Learn how offering automatic, recurring payments can improve your cash flow and help your customers save time.
2 RECURRING PAYMENTS
Collecting customer payments on time is an essential part of what makes a company profitable. However, managing receivables is rarely seen as an extension of customer service. In fact, soliciting past-due payments from customers can put a strain on the customer relationship and detract from a business’s primary goal: growing sales.
By offering an automatic, recurring payment option, your business can transform receivables collection into a customer-service tool that makes the payment process seamless for the customers you serve.
Recurring payments are designed for businesses like gyms or childcare providers offering products or services that customers pay for on an ongoing basis. And when it comes to B2B sales, a restaurant chain may depend on a local bakery for regular deliveries of baked goods or a hotel chain may require weekly deliveries of fresh flowers from a preferred florist. In these cases, the gym, childcare provider,
bakery and florist would all benefit by setting up recurring payments with their regular customers.
In addition to helping customers save time, this service allows businesses to focus on building relationships with their customers by taking the emphasis off of payment collection. Plus, offering recurring payments can help businesses attract new customers who place a high value on customer service, innovation and efficiency.
Put Customers in Control
Businesses are able to set a standard time when recurring payments will be made for customers who opt into the program. However, customers appreciate having the flexibility to choose the frequency of payments, as well as when payments will begin and end.
In addition to enhancing the customer experience, giving customers more control over recurring payments can help them to better manage cash flow. For example, a customer could choose to pay for purchases on the first Monday of every month when his or her business is typically flush with cash. This enhanced level of flexibility and control can strengthen customers’ financial health, thereby improving their ability to pay for purchases on-time and in-full.
To set up recurring payments, the customer needs to choose how often they’d like to submit payment (weekly, biweekly, monthly, quarterly, etc.) and when they want the recurring payments to end. The
only limitation is that there cannot be more than one year between consecutive payments.
One customer, for example, may choose to submit a payment every week because making smaller payments on a regular basis is easier on their cash flow. For another customer, making payments on the second Friday of every month may be ideal because that’s when their customers typically submit payments.
The amount paid for each bill can vary from transaction to transaction, so businesses can charge customers a fixed amount or adjust the payment amount based on the number of products or services purchased during a specific billing period.
In addition to the ongoing convenience of recurring payments, the opt-in process should be simple and straightforward for customers.
In order to enroll, a customer agrees to:
• Make recurring payments for a specified period of time.
• Allow the business to charge their credit card or bank account.
The customer then chooses:
• When payments will be submitted.
• The amount of each payment — whether fixed or variable.
Giving customers the flexibility to choose when payments begin and end, which form of payment to use, the frequency and timing of
Incremental Payments Can Boost Customer Satisfaction
Installment plans give customers the flexibility to purchase more expensive products or services by making smaller, more manageable payments rather than paying for a purchase in a single payment. Unlike recurring payments that let customers pay for ongoing purchases, incremental payment plans are designed to stretch out the payment period for a single purchase.
Customers often appreciate the flexibility that incremental payment plans offer — especially when they can choose payment terms such as when and how often payments are made, and the amount of each installment, until the purchase is paid-off in full.
Letting customers pay for larger purchases over time may also help grow your sales of higher-priced products and services. By making it easier to pay down more expensive purchases, you may be able to broaden your customer base and entice current customers to make larger purchases.
payments and the amount of each payment, can have a significant impact on customer satisfaction. By allowing customers to select the payment details that work best for their needs, businesses can enhance customer service and grow customer loyalty.
Strengthening Business Finances
By establishing automatic payments for some or all of its customers, a business can reduce the chance of late or missed payments. The result is better — and more predictable — cash flow over the short- and long-term.
As customers opt for recurring payments and turn off paper billing,
businesses can drive down their postage costs and significantly
reduce their carbon footprints. And because the payments are automatically
deducted, this service can decrease the number of bad-
debt write-offs and reduce the need to hire collection agents.
The bottom line: When businesses are no longer forced to spend hours each month convincing customers to submit payments, they can put their energy toward building stronger relationships. Recurring payments can also help businesses strengthen their relationship with customers by making the payment process more convenient. Often times, payment submission is one of the most frequent touch points between a business and its customers. By focusing on the payment experience, businesses can make a significant impact on overall customer satisfaction.
How You Can Make the Most of Recurring Payments
1. Be Transparent
Be clear and let customers know what to expect. Include any fees they may incur from the delivery of your products and services. Supplement this information by offering to alert customers when a bill exceeds a certain sum. Doing so will help your customers feel more in-control of the payment process.
Also, let customers know if goods or services will be late or cannot be delivered. And make it easy to terminate recurring transactions by letting them know when the last bill will arrive or, if a credit is due, when it should appear on the billing statement.
2. Avoid Billing Hassles
Consider letting the payer choose the billing date when they have the most cash on hand.
And don’t undercut the goodwill you’ve built by billing customers before they’ve given authorization or by terminating their accounts the first time they don’t pay promptly. That only alienates customers who may have had the best of intentions. Neither side wins.
It’s also smart to state your cancellation policy and authorization agreements in writing, so customers know what to expect and what they’re agreeing to.
3. Offer Alternative Payment Options
By accepting payment through multiple payment types, you can cater to a wider range of customers. Otherwise, consumers who are struggling with shrinking credit lines may decline to use this helpful service. In addition, when customers make ACH and eCheck payments, it can minimize the card transaction fees that you incur.
4. Protect Yourself Against Fraud
You, as the business owner, should also be concerned about fraud. Safeguards include using address verification services and asking cardholders for the three- or four-digit security code printed on their credit and debit cards.
5. Make Billing Statements Clear
Arrange with your card processor to give clues on billing statements that help both you and clients recall charges made. Such acronyms, known as soft-billing descriptors, often truncate the merchant’s name to three recognizable letters plus an asterisk followed by a more detailed description of the item being billed.
Of course, you need to share those acronyms, or “Doing Business As” names, with your cardholder so they recognize you on their statement.