recurring billing software

Recurring billing refers to the process of repeatedly and automatically charging customers for services or products. This can include monthly subscriptions, membership fees, or usage-based charges.This payment method is becoming increasingly popular because it provides a convenient and efficient way for businesses to receive predictable revenue and for customers to have a hassle-free payment experience.Automated recurring billing is most commonly used in subscription business models in Communications, Software & SaaS, Energy & Utility, and Media & Entertainment industries.It works best with automated payment collection, but that function mostly depends on the selected business model. To implement recurring billing, billing software or a platform is needed.It truthfully and promptly bills each customer, taking into account international taxes, proration, missed payments, etc. Recurring billing is done monthly, quarterly, yearly, or in any other custom billing cycle. Table of contentsHow Does Recurring billing work?Which industries use recurring billing?TelecommunicationsEnergy and Utility companiesSaas & Software industryMedia & EntertainmentOther industriesPricing models and recurring billingBenefits of recurring billing for companiesLess missed or late paymentsIncreased customer retention and reduced churnAutomated billingIncreased securityBenefits of recurring billing for customersPossible issues with recurring billingRecurring billing and digitalization How Does Recurring billing work? Recurring billing is the system most suitable for businesses that provide usage-based or metered billing, subscriptions, or a combination of various charging and billing models.Companies use recurring billing software to automate their charging and billing process fully. Customers are charged and billed for the services or goods without additional involvement from both sides.After the initial offer is confirmed, the billing cycle and payment methods are set and assigned to the customer's data. From then on, the customer gets billed repeatedly until either side terminates the contract. Which industries use recurring billing? Telecommunications Recurring billing is the system most suitable for telecommunication companies. Communications service providers (CSP) use monthly or annual billing systems to charge users for provided services and other additional services or devices.These additional charges can include subscriptions to music streaming services or payments in installments for mobile phones and other gadgets.For example, a customer can subscribe to a monthly mobile phone subscription which includes a certain amount of phone calls, SMS-s, and mobile data. To that plan, he can add subscriptions to other services like music streaming or IP TV and purchase extra mobile data usage on the home network or when roaming.Usually, when signing a 12 or 24 months contract, he can also buy a mobile device, router, or TV box for a discounted price which he repays in installments.From that moment on, the customer automatically gets an invoice every month. To ensure a customer gets only one invoice for all services, the recurring billing platform uses a function called consolidated billing and invoicing. Energy and Utility companies Without a recurring billing platform, it would be hard for electricity and gas providers or utility companies to function. Usage-based billing combined with automated consolidating invoicing in monthly billing cycles is the best formula for these companies to keep track of their user, their consumption, and payments.For a much more in-depth view of energy & utility billing, please read our blogs on utility billing software solutions and specifics of water utility billing software. Saas & Software industry SaaS and software businesses like Google Apps, Slack, Microsoft, and Adobe are among the most loyal users of the recurring billing system. It is especially convenient for them to charge their users with prearranged automated payments rather than ask for payment information repeatedly.Once the user subscribes and pays the first installment, the business gathers the provided payment information, and from that moment on, the monthly or annual subscription is on.Recurring billing solutions are also used with business models like Free Trial or Freemium, commonly used in SaaS business models. Media & Entertainment Publications such as online newspapers, magazines, and video streaming services also benefit from a recurring billing system. Most of these services use subscription or pay-per-use (pay-per-view) business models or a combination of both.While typically, for most subscriptions, the billing cycle is one month, it's not uncommon for newspapers and magazines to offer an annual subscription.If the pay-per-use model bills the user when he uses the service, it is not recurring billing. However, the more practical way is to use recurring billing and bill the users once a month for all services they used in that period. Other industries Recurring billing is changing other traditional industries. For example, let's look at the fitness industry.Gym subscriptions are not new. They have offered monthly, quarterly, or annual gym memberships for a long time, but now the system has changed.Currently, many gyms still collect membership payments manually. A user will come to the desk and pay monthly or annually by cash or credit card. Sometimes he will get a printed invoice and pay over a bank transfer.The common problem is that members tend to forget to pay or skip months.A more modern way is to use an online subscription system that can automatically and recurringly charge the members and collect payments directly from their credit card or another payment method.This way, they can reduce churn and have a much more effective dunning process. This solution has proven the best and most convenient one for companies and customers in many industries.Please read our blog on selecting the best subscription management software for more