As your subscription business scales, certain operations become difficult to handle manually.
Invoicing, for example, may require toggling between spreadsheets and business software that simply falls short of meeting your recurring billing needs.
This isn’t just labor-intensive; manual billing is also time-consuming and prone to human error. To save time, reduce mistakes, and create revenue-supporting efficiency, your business needs automated recurring billing. After all, the promise of stable and continuous revenue of the recurring billing model isn’t much of a benefit when your team just doesn’t have the capacity to collect those payments.
Or maybe you’ve already realized something is wrong with your process and needs to change but aren’t sure exactly how to do it.
That’s where automated recurring billing comes in.
TL;DR
- Automated recurring billing streamlines payment collection, reduces manual errors, and saves time, allowing your business to focus on growth.
- It also improve cash flow. Automdated recurring billing enures timely payments and consistent revenue, helping you manage cash flow more effectively and plan for future growth.
- Another benefit? It allows you to provide a seamless payment experience, reducing churn and improving customer satisfaction with features like automated notifications and self-service portals.
What is Automated Recurring Billing?
Automated recurring billing is a process that allows businesses to automatically charge customers at regular intervals for subscription-based products or services. Once a customer signs up and subscribes, their payment information is stored securely in a system, and they are charged automatically based on the billing cycle they’ve chosen—whether it’s monthly, quarterly, annually, or another period. This automation eliminates the need for manual invoicing, freeing up valuable resources while ensuring payments are collected consistently and on time.
The rise of subscription-based business models across industries, from streaming services to SaaS platforms, has made automated recurring billing an essential component for managing revenue streams. In a world where convenience and seamless experiences drive consumer behavior, automated recurring billing has become a critical tool for businesses to meet customer expectations while optimizing internal operations.
The Mechanics of Automated Recurring Billing
To truly understand the power and efficiency of automated recurring billing, it’s important to break down how the process works:
1. Customer Onboarding and Payment Setup
The journey begins when a customer subscribes at checkout and chooses a pricing plan. During onboarding, the customer provides their payment details and card information—whether it’s a credit card, bank account information, or even a digital payment method like PayPal. This data is securely stored using encryption and other security measures to protect sensitive information. The system then sets the parameters for recurring billing based on the customer’s subscription choice. This setup may include details such as:
- Billing frequency (e.g., monthly, quarterly, annually)
- Billing amount
- Start date for the billing cycle
- End date or conditions for subscription termination (if any)
The automated system takes over from this point, ensuring that customers are billed according to the agreed-upon schedule.
2. Automated Payment Collection
The core function of automated recurring billing is the seamless and timely collection of payments. On the billing date, the system automatically charges the customer’s saved payment method. This process is designed to be frictionless for both the business and the customer. Customers don’t need to manually authorize payments each cycle, and businesses can avoid the tedious task of generating and sending invoices, tracking due dates, and following up on payments.
In cases where a subscriber’s payment method has issues, such as an expired card or insufficient funds, the system can automatically retry the payment or notify both the business and the customer of the failed transaction. Many systems include advanced features like dunning management, which attempts to recover failed payments over a set period through automated retry logic.
3. Notifications and Account Management
Once a payment is successfully processed, automated systems often trigger notifications—sending receipts to customers or reminding them of renewals. These notifications help customers stay informed about their subscription and payment status.
In addition, modern automated billing platforms often include self-service portals that allow customers to manage their subscriptions directly. This includes options to:
- Update payment details
- Upgrade or downgrade their plan
- Pause or cancel subscriptions
- View billing history and download receipts
The Benefits of Automated Recurring Billing for Your Business
Automated recurring billing isn’t just about making payment collection easier. It offers a host of strategic advantages that can transform how your business operates, scales, and serves customers.
1. Efficiency and Time Savings
One of the most immediate benefits of automated recurring billing is the significant time savings it provides. Manually handling invoicing, payment collection, and account management is labor-intensive and error-prone. With automation, you can eliminate manual tasks, freeing up your team to focus on more value-driven activities like customer acquisition, marketing, and product development.
