Reliable customer payments stabilize your cash flow. Yet, ensuring prompt collection for ongoing charges requires a merchant account and electronic processing technology. A recurring payment service automates the billing and processing of fees based on an agreed-upon schedule.
It’s convenient and secure, making it a preferred option for clients and small businesses. Learn how to accept recurring payments effortlessly in six steps.
At a glance: secure recurring payment solutions
- Helcim: Free recurring billing software for small companies.
- Stax: Enterprise and small business solutions for high-volume sales.
- ProMerchant: Offers a payment gateway for recurring payments
- Clover: Better for bundling point-of-sale (POS) hardware.
- Merchant One: Secure recurring payments with a client vault.
- Payment Depot: Supports sales to businesses and consumers.
What are recurring payments?
A recurring payment is a financial transaction that a customer pre-authorizes a service provider or company to process electronically and automatically at regular intervals. Both parties agree to payment terms, such as monthly or annual billing, and methods like automatic ACH withdrawal or credit card payment.
It can be a variable expense like utilities or a fixed amount like subscription services or installment payments. Software as a service (SaaS) and membership clubs use the recurring revenue model to collect product and service fees.
[Read more: Accounts Receivable: How to Improve Your Chances of Getting Paid]
How to process recurring payments: 6 steps
You can automate customer transactions with a merchant account and recurring payment strategy. The actual processing steps vary by provider but are very similar in that you collect the same client information and use online payment system technologies.
Set up recurring payments for customers by following these steps:
- Select a payment processor or SaaS payment solution: First, you need a vendor to process your electronic payments. If your company accepts credit card payments, your provider may offer recurring billing solutions. Otherwise, you can evaluate payment processors, accounting software, or all-in-one e-commerce platforms to find an automated billing system.
- Decide on an automated payment system technology: Next, you need software or integration with existing tools to collect customer information, bill them, and process payments. Your payment processor may provide a virtual terminal, payment gateway, invoicing software, built-in integrations, or application programming interfaces (APIs).
- Define your subscription, membership, or billing plans: Use your pricing model to set your billing terms, including repayment frequency and accepted payment types. Outline how the billing system handles payment failures, auto-renewals, and client reminders.
- Request customer payment information and authorization: Ensure your recurring payment software complies with the Payment Card Industry Data Security Standard (PCI DSS) when collecting and storing client payment data. Customers must grant permission through an online agreement or consent form to automate payments.
- Begin the billing automation process: Payment processors may offer customer portals and shopping cart options (opt-in to subscribe) that initiate the process without business intervention. Alternatively, you can start the process manually through an invoice or subscription management tool.
- Manage recurring payments: Your recurring billing software may provide a dashboard or integrate with accounting or point-of-sale (POS) systems, allowing you to see failed payments and reconcile transactions.
Business automation, such as recurring payments, saves time and improves collection processes.
Best recurring payment services
Well-known credit card processing providers offer tools and support for accepting electronic payments in person, online, and over the phone. However, recurring billing services differ among vendors. Some have built-in invoicing tools and customer portals; most provide virtual terminals and payment gateways.
Here’s how to accept recurring payments for customers through the following credit card processors:
- Helcim: This vendor provides a dashboard with free subscription management and invoicing tools. You can view and update subscription plans available to clients or manually add subscribers. Conversely, Helcim’s invoice software supports recurring payments and lets you configure the billing frequency.
- Stax: Small businesses can establish an automatic payment schedule for recurring invoices through the online dashboard, allowing clients to keep a card on file or click to pay. Stax has enterprise features for customer self-service and subscription management.
- ProMerchant: Small businesses can automatically bill customers on a predetermined schedule through the payment gateway Authorize.net. After signing into ProMerchant’s system, you can create automated recurring billing subscriptions and configure email notifications. It saves payment data and integrates with e-commerce platforms.
- Clover: Businesses can use their virtual terminal account (through the Clover web dashboard) to set up a recurring payment plan and add customers. You can choose the start date, duration, and end date. After you complete the process, the automated billing system emails the customer.
- Merchant One: The Merchant One payment gateway gives businesses access to over 175 shopping cart integrations and APIs for subscription commerce. It integrates with QuickBooks and provides an invoice generator, customer card vault, and fraud tools
- Payment Depot: This credit card processor supports recurring payments through PayTrace, Authorize.net, and SwipeSimple. Each Payment Depot solution has APIs and PCI-compliant software for managing installment or scheduled payments.
[Read more: A Quick Guide to Credit Card Processing]
Types of recurring payment processing solutions
All-in-one SaaS payment solutions, invoicing software, and credit card processors support recurring billing. The best solution for your business depends on your recurring revenue model and objectives. For instance, in the business-to-business (B2B) sector, accounting software with integrated card processing like QuickBooks Online might be sufficient. Alternatively, Helcim provides invoicing tools and integrates with QuickBooks.
E-commerce merchants can use Wix or Shopify to offer subscription management portals. These allow customers to securely keep a card on file, manage monthly subscription payments, and receive their favorite products regularly. Both have native processing (Wix Payments and Shopify Payments), and you may pay additional transaction fees if you want a different merchant account service.
Many e-commerce tools, including WordPress.com and Wix, support digital subscription billing for online courses and virtual sessions. Recurring membership payment processing is an excellent solution for gyms, salons, and other services. Industry-specific platforms often have built-in payment processing through a third-party vendor like Stripe.
Business costs to accept scheduled payments
Many payment processors charge keyed-in or card-not-present (CNP) fees for recurring transactions. These fees range from 2.6% plus 30 cents to 3.5% plus 15 cents per payment. This cost could be a higher percentage than if the buyer paid for a one-time purchase through your e-commerce shopping cart and is almost always more expensive than an in-person transaction.
Merchant account providers may have monthly fees for payment gateways, virtual terminals, or other services. Reducing your credit card processing fees may be possible by encouraging customers to supply bank information to pay through the less expensive ACH withdrawal method or by increasing your processing volume and qualifying for lower interchange-plus rates.
Recurring billing benefits
Business automation, such as recurring payments, saves time and improves collection processes. Your team spends fewer hours invoicing and tracking late payments per billing cycle, reducing operational costs. Scheduled payments also provide predictable revenue streams, helping small companies manage their budgets.
On the customer side, automatic payments are convenient. Shoppers receive their favorite products regularly, and installment payments go off without a hitch. They don’t have to worry about a missed payment showing up on their credit report or losing their membership.
[Read more: 18 Tools to Help Automate Your Business]
Best practices for accepting recurring payments
Successfully implement recurring payments by choosing automated billing software and a processing provider with features that support your revenue model. Outline your plan and update your website to reap the benefits of accepting recurring card payments.
Adopt a recurring payment strategy that:
- Reminds customers of auto-renewal payments through email or text.
- Offers flexible billing cycles and payment methods to suit various preferences.
- Adheres to state, federal, and international laws and regulatory requirements.
- Ensures customers can easily cancel or opt out of memberships or subscriptions.
- Integrates your POS and customer relationship management (CRM) systems.
- Reduces chargebacks through transparent pricing and returns policies.
- Provides accessible customer support and self-service channels.
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