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From gyms to telecom providers, there are numerous businesses that take recurring payments from customers. If your business accepts regular payment for services rendered, you’ll want to compare the best recurring billing systems to find the best fit. Here’s a closer look at the recurring billing definition, types, and advantages to consider.
Recurring billing definition and types
Recurring billing simply refers to a payment model allowing businesses to charge customers at regular intervals. While in most cases payments are taken weekly, monthly, or annually, it’s also possible to set up your own custom intervals. Media companies, utility providers, and SaaS businesses all typically charge recurring payments.
There are two types of recurring billing cycles to be aware of as you choose the best system:
Fixed billing collects the same amount from a customer each cycle. Examples include service memberships, media subscriptions, and other fixed-price products.
Variable billing collects different amounts from the customer during each cycle. Examples include utility payments, where energy use is tracked with a meter and the customer charged accordingly.
What’s the difference between recurring vs subscription payments?
Subscription businesses offer a prime example of the recurring payment model, with customers signing up to receive regular access to services or delivery of products. In return, the customer provides payment details along with permission for the business to automatically take payments at periodic intervals. So, what’s the difference between recurring vs subscription payments?
While subscription and recurring billing systems rely on automated payments taken from customers at predetermined intervals, the key difference boils down to pricing plans. Recurring billing simply refers to the system of taking payment at the agreed-upon time using stored payment details. However, subscription-based business models often involve a tiered system of pricing plans. Customers can opt for the most basic level and then move up to the higher value plan as they wish.
What are the benefits of using a monthly billing system?
There are numerous benefits of using recurring billing, particularly if your business provides regular products and services to customers. While intervals can vary, monthly billing systems are widely preferred due to their convenience and predictability. Many business owners pay monthly bills, and with monthly payments coming in from customers this provides a reliable, steady cash flow.
It’s also easier for customers to track their payments when they’re taken out of a bank account at the same time each month. Sign-up is easy, and once customers have completed their initial payment authorization they don’t need to think about paying the monthly bills. This reduces late or missing payments and their associated fees.
What is the best recurring billing system for your business?
It’s clear that there are numerous advantages to implementing recurring billing, but not all recurring billing software is created alike. Taking automated payments does involve some challenges that the best software will overcome. For example, recurring billing can lead to failed payments if you’re relying on card payments. When the card expires, it’s important to notify the customer with enough time to update old payment details. Insufficient funds and card number typos can also lead to failed payments. The best recurring billing software will not only be convenient and secure, but also have built-in dunning management to retry cards.
Another solution is to use GoCardless and eliminate the uncertainty of failed card payments altogether. Instead, you can collect payments directly from customer bank accounts to save time and money while remaining in control. In fact, businesses can get paid up to twice as fast by accepting GoCardless payments online. With GoCardless, you can fully automate your recurring billing system with weekly, monthly, or custom billing cycles. It integrates with over 300 partners like Xero and Salesforce to streamline your invoicing and payments process, offering convenience to customer and business alike.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.