When you’re starting a new business, one of the first things you need to think about is which payment methods you’re going to offer. As technology has continued to develop, businesses are now able to accept a wide variety of cost-effective payment types, including recurring payments, which can help your business to offer a convenient solution for your customers.
Whether you’re setting up a retail store, a service-based business or even a not-for-profit, there are lots of reasons why you should opt to accept recurring payments. As well as offering great benefits for your business, it also provides a smoother, more convenient experience for your customers.
In this article, we’re going to take an in-depth look at recurring payments, including what they are, how they work, and how they can support your growing business.
We’ll cover the following topics:
Recurring payments are when customers authorise a service provider to withdraw funds from their debit or credit account automatically at regular intervals. They’re used to pay for goods and services provided on an ongoing basis, such as software subscriptions, digital media services and regular deliveries of consumables.
Strictly speaking, the term ‘recurring payments’ refers purely to a specific type of instruction given to your bank. It’s an agreement between the customer and the bank to allow for funds to be withdrawn on a regular basis. However, people tend to use ‘recurring payment’ to mean a Direct Debit or standing order. Legally and operationally, these are completely different things, which can make the subject a little confusing.
In this article, we’re going to focus on recurring payments in the broader sense, discussing which of the different options are suitable for your business to offer its customers.
In order to grow, your business needs to have access to cash and a predictable income stream. Recurring payments are great for this, offering a wide range of benefits to support cash flow and stability.
Easier debt management
By automating monthly, quarterly or annual payments, recurring payments make it much less likely that your customers will go into debt in the first place. The payment is made at the same time each pay period, without them having to remember to action it, and without you having to chase it. This means that your company is likely to have a smaller aged debtors list and more cash in its bank account.
Should customers fall behind on their payments, it’s easy to set up a recurring payment for slightly more than their usual amount, meaning that they can gradually and reliably get their account back on track. As well as making credit control easier, this offers a better service for customers, protecting your reputation and helping to encourage them to stay with your business in the future.
Lower operational costs
Recurring payments are much cheaper to operate for the business, both from the point of view of bank charges but also in regards to processing costs. Manual payment processing can be extremely time consuming, requiring businesses to issue invoices, receive cash, manually enter payments and reconcile customer accounts. The time, effort and higher risk of manual errors associated with manual payments makes it an expensive option.
By automating the payment process, your business can spend less time and money on associated administrative tasks. A robust payment processing system like Access PaySuite is able to integrate directly with your website and accounting software. This allows you to manage your customer’s recurring payments quickly, accurately and without fuss.
Increased profits
Making the payment process simple and worry free means that customers are more likely to be loyal to your business. This is particularly true if your competitors aren’t offering recurring payments, as this gives you a unique selling point. By encouraging customers to stay with you for longer, an easy payment process ultimately increases their lifetime value and boosts profits.
A recurring payment system also helps to attract new customers. It offers a simple, reliable solution that allows them to access goods and services on a regular basis without having to remember to make manual payments. You can offer discounted rates or a free trial to convince new customers to sign up. With the right pricing strategies and upselling tactics, you can leverage the stability of regular payments to turn what could have been a one-off transaction into a long-term revenue stream.
More options for your business
Introducing a recurring payment solution is a great way to ensure that your company remains flexible in the way it does business. For example, a recurring payment solution allows you to pivot to a subscription model, helping you to offer more convenience for your customers. Your recurring payment solution will allow you to offer different billing cycles, as well as the option to upgrade or downgrade their plan as needed, unlocking more sales revenues and upselling opportunities.
It’s also worth remembering that you don’t need to just offer recurring payments on their own; you can use them alongside other payment methods to suit a variety of different products and services. Recurring payments also allow your business to collect variable amounts, for example when billing for utilities, or offer it as a method of prepaying accounts.
Improved security and compliance
Like any form of payment, recurring payments require careful attention to security to minimise the risk of fraud and data breach. Instead of entering their card details each time they need to make a purchase, recurring payment solutions make this a one-time process. Payment information is then securely stored and encrypted.
Payment management solutions also help your business to comply with regulatory requirements such as PCI DSS compliance, giving your customers the peace of mind that their financial information is being kept safe.
