Automatic payments: A guide to auto billing clients

What is an automatic payment?

An automatic payment is like setting a clock to go off at the same time every month, but instead of waking you up, it’s getting a bill paid for you. Once a customer agrees to it, the money is regularly taken from their account, so that business owners can worry less about forgetting to send an invoice and customers not being prompt to pay - it's automatic! Some everyday examples include a meal subscription service like Hello Fresh or a monthly utility bill.

What payment methods can be used to accept automatic bill payments?

There are several ways to accept automatic bill payments: credit cards, debit cards, and direct bank account transfers (also known as ACH payments). Some businesses even accept digital wallets like Apple Pay, making it easier for customers who prefer modern methods.

Imagine you’re offering a subscription box for monthly snacks. Some of your customers want to pay by card, others want the ease of pulling directly from their checking account, and a few prefer using Apple Pay because they don’t want to dig out their wallets every time. By setting customers up with an automatic bill payment, you can accommodate all these preferences. The flexibility of multiple payment methods means happier customers, fewer obstacles to getting paid, and more reliable revenue streams.

How does an automatic bill payment work?

Setting up an automatic bill payment can be fairly straightforward as long as your payment processing software has the capabilities. High level, once your customer agrees to auto payments, they provide their payment information—credit card details, bank account number, or digital wallet link. From there, the system is set to charge that account holder using that method on a specific date, whether that’s once a month or based on the agreed billing cycle.

How do you set up a client with automatic bill payments?

To break it down even further here are the steps involved in setting up an automatic bill payment:

1. Sign up with a payment provider

The first step is to create a merchant account with a payment processor to facilitate the transfer of funds from your customer’s bank account to yours. If you want to set up automatic billing for your business, make sure the payment provider you choose offers this feature.

Hot Tip: Helcim supports recurring payments, and you only pay for what you process.

2. Set up a recurring payment plan

Within your new merchant account, create a subscription plan that includes pricing and specifies how often and through which method you will bill your customers.

3. Obtain customer authorization

Your customer must give permission for you to charge them automatically. This can be done by them providing credit or debit card details, or by completing a PAD agreement for ACH transfers.

4. Securely store payment information

Your payment processor will keep your customer’s payment details in a secure location, ready to charge them at the specified intervals.

5. Receive recurring payments

When a payment is due, your automatic billing plan will process the charge using your customer’s saved payment method. If the payment fails due to insufficient funds or another issue, most systems offer “Dunning Management,” which automatically retries the payment so you can reduce missed transactions.

What are the pros and cons of automatic bill payment?

1. The pros of automatic bill payment

• Convenience: It’s a no-brainer. You don’t have to chase customers for payments or worry about sending reminders.
• Consistency: Payments come in like clockwork, which helps with cash flow management.
• Customer loyalty: Once customers are on autopay, they’re less likely to cancel their subscription because they don’t have to think about paying.

To sum it up, let’s say you’re running a small business, like a local gym. You’ve got 100 members, and before automatic payments, you'd constantly chase after late fees, deal with bounced checks, and juggle calls from people who swear they mailed the payment (but it never arrived). When you switched to auto-billing, those problems disappeared. Now, your members' fees get charged like clockwork, and you can focus on running the gym, not running after payments.

2. The cons of automatic bill payment

• Lack of awareness: Sometimes customers forget about the auto payments and get charged unexpectedly, which can lead to frustration or overdrafts.
• Cancellation hurdles: If you don’t make the cancellation process easy, you could end up with unhappy customers trying to escape charges they didn’t want.
• Security concerns: Some customers are wary of putting their credit card or bank information on autopilot due to fears of fraud.

If you are a business looking to set up automatic payments it's important to put yourself in the customer's shoes and ensure cancellation and change policies are easy to follow. We’ve all been on the consumer side of an automatic payment. Sometimes our budgets and priorities change and it's important that subscription payment policies are easy to adapt. This can help ensure that your customer will return when they are ready to do so as well as a potential advocate for your business.

What are automatic payment examples?

You probably interact with automatic payments more than you realize. Think about your Netflix account or your phone bill—each month, you don’t have to log in and make a payment; it’s just done for you. Outside the more commonplace examples of gyms, meal boxes and streaming services, automatic billing can be used by a variety of different business models.

