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What Exactly Is Recurring Billing, How Does It Work, and Why Should I Use It?

Recurring billing is the ability to automatically send invoices and receive payments on a predetermined schedule. 

Every month (or billing cycle):

  • A new statement is sent electronically to the client — usually via email. This digital invoice is more of a notification than an actionable item.
  • The statement automatically triggers a payment, which is instantly deducted from the client's account — usually via credit card, ACH or wire transfer.

Yet why go through all this? How do merchants and their customers benefit from recurring billing?

Recurring Billing Advantages for Businesses

There are many reasons why you (as a merchant) should explore this payment option, including:

1.  Increased Convenience

You don't need to actively manage billing cycles. All invoices and payments happen automatically, without you having to directly intervene. This frees more time for other activities — like launching new products or improving marketing campaigns.

2.  Better Cash Flow and Forecasting

When your customers sign up for recurring billing, you won’t have to chase down missing or delayed payments as frequently. Money comes into your account like clockwork. This helps to improve cash flow within your business, and it also makes long-term financial planning much easier.

3.  Increased Sales

With traditional billing, customers must deliberately send payments, and as any merchant can attest, this doesn't always happen with the regularity that it should.  However, with recurring billing, all future payments are guaranteed — unless the customer explicitly opts out.

This allows you to use inertia to your advantage.

4.  Deceptively Competitive Pricing

Recurring billing allows you to transform your products and services into subscription-based models. This is especially useful for big-ticket items. Rather than charge a one-time fee of $120, you can offer your customers much more attractive pricing (i.e. $10 a month over the course of the year).

This subscription approach also provides more detailed analytics. If customers do opt out of recurring billing, you’re able to pinpoint exactly when and why they did so. Thereafter, you can implement any necessary changes.

Recurring Billing Advantages for Consumers

This payment option is much more convenient for your users. They don't have to look for checkbooks or postage in order to settle their accounts. They don't even have to sit down in front of their computers once a month to manage their finances.  All payments are 100 percent hands-off (after the initial setup).

As an added benefit, this also means your users pay fewer late fees and surcharges.

How to Get Started with Recurring Billing

Nearly every payment solution lends itself to recurring billing. Electronic transactions are the easiest to set up; but it’s even possible to have paper-based invoices automatically mailed, and paper-based checks automatically collected and deposited.

As a general rule, it’s best to make recurring billing your business’s default payment option. In other words, you should require that customers actively opt out if they don’t want to use it (rather than opt in).

To learn more about BluePay’s PCI-compliant recurring billing solutions, contact our payment support team today.

Topics: Recurring Billing and Electronic Invoicing

Welcome to the BluePay Blog!

Whether you're a small business, an enterprise corporation, a financial institution, or a software partner, we have created a series of blog posts to help you and your customers, learn more about the complex nature of payments. Take a look to learn how payments can help to simplify your business operation, and may even help to grow your revenue.

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