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What To Think About When Setting Up a Recurring Billing System

November 29, 2022
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1
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Revolv3
What To Consider When Setting Up a Recurring Billing System

Subscription billing can create several challenges for businesses. Some recurring billing systems may be difficult to integrate and have archaic technology that leads to reduced conversion and high involuntary customer churn rates that reduce revenue in the process. Some are designed for ease of onboarding and implementation, but lack the full functionality and scalability that your business may need as you grow and mature. 

That’s why it’s imperative to choose your recurring billing service wisely.

The best services use the latest advancements in transactional technology to make your job easy as a business owner while improving revenue rather than jeopardizing it.

Important Recurring Billing System Factors To Consider

It’s nice to generate residual revenue regularly, whether weekly, monthly, annually, or otherwise. However, unless you plan on typing payment information for each one of your customers each time a billing cycle matures, you’ll need to take advantage of recurring billing solutions.

These solutions aren’t all created equal.

Some cost more than others, some have better features (you may or may not need), some will help to improve your company’s revenue, and others may cause it to fall. The most important factors to consider as you shop for the best recurring billing system for your business are below:

Migrating to new providers or transforming your business to recurring

While the deciding factors of your recurring billing providers are unlikely determined by this factor alone, both these scenarios can complicate the selection process.  For businesses moving to recurring models, all the processes, oversight, and compliance can be daunting to wrap your head around while migrating providers offers a host of complexities such as tokenization, reporting, and fitting with as many existing business processes as possible.  

In either scenario, the outcome is only as good as the plan.  Engaging all business units within your company is critical to success.  

  • Does your company have a need to test or A/B test multiple pricing or configurations of your product? 
  • Do you allow for various payment methods or non-traditional payment methods that require support? 
  • Do you have an internal analytics team or are you completely reliant on your recurring provider? 
  • Do you need support for multiple processors 
  • Does your provider need an integration to a CRM or internal system? 

Qualified providers can likely outline these needs and provide information on how their solution fits your use case or if another would be better.  One size never fits all so it’s important to establish your plan/requirements ahead of engaging providers.  

The Type of Recurring Billing

The first thing you should think about as you search for a billing provider is the type of billing you do. Sure, you need a company that can keep track of recurring transactions, but what types of recurring transactions are they? Some might be:

  • Memberships. If you’re SaaS, stream provider, or other business that caters to members, you’ll need a billing system that caters to your type of service. 
  • Transactional (One-Time Purchases): Many sites that offer subscriptions may also offer 1 time purchases for services/upsells/access that can be processed with the Payment Method on file.  Consider a Pay-Per-View boxing match on top of your TV or streaming provider subscription. 
  • Negative Option and Trial Merchants: Many of the payment network regulations apply to merchants offering free or nominal fee trials that result in the customer’s payment method being charged at the end of the trial. This is considered negative option billing and can further complicate your choice of provider. 
  • MOTO/Sales/Call Center or Over-the-Phone Product Subscriptions. Some recurring billing systems require the customer to enter their information manually. If you run an over-the-phone product subscription business, you’ll need a provider that allows the merchant to collect payment information over the phone.  

Payment Gateway and Accounting Integrations

For most use cases the best option is always a recurring billing provider with a direct integration to your payment processor of choice.  In scenario’s where that isn’t offered by your preferred provider, it’s usually best to switch payment processors to one supported with a direct integration.  Gateway providers should be used as a last resort.  Gateway providers typically reduce the technical work of multiple processor integrations, but in doing so, degrade the quality of the payment data leading to increased fees, reduced collections, and higher churn.  

Unlike Payment Gateway integrations, Accounting gateways are usually not done in real-time.  Recurring billing providers are likely integrated to some of the largest accounting solutions on the market making it an easier switch.  If your solutions of choice don’t seamlessly integrate, solutions that aggregate these integrations are available.  Finally, most accounting systems can consume raw data.  Since the need for accounting sync in real-time is rarely a top priority, this is typically the final piece in the automated puzzle.  

  • Accounting Integrations. Accounting is critical for any business, and the easier it is to integrate your payment system into your accounting system, the better. Integration streamlines tracking revenue and expenses, helping to find operational inefficiencies you can nip in the bud.

The Invoicing Process

The invoicing process is crucial when it comes to recurring billing. First and foremost, if you send customers an invoice but require them to type their payment information manually each pay period, you are in the dark ages and can expect a higher churn rate. Choose a system that invoices and automatically bills your customers’ payment methods on file.

On the other hand, it’s also critical to maintain control of your invoicing process.

Some customers may not like being invoiced and billed on the same day, so you may want to set the system to send an invoice five days before the billing due date to let your customers know the due date is approaching. Moreover, it’s vital to be able to brand your invoices and other messages to increase consumer trust in your brand.