1. Service Retainers

If you run a business that offers ongoing services like legal consulting, marketing, or IT support, you likely use service retainers. With automatic payments, you can set up regular charges for your clients, so they’re billed automatically on the agreed-upon schedule, whether it’s monthly, quarterly, or any other time frame. This way, you don’t have to chase after payments, and your cash flow becomes more predictable, allowing you to focus on delivering your services rather than managing invoices.

2. Payment Plans

For businesses that offer high-ticket items or services, automatic payments are a great way to provide payment plans to customers. Instead of expecting the full amount upfront, you can allow your clients to spread their payments over time. With automatic payments, each installment is automatically charged to their card or bank account, ensuring you get paid on time without needing to remind your customers. This builds trust and encourages clients to commit, knowing they can pay gradually.

3. Memberships

Whether you run a gym, a co-working space, or any other membership-based service, automatic payments make life easier for both you and your members. Once someone signs up, their membership fees can be billed automatically each month (or whatever interval you choose), so they never miss a payment. For your business, this means consistent revenue without the hassle of manually invoicing members, and your clients enjoy uninterrupted access to your services.

4. Subscription Payments

If your business revolves around subscriptions—like a software service, online content, or meal deliveries—automatic payments are key. Your customers subscribe, and their payment method is charged at regular intervals, ensuring their subscription remains active. This creates a smooth, hands-off experience for both you and your subscribers. Plus, it increases customer retention because they won’t have to worry about manually renewing their subscription.

5. Donations

For nonprofits or charities, recurring donations are often a game changer. With automatic payments, donors can set up a recurring contribution that’s charged to their account at regular intervals—whether that’s weekly, monthly, or annually. For your organization, this means reliable, recurring funding without needing to continually ask for donations. Donors appreciate the convenience and feel more connected, knowing they’re making a lasting impact automatically.

In each case, automatic payments save time, reduce the risk of missed payments, and help create a smoother experience for both the business and its customers.

How much does it cost to set up automatic payments?

Just like all payment processing, costs for automatic payment software can vary depending on the provider you choose. There are a number of different factors that contribute to a merchants payment processing costs including how a business accepts payments, the card the customer uses and the fee structure the processor uses.

Automatic payments are set up without a card being present so they would be charged the payment processors online fee rates. At Helcim, our average Interchange Plus pricing fee for card not present processing is 2.33% + 25 cents per transaction. In addition to that rate, automatic payment softwares typically incur an additional fee for a premium service. For a number of providers this can be a fixed monthly fee on top of high transaction fees. At Helcim you only pay for what you process - no monthly fee, no activation fee, just 0.4% per transaction. Compared to other automatic payment tools, on average Helcim saves small businesses 25% in processing fees.

What is the best automatic payment software?

There are a number of automatic payment software providers to choose from and your payment needs will help to inform what the best choice for your business is.

Our recommendation is to pick a payment processor that can offer other tools outside of recurring payments. This will ensure that as your business grows and your needs change, you wont need to look outside your current provider for new payment tools. Unlike solo automatic payment services like Chargebee or Recurly, Helcim is a full stack payment processor that offers payment terminals for Brick and Mortar shops, virtual terminals to accept payments over the phone, and automatic payments. So, although you may only be looking for automatic payments right now, it is worth considering the future of your business and signing up with a payments company that can help you thrive.

FAQ: Automatic payments

Can your customers cancel an automatic payment?

Yes, most systems allow customers to cancel an automatic payment. The process usually involves logging into their account and disabling the auto-payment feature. Some businesses allow customers to call in and cancel. Whatever your method, it is important to make the process of canceling for your customers easy to understand and follow.

What are payment methods that you can charge using automatic payment?

Automatic payments can pull from credit cards, debit cards, bank accounts (ACH transfers), and even digital wallets like PayPal or Apple Pay. The broader your payment options, the easier it is for customers.

Are automatic payments safe?

For a small business, automatic payments are susceptible to the same risks as other payment fraud. It is important to have proper checks and balances in place when setting up customer profiles into a recurring plan to reduce the risk of fraud. This can include address verification, CVV requirements, etc.

For customers, automatic payments are safe, but you will want to keep an eye on the routine payments going through to ensure no calculation errors occur. It is also important to keep an eye on your credit card expiration dates to ensure you are not getting charged late fees for an expired card or insufficient funds.

Can automatic payments be late?

If a customer's credit card card in your subscription payment plan has expired, automatic payment can result in late payments. Most automatic payment softwares are equipped with a “dunning management” tool to alert customers and businesses about any upcoming card expirations to mitigate the risk of a late payment.