What is recurring billing, and who is it for?
Recurring billing is a payment model where businesses charge their customers a set fee at prearranged intervals for products or services. It is an essential process for subscription businesses. These payments can be established on any billing schedule—weekly, monthly, annually, or on a custom schedule. Companies that utilize recurring billing include subscription box services, SaaS companies, utility companies, businesses selling memberships (including gyms and streaming services), and publications (including newspapers and magazines).
What are the benefits of this payment model?
The recurring billing model has a number of benefits for both businesses and consumers. Its convenience is a major benefit for both sides, as merchants automate these payments and shoppers only have to provide their credit card or other payment information once during signup, creating a more seamless customer experience. For the company, subscriptions provide consistent cash flow and make for easier and more accurate revenue forecasting.
Any subscription business should be aware of the risk of billing errors, which may occur when credit cards become out-of-date over time. Strategies like dunning—payment retries and strategic communication around this with your customer base—can help mitigate the effects of this, improving customer retention. Strong security measures and PCI compliance are also crucial for businesses handling recurring payments.