Best practices for taking recurring payments

Having a carefully planned and executed payments strategy in place leads to better customer experience, increased customer retention, and, for larger businesses, creates potential for significant revenue uplift.

Over the last few years, subscription services have become extremely popular across the UK and Europe. For example, subscription TV viewing in the UK almost doubled in 2015. Thanks to technology, customers can now subscribe to a huge range of products and services, such as entertainment from Netflix and Spotify, or receive their favourite newspapers and magazines in digital format. It’s even possible to get bacon delivered to the door!

That’s just the tip of the iceberg for subscription services. Businesses are also jumping onto the subscriptions bandwagon with increasing adoption of SaaS (software as a service) tools across all areas of business, in particular accounting, finance and sales functions.

Payments really matter for you as a provider of subscription services, whether your key target market is businesses or consumers. The ability to take recurring payments efficiently can mean the difference between success and failure in the minds of your customers. In addition, having a carefully planned and executed payments strategy in place leads to better customer experience, increased customer retention, and, for larger businesses, potential for a significant amount of revenue uplift.

In this guide we’ve outlined a number of best practices for taking recurring payments. We recommend you adopt some or all of these ideas to maximise your revenue while squeezing the most value out of your subscription-based business model.

Reduce churn by optimising billing and retrying processes

Transactions are commonly declined due to insufficient funds, but there are other reasons transactions may fail. For example, the rejection may be due to technical issues, so you may want to retry the payment in a space of time ranging from one hour to three or four days. It’s critical to make sure you have the right technology in place to immediately notify you about payment failures, tell you the reason why they failed, and have a simple solution available to retry them.

Two common reasons for failed payments are insufficient funds in the customer’s account, and the customer cancelling the mandate via their bank. GoCardless offers a full range of notifications to help you narrow down exactly what is causing your payments to fail, making you better equipped to solve the problem.

Avoid cancelled or expired cards

Direct Debit is of great benefit here, because it allows you to solve the common problem of payments failing due to expired or cancelled credit or debit cards. As Direct Debit operates from bank-to-bank, payments are much less likely to fail, and there is potential to reduce your churn rate to as low as 0.5% by using Direct Debit via GoCardless. This situation compares most favourably to alternative payment methods such as credit cards, where churn rates can be as high as 5-10%.

Allow customers to choose their preferred billing frequency and day This is the one of the most fool-proof ways to ensure that your customers have enough funds available when payment time arrives. Taking payments using Direct Debit via GoCardless allows you to offer your customers flexible payment terms; monthly, quarterly or annually - and to pay on the date that suits them best.

Get familiar with local or regional payment cycles If failures tend to happen due to insufficient funds, for monthly billing, it’s a good idea to examine local or regional payday cycles and bill customers immediately after those occur. You could also consider automating the whole process using Direct Debit, allowing your customers to choose the payment timings that suit them best.

To make sure you get payments right first time, we’ve put together a helpful checklist for recurring payments.

Better still, you could streamline your payments process and avoid the above hassles altogether, by using Direct Debit as your preferred payment method.

What’s more, Direct Debit has recently been highlighted as the UK’s most popular payment method for subscriptions. If you’re a subscription provider, you can’t afford not to include Direct Debit among your payment choices.

With GoCardless, you can manage all customer payments seamlessly, taking advantage of our low fees, flexible timings and fully-automated system. The online signup process is quick and easy with no contract and no minimum term.

We offer you the ability to create your own custom integration, via our API, or take advantage of our range of pre-built integrations with popular subscription billing and accounting software, including Zuora, Sage, QuickBooks and Xero.

Find out how GoCardless can help you improve your subscription payment success rates

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