Complete Guide to Recurring Payment Processing for Small Business and Enterprise Companies

What Is a Recurring Payment?

A recurring payment, also known as a subscription, recurrent billing, or automatic payment (autopay), is an electronically delivered payment that repeats on a set timetable.

Recurring payments automatically charge customers on a regular basis for things such as memberships, subscriptions, lessons, and services. To make recurring payments, customers must sign a one-time authorization form.

Why Are Recurring Payments Helpful?

Recurring payments will be helpful for your business if you have customers who want to pay for and receive something on a regular basis, such as the perks that come with a premium membership to your platform. For example, SaaS-based organizations leverage a monthly billing model to decrease the upfront cost, while creating secured and predictable revenue streams.

Customers often want to continue enjoying certain benefits that come with continuously receiving a product or service, and they don’t want to have to remember to go into their account to set up payment for the same thing every week, month, or year. They want to set it and forget it—so they can continue to receive the benefits of the service without having to worry about payments.

Therefore, recurring payments improve the customer experience tenfold, and it would benefit just about every business to have the option available for customers should they want it.

How Do You Set Up a Recurring Payment?

To set up a recurring payment, you’ll first need to collect some information from the customer. This includes their name, billing address, and credit card or payment information. The customer also needs to authorize the recurring payments, and you’ll need to have terms and conditions that include a cancellation policy for them to sign.

The automatic billing cycle for the recurring payment can be weekly, monthly, annually, or at another time interval of your choosing. You’ll want to pick something that makes sense for the product or service your client is paying for.

Once you have all the information, you can set up the recurring payment in your payment portal or accounting software.

The simplest approach to taking recurring payments is with an all-in-one payment processor that handles transactions while also providing billing software and security measures to safeguard your consumers' personal information.

Learn About the Most Versatile Payment Hub

How Do Recurring Payments Work?

Whether you want to handle recurring payments with a microprocessor or a B2B invoicing solution, the basic procedures are similar: customers sign up for a subscription or recurrent billing invoice, and you charge them at regular intervals for the products or services you provide. You'll want to save the customer's payment information on file so that the charges can be handled automatically.

How Much Does It Cost to Accept Recurring Payments?

Recurring payment processing costs charged by payment processors are generally a minor percentage of the overall transaction amount, but can be a bit higher than in-person credit card transactions because fraud card-not-present transactions can be higher. However, the cost depends on who you go with. Clarity Payment Processing actually doesn't have any costs associated with processing payments.

Check out Clarity Payment Hub to learn why.

Other payment processors or gateways generally charge a percentage of the transaction amount and some also add monthly fees. Square, for example, charges 3.5 percent plus 15 cents per invoice. On the other hand, Stax and PaySimple charge monthly subscriptions for recurring payments—but they also have lower per-transaction prices than other providers.

There are a variety of other payment processing services or perks that these companies may provide. Clarity's innovative Payment Hub solution or competitive rates from our payment processing services, or options like Square's free business management suite or PaySimple's event booking capabilities might be the deciding factor.

Who Uses Recurring Payments?

Many businesses use recurring payments to regularly provide customers with products or services. Oftentimes, online recurring payments occur through a user account or portal with payment information securely stored. Recurring payments are perfect for these types of businesses:

• Streaming Services: Subscribers can watch a myriad of shows on a given platform. Examples include Netflix, Hulu, and Amazon Prime Video. There are also platforms for music and podcasts, such as Spotify, Audible, and Deezer.
• eCommerce: You can subscribe to eCommerce platforms like Amazon Prime or Thrive Market to receive membership-only perks and access. Other eCommerce subscription models, like Huel and Amazon Subscribe and Save, are more simplistic, with just regular deliveries of a product of your choosing.
• Subscription Box Businesses: Subscribers pay for periodic deliveries of boxes with certain products in them. Dollar Shave Club, Birchbox, and Blue Apron are all box businesses.
• Care and Cleaning Services: Automated repeat payments can be made using single or bulk invoices for lawn care, house cleaning, and childcare.
• Utilities: Utility bills like electricity, internet services, and cell phone services typically have recurring or automatic payment options.
• Tutoring or Lessons: Fitness organizations, music instructors, dance studios, and teaching businesses can issue monthly invoices and automatic payments.
• Clubs or Loyalty Programs: Wine-of-the-month clubs and store loyalty programs may use recurring payments to automate monthly club purchases or fees.
• Gyms and Fitness Centers: Gyms and fitness centers often require you to have a membership to use the facilities, which means having recurring payments. Though some do allow you to bring in a guest without them also paying for a membership.
• Software or Online Services: Recurring payments are often used for online services such as advertising, gaming products, software as a service (SaaS), virtual service providers, and some mobile apps.
• E-Learning Academies: Online courses are made available to subscribers on an ongoing basis and new course content is typically uploaded regularly.
• Members-Only Blogs: Informational bloggers can make content available to members or subscribers only, so recurring payments give subscribers premium access.
• Magazines and Publications: The Economist, The New York Times, National Geographic, Forbes, and Scientific American are all magazines that you can sign up to have regular access to. Most typically deliver the printed copies weekly or bi-weekly and give members unlimited access to the online content.

If you're selling anything that auto-renews or requires periodic automatic payments, you'll need a payment processor capable of processing the recurring transactions. The easier it is for clients to pay you, the better.

How Your Business and Customers Benefit from Recurring Payments

Both your business and your customers benefit from recurring payment systems. Let's explore each.

Benefits for Your Customers

Automatic recurring payments are designed to ensure your customers never run out of a product or service. They don't have to worry about manually entering payment information each time or forgetting to make the next purchase. Recurring payments save customers time and hassle, creating a better experience.

In summary, customers get these benefits:

• Continuous or regular access to products and services.
• Don’t have to manually enter payment info each time.
• Don't have to remember to make the next purchase.
• Saves time and hassle.

Benefits for Your Business

Recurring payments boost customer retention, meaning they'll continue buying from your business for longer. Also, if customers continue getting the access they want to your products or services, they'll be happier overall with your business, which may mean they'll purchase more from you. They may even tell their family and friends about their experience with your business, possibly meaning more potential customers.

Recurring payments also save your company time, because rather than manually creating invoices or calling clients for payment, billing is an automatic process that can save you and your staff hours each billing cycle.

Furthermore, recurring payments offer your business a predictable and constant stream of revenue. With a membership or subscription model, you'll know exactly when payments are coming in ahead of time. You can also more accurately forecast the demand for products and services and stock your inventory accordingly.

To summarize, recurring payments offer these benefits for your business:

• Boosts customer retention and satisfaction.
• Brings in more potential customers.
• Saves your business time and resources.
• Provides predictable and constant revenue.
• Allows you to forecast demand more accurately and stock inventory accordingly.

Automatic recurring payments offer many advantages for both businesses and consumers, especially for things customers rely on frequently and that businesses can produce regularly. When setting up recurring payments for your business, it's important to choose a payment service that meets your needs.