How recurring billing helps businesses maintain cash flow.

How recurring billing helps businesses maintain cash flow.

As a business owner, you know all about expenses. They can come in numerous forms: payroll, inventory, overhead, and advertising, just to name a few. While these costs may seem obvious, many entrepreneurs fail to recognize yet another drain on their company’s wallet: invoicing. Fortunately, there is something you can do to minimize the hit to your bottom line posed by invoicing, a solution known as recurring billing.

The cost of invoicing.

Think about it. The expenses of billing are wide-ranging and include hiring staff to create, process, and monitor the payment of bills. Not to mention, the paper, postage, and software involved. There is also the investment of your time or that of another trusted manager to ensure all of the processes are flowing smoothly.

What is recurring billing?

Online technology has revolutionized our entire society and that includes the options available to you when it comes to sending invoices. As a consumer yourself, you are probably already sending electronic payments to retail stores, utilities, and other vendors online. If you are like most people, you love the convenience and accuracy that this process enables. Why not pass the same benefits on to your own customers and contractors?

Automatic billing works like this: each month on a prescribed date, your customer is billed for the same amount of money. During each billing cycle, the customer receives a notification the payment will be deducted. As soon as this happens, a payment is generated from the client’s credit or debit card, or via wire or ACH, and it flows directly into your merchant account.

The pluses of predictability.

Cash is the lifeblood of your business. If it is not flowing smoothly, you can find yourself short of money at the most inopportune times. Automatic billing helps to keep this from happening, because payments are both consistent and guaranteed. Instead of sitting around waiting and hoping checks will come in the mail from distracted or reluctant customers, the funds will simply appear like clockwork in your merchant account, on time and for the specified amount. For that reason, you will be in a far better position to know how much cash you will have on hand at any given point in time and can make purchasing and staffing decisions accordingly. Although it is never easy, even long-term financial planning goes more smoothly when your cash flow is easy to predict.

Eliminating late or missed payments.

With recurring billing, cash flow is more stable, because payments are so regular. When you and your staff are freed up from chasing delinquent customers, you can focus on what you really want to do: growing your business and making a profit. Customers appreciate the fact you are not badgering them or charging them late fees. That leads not only to more money, but to more positive relationships with your valued clients.

An environmentally friendly solution. 

When you don’t use as much paper or fuel resources for mailing, the money stays in your account and the earth benefits as well. Fossil fuel usage is reduced and paper bills are replaced by carbon-neutral electronic messages and processes.

Expanded product offerings

Many items you sell may have accessories that need to be purchased again and again. Examples include toothpaste, razors, printer cartridges, and even snacks. If you implement subscribe-and-save programs with recurring billing, you can leverage these ongoing customer needs by providing a convenient and affordable way for people to get the items they already know they must obtain.

Enhanced security.

Nothing takes a bigger bite out of your bottom line than the expense of a data breach and its staggering financial and reputational costs.. Dealing with paper invoices often means sensitive customer information is left open to theft. On the other hand, using an electronic recurring billing system that is in compliance with the payment card industry’s data security standards (PCI-DSS) can help to ensure that payments are encrypted throughout the transaction process. Should the worst happen, you can demonstrate to both your merchant account provider and your customer you are PCI compliant. As a result, you may not be hit by a one-two punch of penalties and potential account closure that could possibly shut down your entire operation.

Protect your cash flow by implementing recurring billing.

Do you want to adopt a system that results in consistent, predictable results, better cash flow, and higher security? If you’re ready to get the recurring billing process started, these tips should help:

  • Make sure your current solution offers a recurring billing option. If it does not, it might be time to start shopping around.
  • Once you have your recurring billing framework in place, spread the news far and wide to your customers and contractors. Make sure you also know how to use the system so that you can train interested payees and answer any questions that arise.
  • All that remains is to initiate your first recurring billing payment by setting the scheduled start date, billing frequency, scheduled end date, the amount of the first payment, and subsequent payment amounts.
  • In order to be PCI compliant, you cannot store customer credit card details. You can instead use a tokenization system or e-checks.

Invoicing is a fact of life that your business cannot survive without. However, implementing a recurring billing system can pad and stabilize your cash flow and make your overall operations run with much less friction. So, why not get started today?