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What if I told you that with recurring payments, you no longer have to manually send that same invoice to the same client for the sixth straight month? You simply enter their payment details once and then every month the funds are automatically collected.
In this article we’ll explore everything about recurring payments so you can see if it's the right fit for your business.
Let’s start with the basics: What are recurring payments?
Recurring payments are automatic payments scheduled to repeat at regular intervals, based on an agreed schedule - whether daily, weekly, monthly, or annually. Think of your Netflix or Amazon subscription payments. On a certain day each month, funds are automatically withdrawn from your account so you can enjoy your favorite show without having to worry about manually entering your credit card every time the bill is due. Use cases are not just limited to streaming services though. Often you’ll see membership fees, retainers, or payment plans, which are all a form of recurring payment processing.
The main benefit of recurring billing to you as a business owner is the consistent revenue collection. You set it up once and know that you’ll get paid consistently, rather than having to chase down a missed payment or spend the end of the month typing in all your client’s credit card details.
AutoPay vs. recurring payments: What’s the difference?
Autopay and recurring payments are very similar at the surface level. They both involve automatic payments pulled from your client’s account to pay for an ongoing service.
The only difference is when you use recurring payments, the price is set. Each time a recurring payment is made the price remains the same as negotiated in the initial contract. With AutoPay, on the other hand, the price can vary based on usage or outstanding balance. You’ll see AutoPay most commonly on things like utility bills—the funds are withdrawn on a monthly basis, but the price differs depending on usage.
The main payment methods for recurring payments
Recurring payments are pretty flexible when it comes to payment methods, so your client’s can choose their preferred payment method.
Credit or debit card payment
Most of your client’s will opt for credit or debit card payments when paying for a subscription or membership. These are typically lower cost purchases and a card payment is the most convenient for your client.
Recurring billing with ACH
ACH is the more ideal option for your business on larger ticket recurring payments, like retainers or installment plans. It’s a far more affordable option in comparison to credit card payments and can save you hundreds of dollars per transaction. For example, Helcim charges 0.5%+25¢ for ACH, with fees capped at $6. So for the big ticket items, the most you’ll ever pay is $6.
The only downside is it is a bit more of a hassle upfront for your client. They need to fill out a pre-authorized debit (PAD) agreement to allow you to transfer funds from their bank to yours. But it's a simple one time form and after that, their payments are automated and good to go.
So, how exactly do recurring payments work?
Recurring payment processing involves a few key steps:
1. Sign up for a payments company
First and foremost, you’ll need to set up a merchant account with a payment processor to initiate the transactions and get the money from your client’s account to your account. If you want to set up recurring payments for your business, be sure the payment processor you sign up with provides this service.
Hint: Helcim does and you can access our recurring payment tool on only pay for what you process.
2. Create a recurring payments plan
Create a service inside of your new merchant account with pricing and a set interval for billing.
3. Get authorization
Your client must agree to let you charge them on a recurring basis. Whether that be through entering their credit or debit card details, or filling out a PAD agreement for ACH.
4. Store the payment details
Your payment processor will store their payment information in a secure spot to be billed on your chosen interval.
5. Collect automatic payments
When the payment is due, your recurring payment plan will charge your client’s stored payment method automatically. If the payment fails due to insufficient funds, or another reason, most recurring payment systems are equipped with a feature called “Dunning Management” that will retry the payment automatically so you rarely miss a payment.
Examples of recurring payments and how your business can use them
Recurring payments come in all shapes and sizes. Here are a few of the common places you’ll run into them.
Service retainers
Businesses like law firms, accounting firms, marketing agencies, and most other types of professional services often charge retainers for their service. If you fall into that category, the best way to collect your retainer is through recurring billing. When the bill comes every month, the payments are automatically withdrawn and you don’t have to panic when you realize you forgot to send over the invoice.
As these are often larger ticket purchases, you would benefit from using ACH recurring payments rather than credit cards. It’s going to save you a lot of money in the long run.
Payment plans
If your business offers products or services with a large upfront cost, you can use recurring payments to set up an automated payment plan. For example, in an industry like healthcare, education, and home improvement, clients really appreciate when a payment plan is offered.
Again, with these bigger ticket purchases, you’ll likely want to use ACH to keep your payment costs down.
Memberships
Gyms, co-working spaces, clubs, and other membership-based businesses thrive on recurring payments. It lets you keep growing your members without having to worry about billing hundreds of people manually each month. Plus, your members can enjoy uninterrupted access to your service, without having to worry if they paid or not.
The simplest way to get members to sign up is by using a payment link that hosts your membership levels for people to self-serve.
Subscription payments
If your business runs on subscriptions, like a streaming service, SaaS platform, or subscription boxes, recurring payments are essential. Your goal is to grow your recurring revenue, and recurring payments do just that. You can set up different subscription levels and different billing frequencies to grow your subscriber base and offer consistent access to your service. Like memberships, you can use a payment link for subscriptions as well, giving you a webpage for customers to choose the plan that works best for them.
Donations
Nonprofit organizations can really benefit from recurring payments as well. If you have some generous donors who consistently donate to your cause, set them up on recurring payment processing so they don’t have to go through the hassle of writing a check each month.
How to manage recurring payments
Once you’ve created a recurring payments plan and added clients, management gets passed on to the client. You need to give them a level of control over their plan. This could include:
- Giving them an easy way to pause or cancel their payments, either through a self-serve portal, or by contacting you to do it manually.
- Offering flexible payment schedules so they can choose/change the frequency and date they get billed.
- Being transparent about billing terms and fees so they know what they are agreeing to in the first place.
Many payment processors, like Helcim, offer a Customer Manager tool, giving your customers an easy way to control their recurring payment plans. Make sure to look for this capability when picking a provider.
How to set up Recurring Payments with Helcim
1. Sign up for Helcim
Sign up for a free Helcim account in a matter of minutes. No monthly fees and no contracts.
2. Set up a recurring payments plan
Use our recurring payments tool to create as many recurring plans as you’d like, customizing the following details:
- Price
- Billing frequency / specific day to bill on
- One time setup fee
- Expiration date / term length
- Payment methods (ACH or credit card)
- Tax location
- Email notifications
3. Add clients to your plan
Create and save your clients payment information in a secure portal inside of your Helcim merchant account, and add them to one of the plans you created. Alternatively, you can set up a page on your website for you clients to self sign up for a plan.
4. Bill your clients
Lastly, your clients get billed on the set schedule and you get paid, saving money from Helcim’s transparent and affordable pricing.
FAQ
Can clients pause or cancel a recurring payment?
Yes. Most recurring payment processing tools will have a feature for your client’s to pause or cancel a recurring payment plan. Whether you give the client that option or not will depend on the terms of your agreement. You can control all of this with a tool like Helcim’s Customer Manager.
Can you turn off a recurring payment?
Yes. Any recurring payment plan can be turned off by your business. This lets you terminate a plan if an error occurs or honor a client’s request to be removed.
What are fixed recurring payments?
Fixed recurring payments are when a client is billed the same amount every billing cycle. This is how recurring payments operate by default. Typically, a variable amount each billing cycle is considered AutoPay, not a recurring payment.
What are variable recurring payments?
Variable recurring payments are when a client is billed a different amount every billing cycle, depending on usage of a service. Typically, this would be referred to as AutoPay instead of recurring payments.
What happens if my client’s card gets declined or is about to expire?
Typically, your recurring payments tool will come with a feature to retry failed payments. Sometimes you’ll hear it referred to as “Dunning Management”. When a payment fails it retires at another date automatically to help make sure you don’t miss the payment altogether.