The Simple 5 Step Guide to Recurring Payments

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SaaS startups are an exciting place to be. Pulsing with energy, they’re hives of hard work, excitement, and pure gratitude for each and every customer that opts for their product.

But as time moves on and the business scales, something shifts.

The excitement and gratitude are still there, but they become burdened ever so slightly with a new experience: growing pains.

There comes a time in every subscription SaaS business’s life when its previous manual processes no longer do the trick. That’s why digital transformation spending is estimated to double in the next four years. Processes need to be streamlined, automated, and optimized to enable continued scalability.

A SaaS business’s billing engine is a prime example.

Not only does it ensure the maintenance of healthy cash flow, but it also supports a business’s entire revenue operations. Marketing brings in the leads, sales closes them, and then if your business doesn't have an efficient way to capture the recurring payments from your customers, you're going to have a revenue problem.

When that day arrives for your business to transform its recurring billing and payments solution—and perhaps it already has—it’s important to follow the right steps to get your business set up with a digital transformation effort that suits its needs.

1. Know when it’s time to automate your recurring subscription payments process.

It’s very easy for bottlenecks to sneak up on your business.

In the beginning, manual invoicing and payment processing are manageable by hand. But for most businesses, this begins to change around the 150 to 200 customer-mark.

Even then, however, it can be difficult to recognize the signs telling you to automate. Here are a few symptoms that show it’s time for a change.

  • You’re inflexible: It’s hard to adjust your pricing plans or offer custom plans and subscriptions quickly when everything is done by hand. Worse yet, while you lag behind, swifter competitors pick up business.
  • Your billing department is overwhelmed: A staggering 80% of tech workers report feeling burned out. The billing department of a rapidly growing subscription SaaS business is sure to fall within this category. The equation is pretty simple: when workloads double or even triple from quarter to quarter, or even month to month, it’s a problem.
  • Mistakes are being made: Stress isn’t the only symptom of an overworked subscription billing department. Before too long that stress will begin to result in errors. Employees feel rushed, corners get cut (by necessity), and accuracy takes a hit. Unfortunately, mistakes also come at the cost of customers and their experience. No one is happy when they receive a bill riddled with errors. And of course, errors often result in revenue leakage for your business.
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2. Choose the right solution to automate your subscription billing and recurring payments.

Once you’ve come to the understanding you need to change the way you handle recurring payments, it’s time to start thinking about what solution's right for you. This means taking a survey of your billing and collections requirements and selecting an option that fits.

You need a solution that transforms your business model now, as well as how you expect it to develop in the years to come.

  • What kind of recurring billing and payments system are you looking for?
  • Do you bill monthly? Quarterly? Annually?
  • And what other tools will your solution need to integrate with?

Digital transformation comes with the promise of greater efficiency, but this is only true if your tools can work together seamlessly. To that end, the best billing and payment system in the world might still produce frustration if it doesn’t fit well with the rest of your tech stack.

It's also worth mentioning a modern, automated billing platform can do more than just what its name implies, including:

  • hosted registration and self-service subscription management
  • customer communications automation
  • seamless subscription migrations and account updates
  • robust recurring revenue reporting
  • accurate revenue recognition for simplified month-end-close,
  • and lots more.

It takes a truly comprehensive billing platform to satisfy the needs of a growing SaaS business. Integrating the right software now supports business operations of the present while also enabling barrier-free scalability for the future.

3. Set up an effective dunning management process.

Once you have an automated platform in place to handle your recurring billing and recurring payments processes, you’ll want to use it to set up an effective dunning management strategy. Failed customer payments become costly, but with the right tools, you can help nip revenue leakage in the bud. Collections assurance matters.

Modern automated billing platforms enable you to automate credit card retries and dunning email campaigns while also giving your customers easy access to fixing the problems themselves through self-service portals.

Often, collection issues are the result of an honest mistake. Maybe the customer's credit card expired. Maybe they changed providers. Maybe their bank account dipped too low at the time they were billed.

When these minor issues crop up it’s easy to end a relationship with a customer that would have stayed on if given the chance. The right tools allow for a different approach, and retaining customers is everything in the world of SaaS.

By addressing the issue directly, you not only collect the money you’re owed, but you also preserve the relationship, and as a result, your MRR.

Keep in mind up to 39% of invoices are paid late in the United States. Often, it’s a business’s dunning management strategy that makes the difference between late payments and no payments at all.

4. Integrate with the right payment gateway provider.

Payment gateway providers tend to look very similar on paper. After all, their job is to facilitate transactions and how much variety can there be to that?

But differences do exist and can have a pretty big impact on what sort of experience your business has when it comes to managing recurring payments.

For example, gateway providers can vary substantially in how they apply fees to each merchant account. It’s normal for them to make their money through a combination of transaction fees and flat rates. However, beyond that point, each option may handle things differently.

  • Annual fees
  • customer service fees
  • setup fees, and
  • statement fees are all “hidden” methods that some providers use to pad their bills.

If you find a company with these or similar policies stated in their paperwork, it’s likely best to avoid them.

There are also subtle variations to how the payment provider functions. Hosted gateway providers take your customers back to their own site to handle payments. This method can be easy for startups because it doesn’t take much reworking on their part. However, it also creates a small detour for customers that comes at the cost of their time and experience. It also takes up time for your finance team to work back and forth between the two different platforms.

Integrated recurring payment gateway providers, on the other hand, work seamlessly within your website. Integration should be quick and easy through your automated billing provider, and the difference will serve your customers well.

5. Improve the collections assurance on your recurring payments.

Sometimes automated dunning processes, no matter how good, are ineffective. When this happens, additional actions may be required.

Your new recurring billing platform can also be used to improve your collections on aging accounts receivables by providing laser-focused reports and tracking capability. Using an aging accounts receivable widget you can view:

  • who owes you payments
  • how much they owe
  • how many invoices they are behind, and
  • how long the issue has been going on so you can determine what your chances are of collecting.

This detailed reporting makes it significantly easier for billing clerks to reach out specifically to customers that are behind for more personalized payment retrieval attempts.

Transforming your recurring payments process pays off

Taking the proper steps to optimize your recurring billing and payment processing is about more than just reducing stress and optimizing efficiency for your billing department. From enhancing your communication with customers to enabling seamless account updates and accessible self-service portals, every aspect contributes to your customers' experience. And of course, assuring successful payment collections is key.

The tools you choose matter.

By selecting the right billing and recurring payment processing tools, you not only treat your customers to a better experience, but you also help the rest of your business perform at the highest possible level.

Tags: Recurring Billing Payments

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The Complete Guide To Subscription Billing