How to Set Up Recurring Payments in Your Small Business
Recurring payments have taken over a variety of industries and businesses, and for a good reason: they’re incredibly convenient for everyone.
Customers can set up a payment method and enjoy your services on an ongoing basis for a low monthly price. Meanwhile, your business can benefit from predictable revenue and easy payment management.
It’s a win-win situation.
This types of payments can help nearly any small business by:
- making it easier to manage billing and collect payments
- maximizing profits
- reducing expenses
- predicting revenue
But, to take advantage of these benefits, you first have to get your business ready to accept recurring payments. Don’t worry, though; it’s not too difficult.
Let’s take a quick look at how you can set up this type of billing for your small business.
What are Recurring Payments?
Essentially, a recurring payment is a payment that businesses automatically process regularly.
Customers go to your website, set up a payment method, agree to the billing terms and conditions. Then their payments are processed on the agreed-upon payment schedule.
Should I Set Up Recurring Payments?
If you’re like me, you’re probably subscribed to several services that use this type of billing. Subscription-based services, like Netflix, Amazon Prime, Hulu, Spotify, and countless others use recurring payments to make it easy to process payments and predict revenue.
But this billing method can help many other types of businesses.
For example, utility companies use this type of payment for easy billing. Your electricity, internet, water, cable, and other utility bills use them.
Physical services can also use recurring payments. A weekly maid or lawn care service, for example, could use them to avoid having to collect each customer’s payment weekly, manually.
Software as a service (SaaS) products (e.g., Photoshop, Microsoft Office) also use recurring payments to manage their customers’ repeating payments.
Ultimately, if your business has to collect payments from customers on a repeating basis, this type of payments can make things much more comfortable for you.
Advantages of Recurring Payments
Why set up Recurring Payments? Why not just collect payments manually? Why bother setting up automatic payments?
There’s a reason so many businesses rely on recurring billing. Automatic payments offer many benefits, including:
Recurring payments make it easy to estimate your revenue based on how many active customers you have. This also makes it easier to budget and plan future spending.
With recurring payments, you don’t have to worry about customers not paying on time. This leads to improved cash flow and easier financial planning.
Customers tend to choose automatic recurring payments if the option is available. It allows them to always make on-time payments without having to do it themselves.
Save Time & Money
Recurring payments save a lot of time. You don’t have to prepare and send monthly invoices manually. Payments are automatically processed, which saves plenty of time and money.
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Ultimately, if they suit your business model, this billing method is very convenient and can be a huge time-saver.
How to Set Up Recurring Payments
Interested in setting up this type of payment for your small business?
Fortunately, it’s relatively easy.
To take advantage of the benefits offered by automatic payments, you’ll need a payment service provider. These services make it easy to set up and accept recurring payments from your customers.
1. Research Billing Software Providers
There are a variety of companies that offer payment processing services, which includes automatic and recurring billing processing.
Some of the best billing software services include:
Each of these services is known for being reputable, offering high-quality services, and supporting a wide variety of payment methods.
Make sure to review all of them and learn how they can benefit your business.
2. Choose a Billing Software
While the services mentioned above are a few of the best and most popular, you need to choose the one that better fits your business’ needs.
When looking for a payment processing service, make sure to look for the following qualities:
✔️ Invoice generation
✔️ Sends emails after payment is processed
✔️ Accepts a wide range of payment methods
✔️ Is very secure
✔️ Low fees
✔️ Accounting integration
✔️ And, of course, make sure they offer recurring payments
Be sure to compare terms, services, features, and fees between multiple payment service providers to find the one that best meets your needs.
3. Activate Recurring Payments
Each billing software has different ways of activating the recurring payments option, but it’s not hard to do. You need to find the “recurring billing” or “recurring payments ”option. Some software have it under the invoices or billing section, while others have their unique section for this type of payment.
There you will be able to select the amount and the frequency of the payments for each customer.
4. Tell Your Customers
After you pick a payment service provider and set up this type of payment, start to market it to your customers. Make sure all your customers know they can set up recurring payments.
To get more customers to make the switch to automatic payments, you can try offering incentives, such as a modest discount for the first month of recurring billing.
Thanks to automatic billing software, setting up recurring payments is very easy.
Types of Recurring Payments
There are three main types of recurring payments:
- Fixed Payments: They stay the same for each billing cycle. Subscription services and membership dues are great examples of this type of recurring payment.
- Variable Payments: They vary from month to month. Utility bills, for example, aren’t usually the same for each billing cycle.
- Pre-approval Transactions: These are transactions that require the customer to approve the charge shortly before service is provided or after it is completed.
For most small businesses, fixed and variable recurring payments typically make the most sense.
It’s time to set up recurring payments
Recurring billing is popular for a reason: it is very convenient and can save your business a lot of time and money.
Fortunately, with the help of a payment service provider, setting up recurring payments for your small business is easier than ever. By following the tips in this article, you can quickly start accepting recurring payments and taking advantage of its benefits.
Do you want more ways to accept payments? We invite you to keep reading:
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Want more help growing your small business?
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We’ve worked with countless small business owners to help them find the loans and resources they need for their small businesses to succeed.
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