The subscription-based model has proven to be a massive success for many businesses that have jumped on this latest trend. With a subscription-based model, customers can get a taste for new products and services they would have otherwise never heard of.
Home-delivered meal kits, candies, men’s razors, streaming services, the list goes on and on. Just about any vertical can launch a successful subscription-based model.
If you are curious about adopting this type of business model, know that this strategy will boost your sales and “lock-in” a steady stream of revenue every month. Let’s take a look at how your business can get started with a subscription-based model by establishing recurring payments.
What Is A Recurring Payment
Recurring payments are an automatic charge to a customer’s bank account or credit card for both goods and services on a regular basis. In order for this to happen, the merchant must enable that option within the “payment flow” and the customer must agree to have this be an ongoing charge.
In order for a customer to establish a subscription, they must provide their credit card information in order to be saved as a “card on file.” By allowing this card to be on file and set up as a recurring payment, the customer gives approval for both the initial payment and all the successive payments to come.
Subscriptions are typically referred to as “open-ended”, which means that the customer will be charged indefinitely until the customer cancels the subscription or the card on file is expired.
What Solutions Do You Need To Accept Recurring Payments?
Before we begin, let’s take a look at what you will need before you set up your subscription-based business. First, set up recurring payments with a reputable payment service provider that fits your business model and your budget.
There are different types of companies that can help you get started on recurring payments:
- All-in-one payment processors: look for solutions that provide recurring billing and tools within their payment processing platforms. Some come with “out-of-the-box” solutions that come complete with site templates.
- Accounting software: This would be the best for a very minimalistic solution to displace wasteful paper billing.
- Subscription management platform: These platforms work between the merchant and the payment gateway to manage all the operations related to subscription businesses. However, these solutions are much pricier and a better fit for larger enterprises.
The Benefits Of Accepting Recurring Payments
Besides the massive growth of subscription-based businesses, there are more reasons to get in on accepting recurring payments for your business.
1. Optimizes cash flow – Since your payments are automatic, you will never need to worry about being paid on time. You will have no doubt when your payment will be processed every month. This keeps a steady cash flow and you will know how to plan ahead by knowing how much money you have.
2. Convenient for clients – Customers prefer a “set it and forget it” option when it comes to paying their bills. By setting these automatic payments, they know that their bill will be paid on a timely basis, without having to take any action of their own.
3. A time saver – Your entire billing process is automated, which means you don’t have to manually create invoices every month. Less time invoicing means more time to attend to other critical business matters.
4. More security – Your client can rest assured that your automatic billing software will provide them with high-level payment security. These solutions encrypt the user’s personal and payment information.
The best recurring payment processing provider will provide as many tools as possible that offer flexibility and affordability for your business. Not only must it handle the payments safely and efficiently, but it must also manage the billing process effectively.