A recurring billing system fosters customer retention and meets customer demands
In the world of recurring billing systems, the recurrent billing process of customers is automated end to end. Once the customer provides the payment details, the invoice creation is complete, and the payment cycle will also be set up to bill the customer with charges specific to the service chosen. After this stage, no further manual stepping-in is required to relieve customers from payment reminder headaches.
This automated or the “set it and forget it” billing cycle is a timesaver for customers and business owners also reducing the possibilities of non-payments and delayed payments
Recurring billing systems correspond to businesses with recurring revenue like SaaS (Software as a Service) companies, magazines, and fitness memberships that follow a subscription billing model. Subscription businesses like these dominate the ones that follow a common transactional model with more benefits. They range from reliable cash flow, customer satisfaction and long-lasting customer relationships to high business valuations. However, this model comes with its own challenges since they involve varied marketing tactics, dynamic sales plans and an entire assortment of new KPIs.
Recurring revenue for a subscription business also means more workload for the inventory management and accounts receivable team and not just consistent and predictable cash flow
In a recurring billing system, a customer only has to sign up and provide their payment methods once for the respective pricing plan and they are all set. A single customer sale in this model defines multiple transactions charged periodically in a fixed timeframe or billing schedule. Whereas in the traditional billing model a single sale only consists of a single transaction which is either charged all at once or in increments with added constraints.
Therefore, the billing frequency will be higher in a recurring billing management model than in the traditional one.
The pricing strategy developed by such recurring revenue businesses is complex in nature for the billing processes and accurate revenue recognition. This pricing model features multifaceted rate structures which might be usage/volume-based, customer-specific offerings and pricing tiers. This automatically demands extra efforts to make sure the billing for consumers is correct. Time or Usage-based billing and quantity-based billing pose a challenge because the billing charges could vary month after month. Apart from this, promotional discounts and free trials bring more complexity, as this payment model must indicate both the start and end of the billing dates.