5 Tips for how to manage recurring payments for start-ups

Managing recurring payments for startups involves a strategic combination of implementing robust payment processing systems, managing customer subscriptions, ensuring compliance with financial regulations, and optimising transaction security. As a start-up, employing a dependable, scalable solution, like subscription management software, to automate payment collection and admin is critical. Ultimately, efficient management of recurring payments is instrumental in boosting customer retention, sustaining cash flow, and driving the growth of start-ups.

For start-up businesses, the subscription business model could be an ideal fit. Many start-ups have succeeded with commercial subscription models, offering predictable revenue, immense scale opportunities, and stronger customer relationships.

But if you’re implementing a subscription-based model, your payment method matters. Failing to manage recurring payments quickly and efficiently may cause your customers to lose faith in your business and go elsewhere. Fortunately, learning to manage recurring payments doesn’t have to be a struggle. Find out everything you need to know with our top five tips on payment processing for start-ups.

1. Use GoCardless to manage recurring payments seamlessly

GoCardless is a great way to manage recurring payments for start-up businesses. With low fees, flexible timings, and an easy sign-up process, you can reduce involuntary churn and maximise LTV. 

Plus, GoCardless offers seamless integrations with popular accounting software like Xero, QuickBooks, and Sage, so it’s simple to incorporate GoCardless into your existing payment stack.

2. Offer the right payment method for your chosen market

Different countries have different preferences regarding their preferred payment method. To ensure fast payments for start-up businesses, it’s a good idea to find out what these preferences are and ensure you’re catering to them. GoCardless has put together a study of payment preferences for recurring purchases that can help you do just that. 

While the U.S. is still in thrall to credit cards – their preferred payment method for online and traditional subscriptions – other countries may be more likely to prefer bank payment or digital wallets. In Australia, credit cards, Bank Debit, and debit cards are the preferred options for online/traditional subscriptions, so offering these payment methods to your customers makes sense.

3. Optimise your billing procedures to reduce customer churn

Churn is one word liable to put any start-up business on edge. Whether due to insufficient funds or cancelled/expired cards, involuntary churn can be a significant problem for businesses trying to manage recurring payments effectively. To keep churn to a minimum, ensure that you set up your billing system to notify you of any payment failures and identify the issue causing the failure. 

Also, you should set up your payment process to retry payment after a set amount of time (1 hour, 24 hours, etc.), as technical issues can cause payment failures. It’s also worth noting that Bank Debit payment schemes are much less likely to fail as payment is taken directly from the account.

4. Keep communicating with your customers to reduce chargebacks

While getting your billing processes right is a significant factor in learning how to manage recurring payments, it’s also important not to forget the human aspect. If you cannot provide the goods or services a customer orders by the stated delivery date, you should notify them immediately. This way, you can reduce the number of chargebacks your business experiences while also minimising the number of calls to your customer support line.  

5. Let your customers choose their preferred payment schedule

Sometimes, the best way to handle payment processing for a start-up business is to offer flexible payment terms. By letting your customers select the day they’re billed and the frequency with which they’re billed, you can ensure that they always have enough funds in the bank to make payments. 

Allow your customers to receive bills monthly, quarterly, or annually – they’ll appreciate the additional flexibility and may be more likely to stick around for the long haul.

Key Takeaways

Offering bank payments as part of your payment mix can solve some issues in managing recurring payments for start-ups. While cards are often considered a subscription payment requirement, they have issues. 

Payment failure and churn

Payment failure, chargebacks and churn are particular problems with card payments, which experience failure rates between 10 - 15% resulting in lost customers. Bank payments, such as Direct Debit, have much higher success rates - GoCardless collects 97.3% of Direct Debit payments on the first attempt, cutting involuntary churn cut by more than 70% and increasing lifetime value and ROI by more than 30%.

Local payment methods

A significant 76% of international consumers preferred options to pay in their local currency. Bank payments offer you the chance to provide those local options. GoCardless offers cross-border, direct account-to-account bank payment options in over 30 countries, with low transactions fee and using the Real Exchange Rate. 

Automation

GoCardless automates bank payment collection, allowing you more time to prioritise customer service and business growth. Setting up payments is a breeze through the merchant dashboard, and you can even automate the entire collection and reconciliation process. 

Flexibility

GoCardless allows you to edit subscription amounts and schedules without needing new customer authorisation – this allows you to offer customers more convenient payment dates. .

Case Study: Carrefour

Supermarket giant Carrefour wanted to trial a new subscription service and decided that as a global leader in online payments with a reputation for reliability, responsiveness and being customer-focused GoCardless had the technology and the experience to deliver. 

Just one month after its integration, the GoCardless solution outperformed SEPA’s average for failed payments: just a 1.79% failure rate compared to 2.9% for SEPA.

Charlotte Lacombe, Project Manager in Carrefour’s Strategy Division, was impressed;

We can help

GoCardless helps you automate the collection of subscription or recurring payments, offering you and your customers flexible and cost-effective payment collection. It’s easy to set up and collect payments through our user-friendly merchant dashboard, or you can connect GoCardless with over 350 partner apps, such as Xero and Quickbooks.

With a pay-as-you-go pricing model and no contracts or long-term commitment required, you can try GoCardless risk-free and automate payment collection for subscription and recurring payments, reducing failed payments and reducing manual admin.

People Also Ask: 

How do small businesses accept recurring payments?

Small businesses accept recurring payments by implementing online invoicing and payment gateways which provide a secure, convenient, and reliable mode of payment for both global merchants and their customers. The setup is quick and easy and can facilitate more sales, simultaneously building customer trust. A business leveraging this technology pays significantly lower costs compared to traditional methods, with high-level automation leading to a reduction in the cost per invoice by nearly 250%. 

These digital financial transactions bring a major advantage by ensuring prompt and instant payments, eliminating the need for the traditional process of sending reminder emails for late payments. In summary, the adoption of online payment systems has revolutionised the process of accepting recurring payments for small businesses, making it more efficient, cost-effective, and customer-friendly.

How do I set up a recurring subscription?

Setting up a recurring subscription involves a systematic procedure that entails specifying your subscription terms, implementing a subscription management portal for client charges, and outlining the process for purchasing your subscription product. Recurring subscriptions often leverage payment platforms such as Shopify, Square, or Stripe, which allow for regular, repeating payments from the subscriber to the payee, forming a type of ongoing contract, as seen in examples like monthly phone bills. 

Advanced subscription models can also integrate with development platforms like Firebase for customised features, especially for tech-savvy businesses. Furthermore, you may set up recurring credit card payments or sales receipts in accounting software like QuickBooks for seamless financial management. This comprehensive approach ensures that the recurring subscription setup is well-aligned with your business model and customer needs, optimising your revenue and retention rate.

How can I stop all recurring payments?

Stopping all recurring payments entails cancelling or suspending the automatic payment feature associated with your financial account. This requires navigating to the payment settings of your account on the respective platform and selecting the option to halt or cancel recurring payments. It's crucial to review the details of each payment arrangement, as some may require specific steps or have cancellation penalties. 

Also, it's beneficial to keep track of all your subscriptions or recurring payments, frequently reviewing them to confirm whether you still require those services. Additionally, contacting your bank or card issuer directly can provide another method to manage and stop recurring payments. Remember, it's crucial to obtain confirmation of the cancellation, either in written or electronic form, to avoid any potential disputes.