Recurring Transaction - What Is It And How Does It Benefit Your Business?

What Are Recurring Transactions?

Are you wondering whether or not recurring payments or subscription billing are right for your business? If yes, you might have to stop worrying too much about it. Wait, here's a question for you. Do you often see your business as a one-off sale? In case you're a sustainable business owner, we're sure that's never an option for you, or what do you think? Well, for you to achieve the best out of your business, one of the things that you must do is to build a strong relationship with your customers. The benefit of this is that it helps you to retain more customers to your business, which is one of the factors needed to achieve a better sale.

Speaking of customer retention, there are several strategies that you can use to achieve it for your business. One of them is by ensuring that your payment system is easy for your customers to utilize. We're not saying that having a not-so-easy to use payment system can drive customers away from your business. However, by having a great payment option, you can always retain more customers to your unique business offerings. That said, one way to provide your customers with an amazing payment system is through recurring payment or subscription billing.

In this post, we'll be sharing with you everything that you need to know about recurring transactions. First, we'll talk about what recurring payment means. And apart from that, we'll also talk about the meaning and benefits of recurring billing for your business.

How Does Recurring Payment Or Subscription Billing Work?

What Does Recurring Payments Mean for You?

Recurring payments or subscription billing are systems that allow you to continuously charge your customer’s credit card for services that you offer them. These could be weekly, monthly, quarterly, or even annually. To break it down, recurring payment occurs when customers and online merchants engage in an ongoing relationship, instead of a one-time transaction. All that customers need to do is to provide the merchants with their billing information - just one time. After that, they also have to permit sellers to charge them continuously, depending on their purchases.

Although there are several ways to do recurring payments or billing, the easiest one is via payment service providers. That's because these companies will provide you with services that meet your business needs. One of the services that most payment providers offer is that they help customers to collect and process their recurring payments. Apart from that, they also secure the payment process, ensuring that online merchants receive payments. That said, let's have a quick look at the steps involved in processing a recurring payment below.

  • First, a customer needs to visit your website and choose recurring payments from the available options that you offer.
  • Next, the customer will accept all the terms and conditions necessary to initiate the recurring billing option.
  • After that, the customers will have to go ahead and provide their payment details. And with that, they must also trust and permit you to save the card details for future payments.
  • It's worth noting that recurring payments won't be possible unless the processor contacts three different parties for approval of the transaction. They include the client's credit card network, issuing bank, and the acquiring bank.
Key Benefits Of Recurring Billing For Business Owners

Why You Should Consider Recurring Billing

Because of the mutually beneficial option that recurring payments offer both consumers and businesses, the billing system has now become popular in most companies. Here are some of the benefits that you stand to gain by considering subscription billing for your business.

Reduced Administrative Costs

One of the benefits of recurring payments is that it helps to reduce invoicing and other associated costs. Apart from that, it also enables businesses to easily account for all their transactions.

Streamlined Communication

Another benefit of recurring payment is that it helps to reduce payment conversations with your customers. Rather, it gives you more time to talk about other important things, such as your product and services.

Encrypted Security

Payment gateways make use of PCI compliance and tokenization. And with that, you can securely manage your client's confidential data, without having to worry about any security concerns.

Increase Cash Flow

Surely, you'll agree with us that late payments can affect cash flow. That's why most organizations implement late fees to charge their clients for not paying on time. Well, with recurring payments, it's a win-win for you and your customers. That's because the payment option guarantees a reliable cash flow for businesses.

Increase Customer Retention

As mentioned earlier, a recurring billing system will help you to retain more customers for your business. With payment automation, most customers only focus on enjoying their products, without worrying about payment. This is one of the strategies that help businesses to achieve a boost in their customer retention.

Things You Need To Know Before Setting Up A Recurring Billing

Choosing What to Target

Before going ahead and setting up a recurring payment for your business, you must consider a few factors. These include;

Financial and Time Consuming

Before setting up a recurring payment for your business, it's worth noting that it'll cost you time and money. As such, ensure you have enough budget before running into the process.

Does Your Product Need Recurring Billing?

The first thing that you need to consider before starting a recurring billing is that you need to check whether or not your products or services need the payment option. Although subscription billing is effective for all businesses, it's worth noting that this payment option won't work for everybody. That leads us to the question of how do you know that recurring billing is right for your business? Well, you can only know this by running a pilot test to check whether the option is effective for you.

Worries as a Result of Dunning

No doubt, there are lots of benefits attached to starting a recurring billing for your business. However, you must also put in mind that the payment option isn't without its problems. One of them is the issue of dunning (calls made to customers regarding their debts). There are lots of reasons why customers might end up owing you money even with recurring billing. One of them is the expiration of credit cards. Apart from that, another common cause is when a credit card reaches its spending limit. As such, you'll need to create systems and processes to thoroughly check cards regularly to avoid the issue of dunning.

In case you're interested in starting a recurring billing for your business, you can speak to us at Clarity Ventures. We have a team of experts with many years of experience in helping businesses grow. We have successfully helped many of our clients to set up recurring billing systems in the past. As such, we have all it takes to handle the recurring payment option for you. That said, you can check here to speak with an expert and get more information regarding the payment option.