What recurring payments and billing mean, how they each work, and why to use any of them is the main focus of our top 6 questions on recurring payments. See how recurring payments can benefit your startup and how to set those up to your advantage.
What's recurring billing?
Recurring billing refers to automatic charges that a merchant can set up for a consumer for many reasons. Yet, that cannot happen without user agreement, of course. And the idea is for consumers and merchants to agree, basically, on fixed amounts due on a specific date or with a particular frequency. That means we can arrange to pay $18 every month on the 5th, for example.
The most common recurring billing scenario nowadays refers to many subscriptions to sell goods or provide services. Our pay-per-view, cell phone bills, sport magazine subscriptions, or other services, such as Netflix and even the vet for periodic check-ups, can all be part of recurring billing.
Ideally, clients get to choose how often and how much they pay. And they undoubtedly do so in exchange for what's being purchased or the services being hired. For instance, we can pick an introductory $5 per month plan to be paid on the 15th of July. And we can also agree to that for a full year. That leaves 11 pending payments that can all be a part of a recurring billing process.
Why use recurring billing
Recurring billing can make sense for many reasons. Initially, merchants can rely on these types of billing modules to ascertain a fixed amount of steady income on a somewhat predictable basis.
It helps finances when we know how many users will equal which sum coming in on which precise date. That's how we can draw monthly or yearly recurring revenue. And those are important for several reasons, as well. We'll expand on that further below, by the way.
As consumers or users, recurring billing can be a gateway to many perks, too. And these can range from a discounted rate when we sign up for recurring payments to added benefits aimed solely at those clients who would like to be billed automatically on a regular basis. It also helps to know that this kind of payment setup annihilates money going to waste on delinquency or late fees. Since merchants take care of what we owe for what we hire or buy, we never miss a due date and can be safe from added charges when we forget about the service or date.
What's a recurring payment?
What recurring payments mean is basically an amount that we pay on a fixed date for a set amount. So, we repeatedly cover the same fee at a prearranged time and get billed automatically for it. Those are recurring payments, essentially.
How do recurring payments work?
As we said, recurring payments happen around the same time every specific frequency for a somewhat fixed amount. When we say around or somewhat, we're merely making room for exceptions. We may set up a payment for the first week of every month or a local currency equivalent to a fixed dollar amount. Yet, very commonly, and in most cases, recurring payments are set in terms of calendar and amount.
How recurring payments work is that we usually give merchants our permission as users to be automatically billed within that periodicity we described above. For that, we can authorize an initial payment and have that stand through added agreements for how we're billed every time following this occurrence and the amount we're paying.
Our bank accounts or credit card is thus charged in full compliance by a participating merchant.
How recurring payments can benefit your business
We described it above a bit and promised to expand on it further, so... let's get to that now.
As a merchant, recurring payments can give you what we term recurring revenue. And that can be termed either by month or per the year. Briefed as MRR or ARR for monthly or yearly, these figures can do wonders for your financial projections.
Also, setting up recurring payments for your startup can help with loyalty programs. This, of course, means potentially cranking up your customer retention.
Furthermore, imagine all the hours spared by letting a centralized software management platform, like Recurring, handle all of your subscriptions for you. This can be an easy setup that cuts down on your billing hours.
For consumers, our live dashboard lets them keep tags on subscriptions the moment they get charged.
Another plus that comes from using this kind of software is being a bit more worry-free about compliance. And that's needed to further draw on benefits with recurring billing.
How do we go about setting up these kinds of payments? We've got you. Let's go over that to wrap up our top 6 questions on recurring payments.
How to set up recurring payments
To set up recurring payments, you'll need to give or receive authorization. This happens through a one-time consent that merchants keep as part of the card on file for upcoming charges.
All this can be coded from within a SaaS management software such as our own. With precise client details, such as full name, billing address, and credit card information, payments can be drawn on a specific date that's signaled for that. Setting up recurring payments is basically as simple as this.
Please take note that this all stops very quickly, too, of course. If a consumer withdraws authorization for recurring billing, then the entire process is canceled.
Make business life more manageable with Recurring.
We've experienced first-hand just how hard it is to manage your stack of software-as-a-service (SaaS) tools as a startup grows. Don't make it so hard on yourself and max out your optimization opportunities with an expense, usage, and efficiency tracker.
Doing the above while replacing platforms for cheaper or better alternatives can take your startup to the next level. Stop waiting on accounting reports and take control of your recurring expenses by signing up for Recurring today!