What Does Recurring Payments Mean?
As subscription-based business models become increasingly prominent, businesses need to pay greater attention to the payment method theyre offering to customers. A well-executed payments strategy could make the difference when it comes to the success or failure of your business. Thats why its so important to get to grips with recurring payment processing, as quickly as possible. Find out everything you need to know about what recurring payments mean, right here. Essentially, recurring payments are a type of repeating payment thats authorised by a customer and taken automatically according to a predetermined schedule. Once the customer grants the merchant permission to take payment on a recurring basis, no more permissions are needed. Examples of recurring payments include cell phone bills, gym membership, and Netflix subscriptions, to name just a few. There are a wide range of benefits, both for customers and merchants, associated with recurring payments. Firstly, using a recurring payment processor to take payment is much more convenient than billing a routine charge repeatedly. All the work gets done on the front end, and after that, payment gets taken automatically, so your accounting team can spend time on other, more valuable tasks. In addition, recurring payments ensure a prompt and reliable inflow of capital, helping to produce a healthier cash flow and lowering your collection costs. This puts your business in a better economic position and reduces the amount of guesswork required in your financial planning, as youll know how much revenue you have coming in with a high level of certainty. Recurring payments also strengthen your relationship with your customers by making it much easier for them to do business with your company. If theyre satisfied with your product/service and they dont need to spend any time on making payments, your customers will be much more likely to stick around for the long haul. Given that payment is made automatically with recurring payment processing, any erroneous bills can be a little more difficult to deal with. Rather than re-sending the bill, youll need to arrange a refund, which is likely to be more time-consuming. You may also need to prorate the bill, which, again, can be a lengthy and complex task. However, choosing the right recurring payment system can alleviate many of these potential downsides. How to accept recurring payments  There are many different recurring payment processors that can help you to implement recurring payments, including major names like Stripe, Square, and PayPal. While different processors have different workflows, generally, they follow the same steps:  The customer chooses to pay on a recurring basis. Then, they agree to your businesss terms and conditions and agree to the amount charged, the payment schedule, the fee structure, and the expiration date (if any applies). Next, theyll enter their payment information and allow your business to save it. At this point, the recurring payments begin to take place. Here, like a credit card transaction, your payment processor contacts the card network and the issuing bank to confirm payment. Finally, your customer will receive an invoice explaining the details of the payment. They may also receive an advance notification to warn them that payment is about to take place. Its important to take care when choosing which recurring payment system to go for. For many businesses, GoCardless is the right option. Recurring payment processing with GoCardless  If youre looking for a recurring payment system for your small business, GoCardless could be the ideal solution. Its fully automated, which reduces the demands on your accounting team, and allows you to take recurring payments quickly and easily. In addition, GoCardless provides customers with the opportunity to either create a custom integration with our API or utilize pre-built integrations with popular accounting tools like Xero and QuickBooks. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.