Improve Your Collections With Recurring Payments
Managing customer collections is not always easy, and there is often no protocol for consistent control in this aspect. One of the main problems of not having a clear collection strategy in the company is late payments. Around 20% of customers are late in their payments or do not pay their debt, significantly reducing the company's gross income.
If you offer a product or service that your customers need regularly, the best thing to do is to provide them with a recurring payment option. This will increase your sales flow and guarantee buyers a more convenient and straightforward payment method.
But how is it done? If you need help figuring out where to start, don't worry. We'll tell you what a recurring payment is, how you can use it in your business and how it differs from a one-time payment.
What Are Recurring Payments?
From Netflix to Photoshop, different types of companies have this form of payment, which is used for services billed periodically, according to a period established between the provider and the customers, who authorize to charge them a certain amount in exchange for goods or services, saving companies and customers a lot of time when it comes time to charge/pay.
The use of recurring payment has significantly grown in recent years due to the new service acquisition models available to consumers. Although this type of charging is more frequent in services such as those mentioned above, it is also possible to offer it in exchange for products that are sent periodically to the customer.
Types Of Recurring Payments
We can track two different types of recurring payments. The first includes recurring payments from the associated corporate bank accounts through bank payment. This action is crucial for Finance teams as it allows them to monitor cash flow and keep managers and stakeholders in the loop.
Secondly, we can track employees' subscriptions on their company cards. These recurring card payments, also known as 'continuous payment authorities' or 'future card payments', will include any regular charges on a company card.
By tracking regular payments made through the bank or with cards, your Finance team will be able to monitor cash flow and ensure there are always sufficient funds for other future activities or expenses.
What Are The Benefits Of Recurring Payments?
Recurring payments are popular because they offer several benefits for both businesses and consumers. Some of its significant benefits include:
- Consistent income: recurring payments improve cash flow with periodic income inflows that facilitate monthly income forecasting.
- Lower risk of non-payment: accepting recurring payments increases collection guarantees since automatic payments have lower default rates. In addition, it is also easier to have debt collection processes in place.
- Business scalability: automating the process of receiving payments makes it easier for a business to grow in a scalable manner.
- Reduces uncertainty: one of the main objectives of recurring payments for businesses is to forecast the business situation in approximately one year accurately. Receiving recurring payments is the way to do this.
- Increased customer retention: subscribing to a product or service improves customer retention by creating a time-based relationship that is harder to break and will be easier to reduce churn.
- Convenience for customers: receiving recurring payments is convenient for companies and customers. This way, they no longer have to worry about paying every month or renewing their service because it is done automatically.
Recurring payments reduce the risk of non-payment, improve the relationship with the customer, and enhance the financial management of the business. It is also worth noting the growth of the recurring business market: in 2020, in the United States alone, the increase was 12%, even with the 10% decline of the country's largest companies.
Offering recurring payments is a way to build customer loyalty and ensure the circulation of capital in the company.
Why Are Recurring Payments Important For Customers?
Recurring payments are fundamental for the customer, who can choose how they want to pay. This means being able to pay the "bill" in their preferred channels or even program the automatic debit, so they never miss the due date.
Since the payment system usually sends reminders, the customer pays on the correct date and avoids interest and penalties. In other words, you have a more convenient and economical means of payment.
Companies are constantly concerned about improving the quality of this experience, increasing their performance and delivery to the end consumer. Adopting an automated platform with recurring billing by credit card and other means of payment is also very advantageous for the entrepreneur and his company.
Advantages Of A Recurring Billing System
Adopting an automated platform with recurring billing by credit card and other means of payment is also very advantageous for the entrepreneur and his company. It has several security tools, such as data encryption, to receive on time and conclude the transaction according to the customer's expectations.
This type of platform also facilitates the control of delinquent customers. The system notifies the collection area of overdue payments and sends the automatic collection, making the process faster and without risk of error.
An automated platform can mitigate human errors: steps are executed in a continuous and intelligent flow, reducing bottlenecks, as operational functions are left to the platform, and people invest their time in more strategic actions.
Paystand: Much More Than A Recurring Billing Platform
Your company can go a step further and have more than a system focused on financial transactions that can help your business by streamlining your cash cycle with integrated payments and collections, including scheduled and recurring payments!
With Paystand, you can eliminate the manual overhead of payment collection, making it a more efficient and automated process with:
- Scheduled Payments to set up monthly, annual, or even custom schedules
- AutoPay for customers with authorized funds on file
- Recurring Payments for customers who have regular payment terms