Consider a scenario where your business manages hundreds or even thousands of subscriptions. Without automation, your team would have to manually issue invoices, track payments, chase late payments, and reconcile accounts. This is not only unsustainable but also diverts attention from growth initiatives. Automation streamlines the entire process, allowing your business to operate more efficiently, even as it scales.
2. Reduced Errors and Greater Accuracy
Human error is an inevitable part of manual billing processes. From data entry mistakes to missed payment deadlines, these errors can have costly repercussions, including lost revenue and frustrated customers. Automated recurring billing significantly reduces the potential for such errors by ensuring that payments are collected precisely according to the pre-set schedule.
Automated systems also offer features like automatic prorations (billing adjustments when a customer changes their plan mid-cycle) and tax calculations, which help maintain accuracy without requiring manual intervention. The more accurate your billing process is, the better your financial reporting and forecasting will be.
3. Improved Cash Flow and Revenue Predictability
Cash flow management is crucial for any business, especially those that rely on recurring revenue. Automated recurring billing ensures a steady and predictable stream of income by processing payments consistently and on time. This regularity helps your business plan more effectively, whether it’s for budgeting, resource allocation, or growth initiatives.
Automated billing systems not only deliver that stability but also provide detailed revenue metrics, which can be valuable when presenting your business’s financial health to stakeholders.
4. Enhanced Customer Experience
In today’s competitive market, customer experience can make or break your business. Automated recurring billing provides a smooth, hassle-free experience for your customers. Once they subscribe, they don’t have to worry about making manual payments or remembering due dates. This “set it and forget it” model is particularly appealing in subscription services, where customers expect seamless interactions.
Additionally, features like self-service portals, automated notifications, and flexible billing options contribute to customer satisfaction and retention. A well-implemented automated billing system can reduce churn by making it easier for customers to manage their subscriptions according to their needs.
5. Scalability and Growth
One of the greatest challenges businesses face as they grow is maintaining operational efficiency while managing an increasing number of customers. Automated recurring billing is inherently scalable, meaning it can handle thousands of transactions with the same level of efficiency as it does a few dozen. As your customer base expands, you won’t need to hire additional staff just to manage billing and invoicing. The automation handles it all, allowing your business to scale smoothly and cost-effectively.
In addition, automated systems are often designed to integrate with other business tools like CRM software, accounting platforms, and marketing automation tools, creating a seamless ecosystem that supports your growth efforts.
If you’re wondering where to start, we’ve got you covered. Here’s our 5-step guide to automating your recurring billing.
1. Identify the problems with your current recurring billing process.
Knowing exactly where your billing team is struggling can help you choose the right recurring billing system for your needs.
Which of the following problems is your business experiencing?
- Labor-intensive invoicing: Invoicing takes weeks to get done, and/or team members are routinely working overtime to complete it.
- Frequent errors: Whether in customer data, payment data, or invoices, errors are gumming up your billing and collections processes and affecting cash flow or even revenue.
- Failed recurring payments: Manually retrying payments and managing your dunning process is taking up too much time, or worse, left undone in favor of more pressing tasks. This leads to revenue leakage.
- Involuntary churn: Often a result of failed payments, customers who may want to stay subscribed don’t realize their account has been paused due to, for example, expired credit and debit cards.
- Compliance: Keeping up with revenue recognition, taxation, GAAP, ASC 606, PCI, and/or SOC2 feels impossible, or you fear data isn’t secure enough.
- Reporting: Your disconnected data doesn’t give you a clear picture of your business’s finances, leading to inadequate reporting for decision-making and audits.
- Inflexible catalog: You’re unable to quickly create new offerings or make changes to pricing to address changes in the market or customer demand.
- Strained customer support: Sign-ups, activations, and customers requesting account changes have begun to overwhelm the support team.