Keep in mind there are a variety of payment Network regulations for Credential on File (CoF) and Recurring Billing that will certainly apply to your business.  Some of these regulations can be specific to your Merchant Category Code (MCC Code) so work with a provider who is knowledgeable in this space.  

Involuntary Churn Minimization

Involuntary churn is the term for losing a customer that didn’t want to cancel your service. A high involuntary churn rate can significantly impact your revenue, so it’s best to work with payment processors that actively work to reduce involuntary churn rates.

Some of the biggest reasons for involuntary customer churn include the following:

  • Expired Payment Method. A quality recurring payments solution will keep tabs on credit and debit card expiration dates. These solutions send messages to customers before their payment methods expire, asking your customers to update their payment methods.
  • Unwarranted Declines. Some payment processors and gateways use old technologies that might not pass all the relevant data that the networks and banks require. That leads to excessive unwarranted declines, also called false declines.. If your customers can’t get your payment solution to accept their payment method, they will leave and potentially work with one of your competitors instead.  

A solid payment processing solution, like the solutions offered by Revolv3, can help you avoid these issues. Revolv3 uses dynamic routing to put an end to unwarranted declines. In addition, the company’s solutions are easy to scale as your company grows.

Analytics and Reporting

Analytics and Reporting

Businesses don’t grow to become behemoths by doing the same things day in and day out. They become goliaths by paying attention to the data and making moves to create more efficient and profitable processes.

The best recurring billing companies know this and take an active approach to give you the data you need to improve your business.

With quality analytics and reporting, you can easily see which pricing plans are most effective, what payment methods your customers use the most, and more. You may find that small changes significantly impact your profitability as you track this data.

Simplify the Billing Process With Subscription Management Software

The right subscription billing software with the best features can make your life easier as a business owner. Not only can it help you reduce involuntary customer churn, but it also can provide a better user experience for customers who are signing up. At the same time, a solid solution provides the data you need to grow your bottom line with every billing cycle.

One brand that offers state-of-the-art solutions for recurring payment processing is Revolv3. Here’s what sets the company apart from the pack:

  • Dynamic Routing. Revolv3’s technology looks for the fastest path to approval, improving first pass approvals, limiting retries and the additional fees associated with that technique, helping to reduce your involuntary customer churn rate and improve your top line revenue. 
  • All Business Sizes are Welcome. Revolv3 doesn’t discriminate against the little guy in business; they welcome him. Moreover, the technology is scalable when the small business grows to become a massive corporation.

Schedule a free demo with Revolv3 today to learn how their solutions can help your business.

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What To Consider When Setting Up a Recurring Billing SystemWhat To Consider When Setting Up a Recurring Billing System

Subscription billing can create several challenges for businesses. Some recurring billing systems may be difficult to integrate and have archaic technology that leads to reduced conversion and high involuntary customer churn rates that reduce revenue in the process. Some are designed for ease of onboarding and implementation, but lack the full functionality and scalability that your business may need as you grow and mature. 

That’s why it’s imperative to choose your recurring billing service wisely.

The best services use the latest advancements in transactional technology to make your job easy as a business owner while improving revenue rather than jeopardizing it.

Important Recurring Billing System Factors To Consider

It’s nice to generate residual revenue regularly, whether weekly, monthly, annually, or otherwise. However, unless you plan on typing payment information for each one of your customers each time a billing cycle matures, you’ll need to take advantage of recurring billing solutions.

These solutions aren’t all created equal.

Some cost more than others, some have better features (you may or may not need), some will help to improve your company’s revenue, and others may cause it to fall. The most important factors to consider as you shop for the best recurring billing system for your business are below:

Migrating to new providers or transforming your business to recurring

While the deciding factors of your recurring billing providers are unlikely determined by this factor alone, both these scenarios can complicate the selection process.  For businesses moving to recurring models, all the processes, oversight, and compliance can be daunting to wrap your head around while migrating providers offers a host of complexities such as tokenization, reporting, and fitting with as many existing business processes as possible.  

In either scenario, the outcome is only as good as the plan.  Engaging all business units within your company is critical to success.  

  • Does your company have a need to test or A/B test multiple pricing or configurations of your product? 
  • Do you allow for various payment methods or non-traditional payment methods that require support? 
  • Do you have an internal analytics team or are you completely reliant on your recurring provider? 
  • Do you need support for multiple processors 
  • Does your provider need an integration to a CRM or internal system? 

Qualified providers can likely outline these needs and provide information on how their solution fits your use case or if another would be better.  One size never fits all so it’s important to establish your plan/requirements ahead of engaging providers.  

