Recurring charges are a big thing, and we believe that automated billing is necessary for any serious business. You can take your business from a start-up to success or streamline enterprise operations to increase profits and reduce costs with a suitable recurring billing system. Since they benefit both businesses and customers, recurring payments grow worldwide.
To help your business succeed in this world full of competition, you’ll need the right recurring billing software and a strategy to make the most of your recurring billing options. Let’s check what your business needs to know about recurring billing systems and recurring charges in general.
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Recurring charges are everywhere. To illustrate, this can be your monthly subscription to an online newspaper where you are billed the same amount on a selected day in the month. A recurring charge is also your telecom bill, where you are charged your subscription plus extra usage-based charges if you exceed your monthly data plan. A recurring plan can also be your credit card, where you are billed on a selected day of the month, but the amount will be different every time.
What Are Recurring Charges (And How Do They Work)
To put it simply, recurring billing = repeated payments. It is an arrangement between a merchant and a customer where they agree to be automatically charged for specified services or products delivered to them continuously. For starters, customers choose “recurring billing” as their desired payment method, agree with the merchant on a designated billing schedule, and give their card permission to be charged according to the specified subscription model. You can set up recurring payments for your customers.
Recurring transactions are deducted from the customer’s card or bank account at the same time of the month, each month, without further action from them. Customers can view the amount and date of upcoming transactions on their statements. These charges continue until the customer decides to cancel the subscription.
Are Subscriptions And Recurring Charges The Same
Well, the terms subscription billing and recurring billing are similar in some ways, but not even. Both subscription and recurring billing involve an auto-pay system, customer’s payment information storage, and periodic withdrawal of credit from the customer’s account. Apart from auto-charging, other payment methods like cash and check are allowed in subscription systems and recurring billing.
The significant difference between them is the pricing plans. Subscription businesses can have multiple pricing plans, where the customers can choose to move to a higher or lower plan at any time, depending on their business needs.
This is a common question, but the reality is that subscriptions are just the most common form of recurring charges. Good billing software for recurring charges enables subscriptions and much more. Remember that recurring billing and charges are suitable for any business, not just subscription businesses, even if subscription businesses mostly use them!
Fixed or Variable Pricing Plans
Recurring payments can be either fixed or variable. The customer is charged the same amount each time when they are fixed. With variable recurring billing, the payment amount depends on the cost of the customer’s services and their needs during the payment period — their usage. However, variable recurring payments may be better for service providers whose offerings vary in quantity (i.e., a tutor who sometimes provides two hours of tutoring instead of one).
Some Examples Of Pricing Plans
- Usage-based: You pay for what you use with the usage-based billing plans. There is no minimum monthly charge. Customers can upgrade or downgrade the plan at any time. Usually, customers are billed post usage on a regular, pre-determined schedule.
- Tiered: Different products or services have different price points. When the customer chooses another bundle of features or exceeds a particular volume of features, they need to upgrade to a higher pricing tier.
If you follow any of the above, make recurring billing easy with our simple and elegant system. Our revenue management software makes it easy for you to take payments and help facilitate recurring billing for a smooth transition.
Recurring vs. Non-recurring Charges
A recurring charge is a charge you set to recur automatically on the billing months you select. This can be done in the Membership Dues Schedule for various groups at the individual account level. They will automatically be generated on the 1st of the month you define until you tell the system not to charge it anymore. On the other hand, a non-recurring charge is a past invoice, whether an admin manually creates it (such as for a sweatshirt), someone registers online, or an admin generates fees. Most importantly, non-recurring charges generated this month will be included on the monthly invoice next month.
Recurring Billing (Pros and Cons)
Pros:
- Easier accounting and invoicing: recurring payment platforms can often integrate with your accounting and invoicing systems. In this case, recurring charges can trigger the creation of an invoice and the recording of a credit in the appropriate general ledger account. That’s less work for you and more accuracy in your billing.
- Fewer late or missed payments: let’s say your customers pay you regularly. The customer no longer has to remember to deliver you with recurring payments. Instead, they’ll have their funds automatically withdrawn and sent to you. The result is the near-elimination of late or missed client or customer payments.
- No need to ask customers or clients for payment: every small business owner likes earning money, but few enjoy pestering clients for payment. You’ll get your money automatically without asking for it with recurring payments. That means more significant cash flow and fewer headaches.
- Recognizing the revenue: this allows you to manage cash flow better and make the best use of the timing of the revenue recognition. It also helps protect your business’s profits. Instead of an unexpected downturn in sales, your company has more predictability in its cash flow since some revenue comes with every payment received.
- Better UX: to provide a good experience when purchasing subscriptions and gain customers’ trust, you have to create a better UX. Here, customers should identify the savings of a subscription plan, the selling plan options, and the terms and conditions. Recurring billing means customers do not get hounded for repeated charges. It saves them time and money and provides a personalized customer experience, such as customized subscription plans.
Cons:
- Complex Process: With recurring charges, recurring billing becomes more complicated than one-off payments. There are non-recurring add-ons, multiple pricing tiers, discounts, taxes, and many more. Handling recurring billing in-house can turn your billing into a mess – complex and puzzling. That’s where an innovative subscription platform like Tridens can help.
- Customer Churn: Subscribers have an option to cancel anytime. Customer churn is the annual percentage of customers who discontinue a subscription or membership during a given period. Subscription companies are more prone to churn than companies with traditional sales because subscriptions require a customer investment. If users are dissatisfied with the product, service, or price – churn happens. It is also why focusing on customer retention is vital for subscription businesses.
All-in-One Recurring Billing Software
In our honest opinion, recurring billing is an absolute must-have. Furthermore, the whole point of subscriptions is that they’re automated. So, make sure you put everything on autopilot with Tridens cloud billing software that automates your recurring billing process and sends out beautiful invoices out of the box based on your behalf’s billing frequency.
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