How To Collect Recurring Payments The Right Way [7 Essential Best Practices]

April 10th, 2024 by Felix Cheruiyot

Best Practices for Collecting Recurring Payments

Most consumers will cancel their subscriptions on the slightest hint of billing malpractice. Discover 7 best practices for collecting recurring payments that will safeguard your revenue.

Recurring billing can significantly improve customer retention and fuel your business's growth when used responsibly. But when permissions are hidden in fine print and options to pause or turn off recurring payments are not provided, customers can feel like they have been trapped in a forced relationship.

Therefore, even though recurring payments are convenient for businesses and customers, there's a large grey area and issues in how they are implemented that can sour the relationship.

This article outlines 7 best practices for collecting recurring payments. Applying them in your recurring revenue business will reduce subscription cancellations, prevent chargebacks, and protect your revenue.

Why your subscription business must follow best practices when collecting recurring payments.

There is a growing chorus against buying anything on recurring payments. Statistics show that 30% of subscriptions are going unused each month.

An alarming 77% of people surveyed for a study said they struggled to remember the recurring monthly subscriptions they were signed up for. This is hardly surprising, considering that millennials in the US have an average of 17 paid entertainment subscriptions.

These forgotten subscriptions cost consumers $133 more than they realise a month. All these figures explain why consumers now treat autopay and recurring billing with suspicion. For a growing constituency, recurring payments must be avoided at all costs.

However, even with the growing movement advocating for its demise, recurrent billing has excellent benefits for businesses implementing it correctly. We will show you how to do that using the recurring billing best practices we share below.

7 recurring payments best practices every subscription business must follow.

Businesses that use sneaky tactics to generate recurring revenue are betting more than their sales. They are risking financial penalties that can reduce their profits.

While the financial consequences of your billing malpractices may be survivable, the damage to your subscription business's reputation may prove more challenging to overcome. Following the 7 recurring billing best practices we will discuss below will safeguard both your revenue and business reputation.

1. Educate your customers.

Consumers generally mistrust businesses. This mistrust develops when businesses do not educate their customers on how their practices and systems benefit them.

Recurring billing provides payment convenience, but your customers will only know this if you communicate it. They will assume you are only using it to bill them repeatedly and secure a source of predictable revenue.

But you should go beyond educating your customers on how recurring billing makes their lives easier and show them how recurring payments ensure a regular supply of the product or service they need.

Intentional and consistent content marketing is your best resource for educating your customers on why they need a subscription to your product. Use content to demonstrate to your customers how your product solves their problems.

To ensure revenue is guaranteed, customers must willingly sign up for recurring billing and understand how it works and why it's convenient for them. They may cancel their permission or even claim chargebacks on completed payments.

2. Be transparent.

Failure to educate customers on the benefits of signing up for recurring payments may be explained as general ineptitude on your part. Or it could be strategic incompetence, where you exploit consumers' ignorance by tricking them into a subscription they don't need.

While you can collect some payments from them and sustain your business for a while, an uninformed consumer does not make an ideal customer. As soon as they acquire the necessary knowledge, you will lose their trust and, most likely, their business. The last thing you want is to trick customers into signing up for a subscription and risk being seen as dishonest.

Disclosing to customers that you will be making recurring charges on their debit card will scare some of them away, but those were never your customers to start with. They were going to churn sooner or later. Rather than trick them into a subscription, win them over by selling the benefits your product offers.

3. Obtain express consent from customers before enrolling them in your recurring billing program.

Educating customers and being transparent about your recurring billing program is not enough. Not every customer will read your policies and content.

To prevent future payment disputes and chargebacks, ensure you get each customer's express consent before you sign them up for a subscription.

In the UK, there is a growing scourge of accidental subscriptions that are easy to get into but hard to get out of. The bill for these totalled a staggering £688m in 2023 alone. They are considered 'accidental' because the consumers thought they were making one-time purchases.

Ideally, you should obtain customers' written consent, but this is not always practical, especially for virtual businesses. A checkbox on your checkout or order summary page will suffice in such cases. Program the page to render and conclude the purchase or sign-up after the customer checks the box.

The customer must confirm that they have read and understood the payment terms by checking the box. Make sure to add a link to the payment terms.