The Type of Recurring Billing

The first thing you should think about as you search for a billing provider is the type of billing you do. Sure, you need a company that can keep track of recurring transactions, but what types of recurring transactions are they? Some might be:

  • Memberships. If you’re SaaS, stream provider, or other business that caters to members, you’ll need a billing system that caters to your type of service. 
  • Transactional (One-Time Purchases): Many sites that offer subscriptions may also offer 1 time purchases for services/upsells/access that can be processed with the Payment Method on file.  Consider a Pay-Per-View boxing match on top of your TV or streaming provider subscription. 
  • Negative Option and Trial Merchants: Many of the payment network regulations apply to merchants offering free or nominal fee trials that result in the customer’s payment method being charged at the end of the trial. This is considered negative option billing and can further complicate your choice of provider. 
  • MOTO/Sales/Call Center or Over-the-Phone Product Subscriptions. Some recurring billing systems require the customer to enter their information manually. If you run an over-the-phone product subscription business, you’ll need a provider that allows the merchant to collect payment information over the phone.  

Payment Gateway and Accounting Integrations

For most use cases the best option is always a recurring billing provider with a direct integration to your payment processor of choice.  In scenario’s where that isn’t offered by your preferred provider, it’s usually best to switch payment processors to one supported with a direct integration.  Gateway providers should be used as a last resort.  Gateway providers typically reduce the technical work of multiple processor integrations, but in doing so, degrade the quality of the payment data leading to increased fees, reduced collections, and higher churn.  

Unlike Payment Gateway integrations, Accounting gateways are usually not done in real-time.  Recurring billing providers are likely integrated to some of the largest accounting solutions on the market making it an easier switch.  If your solutions of choice don’t seamlessly integrate, solutions that aggregate these integrations are available.  Finally, most accounting systems can consume raw data.  Since the need for accounting sync in real-time is rarely a top priority, this is typically the final piece in the automated puzzle.  

  • Accounting Integrations. Accounting is critical for any business, and the easier it is to integrate your payment system into your accounting system, the better. Integration streamlines tracking revenue and expenses, helping to find operational inefficiencies you can nip in the bud.

The Invoicing Process

The invoicing process is crucial when it comes to recurring billing. First and foremost, if you send customers an invoice but require them to type their payment information manually each pay period, you are in the dark ages and can expect a higher churn rate. Choose a system that invoices and automatically bills your customers’ payment methods on file.

On the other hand, it’s also critical to maintain control of your invoicing process.

Some customers may not like being invoiced and billed on the same day, so you may want to set the system to send an invoice five days before the billing due date to let your customers know the due date is approaching. Moreover, it’s vital to be able to brand your invoices and other messages to increase consumer trust in your brand.

Keep in mind there are a variety of payment Network regulations for Credential on File (CoF) and Recurring Billing that will certainly apply to your business.  Some of these regulations can be specific to your Merchant Category Code (MCC Code) so work with a provider who is knowledgeable in this space.  

Involuntary Churn Minimization

Involuntary churn is the term for losing a customer that didn’t want to cancel your service. A high involuntary churn rate can significantly impact your revenue, so it’s best to work with payment processors that actively work to reduce involuntary churn rates.

Some of the biggest reasons for involuntary customer churn include the following:

  • Expired Payment Method. A quality recurring payments solution will keep tabs on credit and debit card expiration dates. These solutions send messages to customers before their payment methods expire, asking your customers to update their payment methods.
  • Unwarranted Declines. Some payment processors and gateways use old technologies that might not pass all the relevant data that the networks and banks require. That leads to excessive unwarranted declines, also called false declines.. If your customers can’t get your payment solution to accept their payment method, they will leave and potentially work with one of your competitors instead.  

A solid payment processing solution, like the solutions offered by Revolv3, can help you avoid these issues. Revolv3 uses dynamic routing to put an end to unwarranted declines. In addition, the company’s solutions are easy to scale as your company grows.

Analytics and Reporting

Analytics and Reporting

Businesses don’t grow to become behemoths by doing the same things day in and day out. They become goliaths by paying attention to the data and making moves to create more efficient and profitable processes.

The best recurring billing companies know this and take an active approach to give you the data you need to improve your business.

With quality analytics and reporting, you can easily see which pricing plans are most effective, what payment methods your customers use the most, and more. You may find that small changes significantly impact your profitability as you track this data.

Simplify the Billing Process With Subscription Management Software

The right subscription billing software with the best features can make your life easier as a business owner. Not only can it help you reduce involuntary customer churn, but it also can provide a better user experience for customers who are signing up. At the same time, a solid solution provides the data you need to grow your bottom line with every billing cycle.

One brand that offers state-of-the-art solutions for recurring payment processing is Revolv3. Here’s what sets the company apart from the pack:

  • Dynamic Routing. Revolv3’s technology looks for the fastest path to approval, improving first pass approvals, limiting retries and the additional fees associated with that technique, helping to reduce your involuntary customer churn rate and improve your top line revenue. 
  • All Business Sizes are Welcome. Revolv3 doesn’t discriminate against the little guy in business; they welcome him. Moreover, the technology is scalable when the small business grows to become a massive corporation.

Schedule a free demo with Revolv3 today to learn how their solutions can help your business.

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