When it comes to profitability, most businesses believe that maintaining cash flow can be one of the greatest challenges. However, recurring billing offers a reliable and consistent cash flow for a company and helps them collect monthly payments on schedule.
Additionally, a recurring billing model helps to decrease processing costs by getting rid of new invoices generated every month. Furthermore, recurring billing enables you to balance your Accounts Receivable and reduce negligent payments annually.
- Entirely Automated
A recurring billing platform offers automated subscription management that saves time, eliminates the need for manual work, and even reduces administration costs.
The systematic method of billing the customers is entirely automated. Therefore, once the invoice is generated, the payment details are linked, and the billing cycle is set, customers will be charged for the product or service without any manual interference. This automatic process saves both the customer and business owner from performing the same task at every payment cycle.
- Improves Operational Productivity
With the help of a recurring billing model, clients or customers get invoices on a fixed schedule. Therefore, if you have customers on terms or run a subscription-based business, recurring billing can save your business plenty of time. Besides, recurring payments also help customers who have large accounts and want to pay out a certain amount of their balance on a monthly basis.
- Protects Sensitive Customer Data
Recurring billing comes with a safety mechanism that protects both the customer and the business.
To safeguard confidential consumer data, most recurring billing platforms use a secure payment gateway along with tokenization technology. This technology replaces the credit card details with a special token that can only be deciphered by the appropriate tokenization system.
Note: Businesses who receive online payments, do not have access to customer’s credit card details. The tokenized information is only visible in the payment system and is entirely different from the actual credit card number.
- Decreases Manual Data Entry
Businesses that type in customer details and create invoices manually may face human error or run the risk of misreporting or leaving out information.
Every time consumers place an order, rather than having to enter credit card details manually, recurring billing helps you schedule your payment gateway or accounting platform to send an invoice to a customer and debit their credit card periodically. All in all, recurring billing helps to ensure more data accuracy and eliminates the risk of invoices being accidentally misplaced or duplicated.
- Get Paid Faster
With the help of automated subscription management, recurring billing makes the process of payments easier by charging customers automatically and allowing them to pay invoices once they are available online. This lessens the burden on businesses to bother their customers through email or phone. Furthermore, businesses also reap the benefit of managing their accounts timely and using payment data methods to prepare for the coming months.
Carrying out this simple billing process will not only boost the transaction experience of customers but will also increase the probability of your business receiving payment in due time.
In conclusion, if you are one of the businesses that can substitute some manual operations with automated processes, you should definitely give recurring billing a try. The transition would help all employees, customers, cash flow, security, and the overall environment of the business.