The key to growing your business is creating happy customers. There are two key ways to do this: making your products or services as useful and attractive as you can, and ensuring a simple purchasing and payment process. Recurring payments help to support both of these approaches, as well as offering a variety of other benefits.
Convenience
Offering recurring payments allows customers to choose the payment method that suits them best. For many consumers, recurring payments are the most convenient, as they only need to enter their billing information once, instead of monthly, quarterly or annually.
Continuous service
By automating the process, recurring payments eliminate the need for customers to remember to make a manual payment each billing cycle. This saves time and effort, ensuring that their bills are paid on time so they can continue to use your products and services without worry.
Financial benefits
Recurring payments allow customers to plan their budgets more effectively. By knowing exactly how much will be deducted from their accounts and when, they can better manage their finances and avoid late payment fees.
Payment flexibility
Many businesses offer flexible options for managing recurring payments, such as choosing payment dates or modifying subscription plans. This allows customers to better manage their finances, such as arranging the payment date for after their regular payday.
Improved credit score
Making timely, consistent payments can positively impact a person’s credit score. Setting up a recurring payment can help customers to maintain a good payment history, which can help to prove their creditworthiness.
The recurring payment process works by making a call on a customers’ bank account. To do this, you need to use an authorised recurring payment gateway, which is connected to your payments software using an API (application programming interface). You’ll then need to make sure that your payment terms are explicitly stated on your website, and that you obtain customer authorisation for any recurring payments.
There are many different payment gateways offering recurring payments available on the market, so it’s important to do your research to find out which one is the right choice for your business. It’s quick and easy to set up, so you can start offering recurring payments to your customers in no time.
Take a look at our guide to setting up recurring payments for your business to learn more about the process in detail.
So how exactly does a recurring payment differ from a Direct Debit? And which one should your business use? Like most things, there are pros and cons to both methods. Depending on the size of your business and the products or services you offer, there might be a clear winner.
Recurring payments require a customer to authorise a business or service provider to make charges to their credit or debit card. Accepting recurring card payments therefore means that there’s a risk of failure from expired cards.
Direct Debits are taken directly from the customer’s bank, and don’t require card information to be initiated. Organisations are vetted by banks before they are authorised to take Direct Debits, and payments are protected by the Direct Debit Guarantee. Both of these offer peace of mind for customers and help to make your business more trustworthy.
Generally speaking, Direct Debits are considered better for businesses, as money is taken directly from the customer’s bank account. This means that you don’t have to worry about failed payments from expired credit and debit cards, and the associated costs.
However, recurring payments are quicker and easier for customers to set up. This simplicity can help to boost sales by avoiding up-front admin that could be off putting for customers. The choice will likely come down to which solution best meets the needs of your customers, and the nature of your business.
PaySuite provides a fully secure and compliant payment processing solution, allowing businesses of all sizes to accept recurring payments with ease.
By offering seamless integration with hundreds of leading banking, accounting and checkout solutions, we can help to ensure that your data is accurate across all of your internal and external systems. Access PaySuite also supports business growth with intelligent automation tools that can help you to minimise manual tasks and better manage your resources.
Contact us today and we’ll be happy to advise you on how our recurring payment solution can help your business to thrive.
Want to know more? Speak to our friendly team who can talk you through our payments solutions. We offer direct debits with simple, affordable pricing, with no set-up fee and transaction fees as low as 4p.
Generally there are two types of recurring payments: fixed and variable.Things like gym memberships or subscriptions services like Netflix are fixed recurring payments. Variable recurring payments are as they sound and the charge may change depending on the services provided, an example is a mobile phone or utilities bill.
Typically recurring payments are known as automatic. Although they might be called automatic payments, subscription payments or recurring billing. Whichever name they come after it's when a customer authorises a provider to charge for their services at an arrange schedule.
The best way to stop a recurring payment is to contact the service provider that is billing you. You can also use online banking to easily stop a direct debit.
Recurring card payments offer fast clearance and are charged to the credit or debit card account. Direct Debits may take several business days to clear and are pulled from a bank account.
Pricing varies depending on the size of your business and the number of transactions you process. See our pricing here or get a quote.
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