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STARTING YOUR OWN BUSINESS
Your business needs a lot from you, and you welcome any opportunity to put tasks on autopilot.
We have good news for you: recurring payments allow you to collect money from your customers, with little to no elbow grease required.
Intrigued? We thought so. We’re digging into everything you need to know about using recurring payments to streamline your business, stabilise your cash flow, and keep your customers happy.
Recurring payments happen when a business automatically charges a customer on a set schedule. These automatic payments are typically charged to a customer’s credit card or debit card or are deducted from their bank account through a bank transfer.
You probably make a few automatic payments each month yourself. Think about your Netflix subscription payments. Or your gym membership. Or your monthly meal subscription box. Those are all examples of recurring billing, as you’re being charged on a set payment schedule on an ongoing basis.
Recurring billing is fairly popular among consumers. In 2017, the average customer paid a little over six bills per month automatically.
Why did they go that route? Well, automatic payments offer several benefits—for both the consumer and the business.
There’s no shortage of payment options out there, but the recurring payment option is the only one that takes all of the burden off your customers.
You store the customer’s payment information in your payment gateway and automatically charge them on a set billing cycle. Your customer pays for your product or service without lifting a finger or going through a lengthy checkout process.
That added convenience can boost your customer retention rate—and, as a result, your profits.
Since automatic payments can happen without the involvement of your customer, you reduce the potential for late or missed payments. Recurring payments eliminate the potential for error and forgetfulness.
Nobody enjoys chasing down money they are owed, especially when it’s from your customers. But when you automate your payment processing, you save yourself time and hassle. You can securely store your customers’ payment details and collect your hard-earned money with little to no manual effort.
When customers don’t pay on time, you need to stay afloat by finding money elsewhere. Recurring payments happen predictably, leading to much more consistent and stable cash flow.
Many different businesses use recurring payment plans—from e-commerce companies to service providers. Daycare centers, gyms, SaaS products, utility companies, professional services…the list goes on and on.
Recurring billing can be used by a variety of industries and business models, provided you meet two criteria:
You work with repeat customers.
You work with your repeat customers on a regular basis.
So, if you own a café and work with a corporate client a few times per year as needed, that’s not a great fit for recurring billing. But, if you cater their same luncheon every month, you could set that up on a recurring payment plan.
The very premise of recurring billing is that it’s supposed to be easy. But, that doesn’t mean you can roll it out and watch as the magic happens. There are a few best practices you should know to do this right.
You’ve probably had it happen before: Your credit card expired, and you were mailed a new one with a shiny, new expiration date. You had to update that payment information in dozens of places, and of course, you forgot one. You received an email saying your online payment couldn’t be processed because of incorrect payment details.
It’s a familiar plight for your customers too, which is why you should use your payment solution to set up alerts when payment information is incorrect or about to expire.
That way, you can notify your customers when they need to update their credit card information—before you even try to process their payment.
You’re concerned about your business’s cash flow, but remember that your customers worry about managing their income and expenses too.
That’s why it’s helpful to offer different payment plans and frequencies. Particularly if your products or services are more expensive, some customers might not be able to cover a large monthly charge. Breaking that into weekly or biweekly payments might be more manageable.
Be flexible with the payment schedules you make available to your customers, so they can choose the frequency that’s right for them.
While recurring billing should hopefully boost your customer retention, there will come a time when a customer wants to pause or cancel their payments. When that happens, they shouldn’t need to jump through endless hoops.
Whenever you enroll a new customer in automatic billing, provide them with instructions to update their payment information as well as cancel their payment subscription when they need to. Hiding those details will only breed frustration.
Your billing and invoicing might be happening on autopilot, but remember that businesses are still built on relationships.
Remember to maintain a personal connection with your customers. Send a regular newsletter or a holiday card. Check in with them periodically to ask for feedback about your product or service.
Do what you can to continue to foster that relationship and fuel brand loyalty. Your payments are low touch, but your business shouldn’t be.
There aren’t many aspects of your business that run without your involvement. But, when you set up recurring payments, you can put your billing on autopilot.
Doing so means less work for you and a more streamlined experience for your customers. How’s that for a win-win?
Starting your own business
We hope you’ve found this article about recurring payments helpful. Our guide to starting your own business in the UK can help you grow your business further - simply fill out the questionnaire to find out where you’re at in your business journey and what your next steps are.