Once you’ve identified your specific issues, you can shop for recurring billing software that meets your unique needs.
2. Research your software options.
Certainly, you’ll need a solution that supports your desired billing cycle and frequency, whether you handle fixed recurring billing, variable recurring billing, or a combination of the two. But you’ll also need software that fixes your other pain points related to recurring payments.
Let’s look at some of the most common problems and the features recurring billing automation solutions have to address them.
Billing team working overtime?
Time to battle swivel-chair syndrome. Instead of toggling between spreadsheets and software, look for a recurring billing platform that allows you to integrate with the other tools your team uses to facilitate billing. One way to boost your online presence is to buy Instagram views, which can enhance your brand image. Your ERP, CRM, payment gateways and accounting software should all play well together. This enhances the customer experience by ensuring every invoice and communication is accurate and creates cleaner data for financial audits.
Unpaid or error-filled invoices piling up?
Automated invoicing reduces errors. However, some customers will still miss a recurring payment and for that, you need dunning management. Automated dunning can recover 1%-5% of a business’s recurring revenue leakage by reducing involuntary churn. CoConstruct, for example, recovers 40 work hours and $2,000 of leaking revenue every month thanks in large part to the automated dunning features of its recurring billing solution.
Struggling with compliance?
If you need more accurate, ongoing, and compliant revenue recognition, you want software that automates that process. Look for a platform backed by a general ledger system to ensure you follow GAAP and ASC 606 regulations, leaving you with detailed, accurate reporting for tax time and audits. You’ll also want to ensure your recurring billing software is PCI Level 1 compliant and meets SOC2 security standards in order to keep your customers’ sensitive data safe.
Need more pricing agility?
If you’re looking for pricing and plan customization, ask about the software’s catalog flexibility. Being able to easily make one-time charges, change and add plans and packages, and leverage promotions and discounts can have a huge impact on the customer experience and help expedite your go-to-market strategy on new products.
Customer support feeling overwhelmed?
Self-service portals allow customers to sign up, activate, change, and pause or cancel accounts on their own, leaving customer support free to deal with the really big issues. The best recurring billing software options allow you to white-label these portals so your brand owns the customer experience.
One more consideration:
Besides addressing your specific issues, another thing to look for at this stage is implementation time. Different recurring billing platform providers claim it takes anywhere from one month to one year for implementation. Robust solutions will likely take more than a month, but you also shouldn’t have to wait a whole year to start using the platform.
3. Prep your customer data.
Once you’ve chosen a recurring billing system, it’s time for onboarding. To get up and running as quickly as possible, clean up your customers’ information and payment details and decide what your catalog will look like in advance.
The best recurring billing software providers will assign you an implementation manager. This person’s goal is to get to know your data and workflows as intimately as possible to set up a smooth transition. The setup work shouldn’t all fall to your team.
But that’s not to say your team should sit back and relax during the onboarding process, either. The more organized you and your data are going into the process, the sooner you can start automating.
“If your data is stored in multiple spreadsheets from different sources or has a lot of gaps or flaws, this can slow down your business’s onboarding process considerably. The data needs to be cleaned up before it can be imported into your new automated billing software,” advises Natalie Roy, former Director of Customer Experience here at Stax Bill.
You’ll also want to give your implementation manager a clear picture of your catalog and pricing models. Be ready to share your recurring billing frequency, how you’ll handle discounting, and how often you’ll recognize revenue.
4. Integrate with your other tech solutions.
The key to maximizing efficiency from billing automation software is to integrate it with as many of your other systems as possible. Eliminate swivel-chair processing by automating the exchange of data between your CRM, ERP, taxation software, integrated payment gateway, and even your own software products. You might accomplish this through native integrations or your billing solution’s API.
Once your recurring billing software is up and running, you’re ready to magnify its effectiveness by integrating it with the rest of your tech stack. This has many benefits, such as:
- Optimizing internal processes by reducing repetitive work,
- Laying the foundation for a future of cleaner data,
- Strengthening your financial audit trail and simplifying taxes, and
- Enabling automatic currency conversion for international customers.