Clearly state in the order summary that you will save the customer's payment card details and use them to collect recurring payments until they cancel their subscription.

4. Notify each customer before each recurring charge.

The average consumer spends about $273 on subscriptions every month. This expenditure is spread across subscriptions for video streaming services, fitness apps and equipment, subscription boxes for clothing and cosmetics, precooked meals, hobby supplies, ride-sharing services, productivity apps, online courses, and smart home security systems.

With so many subscriptions, it can be difficult for consumers to know how much they are paying for each every month. Many eventually forget about some of the subscriptions, even though the recurring payments continue.

Therefore, it is ethical to remind your customers that they are subscribed to your service and are still paying for it. Do this by emailing them before and after each recurring charge.

It may seem like these notifications are bad for business since they may remind customers that they no longer need your product and motivate them to cancel, And that is true in some cases. But it can also remind them to use your product and keep them consciously paying for it.

If a customer forgets about a subscription they are paying for and realises it months later, you can be sure that they will cancel as soon as they find out, possibly never to return.

5. Make it easy for customers to raise queries.

Similar to notifying customers before each recurring charge, it can seem that making it easy to dispute payments will motivate them to do so.

In reality, customers who have no way of raising payment queries end up cancelling their subscriptions out of anger and frustration.

Consumers view businesses that hide important information and make it hard to raise queries as unsure of their products' quality or value.

Make it easy for customers to contact your support staff regarding all issues with their subscriptions, particularly recurring payments.

Prominently display links to your customer support page. The page must provide all the ways customers can contact support and ensure that their queries are promptly attended to when they do.

Providing multiple ways for customers to connect with support staff will ensure they get help faster. Some of the ways are email, telephone, social media, and live chat.

Here are some of the ways you can help customers get help quickly:

Your goal should be continually improving your recurring payment experience for your customers' convenience and peace of mind. Customer feedback is critical for this.

6. Enable customers to withdraw their recurring payment authorisation.

If it were up to many businesses, they would not provide an unsubscribe option for customers to cancel their recurring payment authorisation. That's why many email newsletters use the smallest font possible for unsubscribe links. You must know where to look to see the link.

The logic behind that is that the easier you make it for customers to cancel their subscriptions, the more motivated they will be to do so.

Whether that is true matters little as customers who want to cancel but find it hard to will only feel frustration and anger towards your business. That frustration will cause them to aggressively seek ways to cancel, including requesting chargebacks through their bank.

An alternative way of handling subscription cancellations is to offer customers the option to pause recurring payments so they can return when their circumstances change. While you will lose revenue, there is still a chance the customer will return.

Your subscription cancellation page is another good place to stick a link to your customer support page. Ask if the customer's reason for cancelling isn't something customer support can address.

However, do not ask customers to apply or contact support if they want to cancel. That will aggravate them further. And when you do that, they will be so disappointed by the experience that they will tell those in their circles about it, which is not the word-of-mouth marketing you are hoping for.

7. Have a refund policy in place.

Instead of customers claiming chargebacks for disputed recurring charges, rather provide the option to request a refund.

Refunds are less costly for your business than chargebacks. That's because banks charge fees for chargebacks claimed against you by your customers.

Furthermore, customers will usually consider their payment dispute solved if they are refunded without too much fuss. In fact, a clear and smooth refund policy can enhance customers' subscription experience.

Customers would rather stick with a supplier whose recurring billing process is transparent than risk a bad experience with an unscrupulous provider. So, it is in your best interests to ensure that customers can easily raise queries, request refunds, or pause their subscriptions.

Streamline your recurring payments and safeguard your revenue with Intasend.

Recurring billing can set off alarm bells in consumers' minds. Images of strange charges on their debit cards instantly flood their minds when they hear the word 'autopay'.

However, when consumers fully understand them and businesses implement them ethically, the benefits of recurring payments are clear. It is in their implementation that businesses often run into challenges with recurring payments.

You can streamline and boost transparency around your recurring payment processes with billing automation. Learn more about our recurring billing and subscription management software here.

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Sign up today or book a demo with one of our recurring billing experts to explore the software's features and range of applications.

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