Table of contents
- What Are Recurring Payments?
- Benefits of Recurring Payments
- How to Set Up Recurring Payments
- What Are the Best Practices for Implementing Recurring Payments?
- How Do I Choose a Recurring Payment Provider?
- Recurring Payments & Accounts Receivable Automation
- Paystand: Much More Than A Recurring Billing Platform
Key Takeaways
- Recurring payments work by automating collections, ensuring predictable revenue, and improving cash flow.
- Businesses can choose fixed recurring payments for consistent charges or flexible billing models for usage-based pricing.
- Automating recurring payments reduces administrative effort, improves customer retention, and eliminates late payments.
- Paystand’s B2B Network offers a fee-free payment rail, making bank-to-bank recurring payments cost-effective and secure.
- Implementing automated payment plans helps businesses streamline collections and scale efficiently.
Managing collections is a persistent challenge for businesses. Without a structured process, late payments and revenue instability can disrupt cash flow and growth. In fact, over 80% of businesses have experienced late payments in the past six months, with 37% often waiting 60 days or more for payment.
Recurring payments provide a consistent, automated solution that eliminates manual invoicing, reduces late payments, and ensures steady revenue. Whether through fixed recurring payments for subscriptions or flexible payment plans, businesses can optimize billing cycles and simplify collections.
What Are Recurring Payments?
Recurring payments allow businesses to automatically charge customers at predefined intervals—monthly, quarterly, or annually—based on an agreed billing cycle.
From Netflix to Photoshop, this payment model is commonly used by streaming services, SaaS providers, and subscription-based businesses but also benefits industries that rely on regular invoicing, such as B2B transactions and membership-based services.
Due to the new service acquisition models available to consumers, the use of recurring payments has significantly grown in recent years. 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 periodically sent products to the customer.
How Recurring Payments Work
When a customer agrees to a recurring billing cycle, they authorize the business to automatically charge their preferred payment method on a scheduled basis. This eliminates the need for manual invoices and reduces missed payments. The process involves:
- Customer authorization: Customers provide their payment details and agree to recurring charges.
- Automated billing: Payments are processed at each cycle without additional input from the customer.
- Confirmation & reconciliation: Businesses receive payments directly into their merchant account, improving cash flow predictability.
Types of Recurring Payments
Recurring payments fall into two main categories:
|
Fixed Recurring Payments |
These charges remain the same for each billing cycle, which is commonly used for subscription services, gym memberships, and software licensing fees. Customers pay a fixed amount at scheduled intervals, simplifying financial forecasting. |
|
Variable Recurring Payments |
The amount varies based on usage, making this model ideal for utilities, consumption-based SaaS pricing, and installment-based payment plans. Businesses can charge based on customer activity while maintaining a recurring structure. |
As a finance team, you must efficiently track both fixed and variable recurring payments to maintain accurate financial records. Bank payments linked to corporate accounts allow teams to monitor cash flow, manage expenses, and keep stakeholders informed about operational spending. On the other hand, recurring card payments, such as employee subscriptions, fall under continuous payment authorities (CPA) and require oversight to identify unnecessary charges and optimize company spending.
Benefits of Recurring Payments
Recurring payments are popular because they offer several benefits for both businesses and consumers. Some of its significant benefits include the following:
- Predictable revenue & cash flow: Businesses can forecast revenue more accurately, reducing uncertainty and improving financial planning.
- Lower risk of non-payment: Since customers automatically charge their accounts, businesses experience fewer missed payments and reduced delinquency rates.
- Increased customer retention: Subscription-based billing models create a stronger commitment, reducing churn and improving lifetime customer value.
- Streamlined payment collection: Automating collections eliminates manual invoicing, saving time and reducing administrative costs.
- Convenience for customers: Recurring payments remove the need for customers to manually input payment information each month, improving the overall experience.
How to Set Up Recurring Payments
What Are the Best Practices for Implementing Recurring Payments?
We’ve established that adopting an enterprise payment processor with recurring billing is advantageous for both businesses and their customers. In order to make the process more efficient, here are a few best practices:
- Ensure transparent billing terms: Clearly define subscription pricing, renewal dates, and cancellation policies.
- Provide multiple payment options: Offer credit cards, ACH transfers, and fee-less Paystand transactions to accommodate customer preferences.
- Regularly update payment details: Ensure customers keep their payment information up to date to prevent failed transactions.
- Automate payment reminders: Send billing cycle notifications before charges occur to enhance customer trust.
- Monitor recurring payment performance: Track recurring payments' work insights to optimize cash flow and reduce churn.
How Do I Choose a Recurring Payment Provider?
Choosing the right automated platform with recurring billing is essential for business growth. Look for a provider that offers:
- Seamless ERP & CRM integrations
- Secure, PCI-compliant payment processing
- Flexible billing models
- Low or no transaction fee rails
- Real-time payment tracking
Recurring Payments & Accounts Receivable Automation
Recurring payments simplify AR management by ensuring consistent, automated collections, reducing outstanding invoices, and improving cash flow efficiency. By integrating recurring billing with AR automation, businesses can:
- Reduce DSO & accelerate payments: Recurring billing helps reduce DSO (Days Sales Outstanding) by eliminating the need for manual follow-ups. Businesses looking to get paid faster can rely on automated invoicing and scheduled transactions to accelerate cash collection.
- Eliminate manual invoicing: Automating invoice generation, payment tracking, and reconciliation saves time and reduces errors.
- Ensure predictable revenue: Businesses gain better visibility into future cash flow and AR performance.
By adopting recurring payments within AR workflows, finance teams can streamline collections, accelerate payments, and maintain healthier financial operations.
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 payments easier, faster, and more cost-effective:
- Paystand’s B2B Network eliminates transaction fees for bank-to-bank transfers, reducing costs.
- AutoPay for customers with authorized funds on file.
- Automated & personalized payment reminders based on your business needs.
- Recurring Payments for customers who have regular payment terms.
- Immutable transaction records ensure compliance and security.
Simplify collections, reduce DSO, and improve cash flow with automated recurring payments. By integrating recurring billing into your accounts receivable automation, your business can eliminate manual invoicing and ensure predictable revenue.
Download the free ebook, The Guide to Best AR Automation Practices, and learn how to streamline AR and optimize your collections process.