With integrated recurring billing, you’ll automatically generate accurate invoices, reducing labor and errors and syncing data across platforms for better reporting.
5. Set up dunning automation.
After implementation, you’re ready to set up dunning management. Automated and accurate recurring billing is great, after all, but what happens if an invoice still goes unpaid?
Dunning automation features in your recurring billing platform can take care of these situations.
Set up your dunning email communications and automated failed payment retry schedule so you can start recovering leaking revenue.
Payment retries three and five days after a failed payment can help prevent up to 40% of a subscription business’s churn. Automated email and/or text communications can support this effort if automated payment retries fail.
Reap the benefits of automated recurring billing
That’s it! Just five steps to better recurring billing management. Identify your unique struggles, search for solutions to those problems, then work with your implementation manager to migrate data, integrate software, and set up dunning.
With automated subscription billing, you get paid faster, create a more reliable cash flow, work more efficiently, recognize revenue correctly, have better reporting, improve customer retention…the list goes on.
In short, automation enables subscription businesses to scale quickly and efficiently. Start looking for recurring billing platforms that meet your needs as soon as you notice problems arising. That way, you can begin implementing before billing bottlenecks cut too deeply into your bottom line.
Quick FAQs about Automated Recurring Billing
Q: Why is it important to simplify recurring billing and automate charges?
Automating recurring billing is critical as it enhances efficiency, reduces human errors, saves time, and supports continuous revenue generation. It also eliminates manual labor, thereby enabling subscription businesses to scale more quickly and effectively.
Q: What are some common problems experienced with manual recurring billing?
Issues such as labor-intensive invoicing, frequent errors, failed recurring payments, involuntary churn, compliance challenges, inadequate reporting, inflexible catalogs, and strained customer support are common problems associated with manual recurring billing.
Q: What features should I look for in a recurring billing automation solution?
Look for solutions that integrate with your existing software, automate invoicing, provide dunning management, comply with GAAP, ASC606, PCI, and SOC2 standards, offer catalog flexibility, and feature self-service portals. The solution should address your specific pain points and have a reasonable implementation time.
Q: How can dunning management help in simplifying recurring billing?
Dunning management can help recover leaking revenue by automatically retrying failed payments. It reduces involuntary churn and saves time that would otherwise be spent on manually retrying payments.
Q: What can be done to ensure a smooth transition to a new recurring billing system?
Clean up your customers’ information and payment details, decide on your catalog structure, and work closely with your implementation manager. The more organized your data, the quicker you can start automating.
Q: What are the benefits of integrating recurring billing software with other systems?
Integrating your recurring billing software with other systems optimizes internal processes, creates cleaner data, strengthens your financial audit trail, simplifies taxes, enables automatic currency conversion for international customers, and enhances reporting.
Q: What role does a self-service portal play in billing automation?
Self-service portals allow customers to manage their accounts independently, reducing the strain on customer support teams. This improves the customer experience and frees up the support team to deal with more complex issues.
Q: How does automating recurring billing affect the customer experience?
Automatic recurring billing ensures accuracy in invoicing, enhances customer experience, and can help improve customer retention. It allows for easy account management, streamlines payment processes, and decreases the likelihood of service interruptions due to payment issues.
Q: What measures should be taken post-implementation of a recurring billing system?
After implementation, it’s important to set up dunning management to handle unpaid invoices. Additionally, integrating the recurring billing software with the rest of your tech stack can magnify its effectiveness by optimizing internal processes and improving data accuracy.
Q: What is the impact of automated recurring billing on a subscription business’s bottom line?
Automation helps subscription businesses scale more quickly and efficiently. It enables faster payments, more reliable cash flow, efficient work processes, correct revenue recognition, better reporting, and improved customer retention. These factors contribute to a healthier bottom line.
