If you want to be successful as an entrepreneur, getting paid in full and on time should be one of your most important priorities. Using an automated system to either create an invoice or facilitate recurring payments provides you with two of the most effective ways to keep your customers satisfied while the cash flows in consistently and reliably.
As you decide exactly what strategies to employ to get the funds you are owed in the most efficient way possible, it is important to understand the difference between recurring invoices and recurring payments.
Recurring payments defined
As the name implies, recurring payments happen on a regular basis as opposed to being one-time-only.
In the standard subscription model, buyer and seller come to an agreement specifying how much money will be withdrawn, which bank or credit card account the funds will be taken from, the date each week or month that the transaction will happen and the duration of the arrangement.
Once the two parties make a contract specifying the terms, the recurring billing plan proceeds without a hitch until the conditions are satisfied or, in some cases, if there is a problem with the customer’s account or their credit card expires.
Recurring invoices defined
Unlike recurring payments, recurring invoices are not ostensibly set-it-and-forget-it. With this arrangement, your system automatically sends an invoice to the customer on a pre-set schedule.
The difference is that no funds are withdrawn unless and until the customer takes action each time.
Who benefits from implementing recurring payments?
The best fit for this type of arrangement is a business that charges fixed payments at predictable intervals. Software as a service (SaaS), video streaming and meal prep subscription kit businesses are great examples of companies who gain the most from this model type.
The recurring payments configuration optimizes predictability for both you and your customer and minimizes instances of late fees and chasing delinquent payments.
Who benefits from implementing recurring invoices?
Not all businesses have services or products whose prices remain fixed. Customers of utilities, law offices with billable hours and IT support providers generally can expect to pay varying rates each month depending on their usage of the offered products or services.
Setting up recurring invoices helps to ensure that these types of companies don’t duplicate work or over-charge clients.
Why should you implement recurring billing or invoicing?
Regardless of whether you choose to adopt recurring billing or invoicing, the advantages of putting an automated multi-payment invoicing plan into place are numerous. For one thing, it usually means that you will get the funds you are owed faster and more accurately. No matter which recurring model you use, your software helps to ensure that clients remain aware of their status so that bills are resolved with minimal fuss or tension.
Moreover, setting up recurring payments or invoices with clients gives you a much better opportunity to get what you are owed every month. This reliability enables you to budget your resources more efficiently so that you can maximize your resources and plan for the future.
Software that sends out invoices or initiates recurring billing transactions also makes it possible for you to save time and money. With the assistance of automation, you will no longer make costly data entry errors or forget to send out a bill.
When the payment process has minimal errors and is streamlined, you set the stage for satisfied customers. Moreover, you can use these open communication channels to furnish loyal buyers with extra promotions, special deals and members-only content that will further solidify your relationship and inspire them to refer your brand to their friends and social contacts.
Setting up recurring payments and invoices is simple. Just contact your merchant account provider to configure your systems to meet your needs. Before you know it, you and your clients will reap the many rewards of these models.
