Nothing can outweigh guaranteed money when it comes to the success of your business. It happens when you build a sustainable relationship with your customers, and not when you only close a sale. This is where subscription billing and recurring payments help you in having a better customer retention.
Whether it is about selling monthly product deliveries, software as service, or subscription boxes, subscription billing and recurring payments can ensure you a steady stream of revenue.
In this crisp guide, we will discuss what exactly subscription billing and recurring payments are, their benefits and how they work for your business.
Subscription Billing and Recurring Payments
Before breaking the above terms, we need to understand that both these terms basically co-exist. While signing up for an account, customers agree to make regular payments to avail uninterrupted service. Subscribers sign up once, but their accounts get billed automatically monthly, annually or as per their plan.
Now, let’s get to-
What is Subscription Billing?
It is the process wherein customers are automatically billed for their subscriptions on a recurring basis.You can charge your subscribers’ credit cards at regular intervals for availing your ongoing services. Subscription billing identifies:
- Who is to be billed
- What products/services/subscriptions they need to be billed for
- How much should be the billing amount
- When should they be billed
- How to collect the subscription payments
- How the data should be reported for accounting and analytics
What is Recurring Payments?
Recurring payments are based on a business model in which you act as a “service provider” and customers engage in an ongoing “merchant-customer relationship” instead of a “one-time purchase”. Your customers have to provide their billing information once and grant permission to the merchant for charging them as per the agreed frequency and cost.
Now both subscription billing and recurring payments work hand-in-hand as an automated billing process that becomes functional after a customer signs up to avail your subscription-based service.
This could be used for generating monthly invoice for a streaming service, magazine subscription, SaaS product, or any subscription or recurring service. Your customers are charged regularly as per the plan they avail.
However, they are given the option to opt out of the subscription plan any moment.
As the merchant or service provider, you won’t have to annoy your customers for collecting payments. The due amount is automatically transferred from your customer’s account to your business account. And your customer receives the payment receipt.
Check out our blog on Role of Automated Billing Process in Subscription SaaS Business here!
How does a subscription billing system work?
It all starts with a customer selecting his or her preferred payment plan and method. You as the client or merchant would receive the service order information which would be processed by your recurring billing system. The credit card information of your customer will be securely stored. It would further connect the payment request to the payment gateway, processor, card association and the issuer. Your customer is then issued a service billing and payment statement regularly.
What are the benefits of subscription billing for your online business?
Subscription billing and recurring payments system brings in many benefits to the table for both you and your customers.
Your customers have to enter their billing information only once while signing up. The automated subscription billing system will take care of the rest from there. This reduces the need for more inputs, resulting in lesser scope for fraud or mistakes.
Simplified payment process
Do you know that your checkout process, if not done right, can affect around 40% of sales?
Customers do not want to go through a complex payment process that includes multiple steps. Not to forget that this also contributes to increased churn significantly.
So you need to minimize effort required from the customer’s end while making the payment. Hence, a simple, quick signup and payment process is what you need in your online subscription-based business platform.
Diversification of your plan offerings for better sales
When you offer multiple payment plans, you can appeal to different kinds and specific needs of your customers. This way, your customers won’t have to pay for additional products, features or services that they are not interested in.
Moreover, offering various payment gateways and methods provides a sense of convenience to your customers in regards to how and where they would like to pay.
Maintains revenue and provides budget overview
Subscription billing systems give a clear outlook of monthly and annual expenses to your customers, which is always good when it comes to budgeting. As there are no unexpected service costs or additional charges, your customers won’t get a chance to be bogged down by the payments every time.
On the other hand, you have a guaranteed income flowing your way.
The longer your subscribers use your products, the more valuable they become. Moreover, with time your subscribers also tend to increase. Subscription billing system offers you a clear idea of your monthly or annual revenue as well. Basically, you get the foresight to scale your revenue every month. This empowers you to do better planning and optimize your business operations, reduce resource and product wastage, and get higher ROI.
Develop multiple product offerings and scale up business
As an online product or service provider, it gets really important to attend to crucial core matters like product development, subscriber support, strengthen business partnerships, and so on.
When you are assured of your monthly or annual revenue, it is easier to think about streamlining new product and service developments. For example, for a video streaming service, you can think of new strategies for releasing content. While companies that offer subscription-based software solutions can think about offering better products.
When you have issues with your billing process, focusing on other crucial matters just takes a back seat. And no one really wants that!
An optimized subscription billing system will manage different billing terms for all your customers, provide an updated dashboard and report across all business functions apart along with its revenue recognition functionality.
With Muvi Billing’s automated billing system, you can be assured of having end-to-end management of your customers’ complex tax-compliant billing processes, payment schedule, recurring revenue streams and more.
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