information on the software solution needed and why recurring billing is not the same as subscriptions. Pricing models and recurring billing Billing is a process of collecting all charges assigned to a specific user in a period and converting them into billable units. Those billable units are then used to form an invoice, a document presented to the customer.Recurring billing is an ongoing automatic process at the end of every billing cycle.In connection with this process, there is a lot of talk about pricing and recurring billing pricing models. Fixed or variable pricing models. Quantity-based or usage-based pricing. Multi-subscriptions or product bundles.Pricing models range from simple to complex, but ultimately, it comes down to selecting the right automated recurring billing platform. Especially when talking about big volumes of data, customers, and chargeable events, where enterprise billing software is a must.There are three conditions for the billing platform to handle any recurring billing pricing model successfully.First, no matter the pricing model, it must be able to bill charges according to the product offers. It must also consider discounts or other individual variables that affect the end price.Second, it must be able to perform consolidated billing so that the user gets only one joined invoice for all services.Third, it must be able to repeat this automatically at the end of every billing cycle.Modern recurring billing solutions must handle any pricing model because you never know what pricing model you will apply next. Benefits of recurring billing for companies Recurring billing has many advantages for both companies and users. Let's start with some of the more important benefits for companies. Predictable recurring revenue and cash flow Better revenue forecasting enables businesses to scale, which results in more effective capital allocation and a higher return on investment. It is also a base for informed decisions about the product lineup's future and the company's general growth.With recurring billing, companies can create a steady, predictable cash flow and secure the monthly (MRR) and annual recurring revenues (ARR) they need to operate without stress. Less missed or late payments Automated recurring billing makes a user less likely to intentionally or unintentionally delay or miss a payment. Less missed payments mean better cash flow and better liquidity for the company.But not only that. Collecting late or missed payments is always costly and time-consuming. Recurring billing also means less dunning, and good billing software will also include an automated dunning system with warnings and pre-dunning strategies. Increased customer retention and reduced churn A good portion of churn in subscriptions is related to involuntary churn caused by missed payments. If this is reduced, customer retention rates will rise, and churn rates will fall. Automated billing An automated recurring billing system removes the need for manual involvement. Doing so saves time and human resources needed to perform billing and invoicing. It also reduces the dangers and costs of human errors, all too common in traditional billing systems.Automated recurring billing also reduces administrative and invoicing costs, especially if the whole Order to Cash (O2C) process is digitalized. Increased security Payment and customer data security are important topics in connection with the rise of cyber-criminal. Modern, up-to-date billing solutions, like ones needed for recurring billing, include the highest level of security. They guarantee that all your and your customer's data is safe and stored according to data protection legislation. Benefits of recurring billing for customers The most apparent benefit of recurring billing for customers is the "Set and forget" effect. Once a user decides on a product offer and enters his payment details, he can forget about payments and just enjoy the product.The user experience will significantly improve without worrying about making regular payments. Not to mention how annoying receiving payment reminders can be if you somehow forget to pay.Users feel encouraged to buy and use additional services and products if the whole order and payment process is simple.Last but not least, the whole system must include a user-friendly portal and customer support. There, customers can alter their payment details, change their product offerings or subscriptions or cancel them. Possible issues with recurring billing The issues with recurring billing can include payment failures, possible errors, and above all, security.Protecting customers' payment information should be the main priority of every business. Businesses should integrate fraud detection and prevention tools within the recurring billing system to reduce the chance of fraudulent payment processing.Due to card expiration, insufficient funds, or inaccurate card information, recurring billing can experience payment problems.Businesses that use recurring billing solutions must have a strategy to handle this payment failure. In addition, payment problems can lead to payment errors. Notifying customers and resolving the issue can be tiresome and unmanageable, especially if the customer base is growing. Fraudulent actions are also likely to happen. Recurring billing and digitalization Thanks to automated and reliable recurring billing solutions, customers have a seamless and stress-free experience. On the other hand, the business benefits from enhanced customer retention, lower administrative costs, and fewer accounts receivable risks.Recurring billing in connection with the digitalization of processes is also sustainable because it greatly reduces the use of paper, printing, and delivery. With this online automated process, businesses do not need to send invoices, receipts, or other printed documentation. Want to get more information about our solutions? Leave a comment below or Schedule a Demo!

What is Recurring billing?

Recurring billing – Benefits and Challenges for your business