How to Set Up Recurring Payments in Your Business
Getting paid is important for every business owner. And when you run a monthly subscription business or require regular payments from customers, it can be tedious to manually process the transaction every period.
This is where recurring payments come into play. When you set up recurring payments, you eliminate the hassle of manual data entry and payment processing. Instead, your tech stack handles the transaction for you, so you can focus on your business while enjoying the peace of mind of guaranteed revenue.
What are recurring payments?
Think of recurring payments as subscriptions. As consumers, many of us have some sort of recurring payment: it’s a subscription box like Barkbox for puppers and Dollar Shave Club for… anyone with hair, or it’s your bank withdrawing mortgage payments or your landlord deducting your monthly rent.
Basically, a customer has consented to having the merchant (Barkbox, DSC, the bank, landlord, etc.) deduct payments on a regular, pre-determined (and pre-agreed) date. It’s up to the consumer to cancel the agreement and payments with the merchant directly.
From 2013 to 2016, traffic to subscription box websites increased 3,000%. And since 2017, food subscription site traffic went up 800%. As subscription-based business models continue to grow, so does the need for recurring payments.
The pros and cons of recurring payments
As briefly mentioned earlier, the types of business that benefit most from recurring payments are those with ongoing agreements with their customers.
The types of business that often have the need for recurring payments are:
- Banks and financial institutions (e.g., your mortgage or rent, HOA fees)
- Car dealerships (e.g. your lease or finance)
- Gym memberships
- Subscription services (e.g. Netflix, CauseBox, Hubble Contacts)
- Utilities providers (e.g. internet, hydro, cell phone provider)
- Learning and education (e.g. small business coaching programs, higher education institutions)
- Software as a service (SaaS) providers (e.g. MailChimp, Google, Adobe, Zoom)
- Payment plans (e.g. when a product or service is costly, breaking up the fee in equal payments)
But what are some of the good and bad parts about having recurring payments?
Have a look below:
| PROS | CONS |
| – Receive payments on time (no more missed deadlines) – Consumers don’t have worry about payment due dates – No need to send off invoices every month (or reminders or late payment notices) – Less paper trail – Saves you time since it’s automated | – Possible issues like expired credit cards require follow-ups – Possible fraud – Possible billing errors requiring refunds – Extra data protection and payment security is required since you’re dealing with sensitive information – Possible NSF charges (consumers need to ensure there’s money in the bank or room on their credit cards) |
Generally speaking, the pros of recurring payments mostly outweigh the cons. However, it’s important to have the whole picture before knowing what decision is best for you and your business.
How do recurring payments work?
Recurring payments are set up through your payment provider. Most payment gateways support recurring billing. Simply log into your account and enable the feature that stores the card number for future use. You can also store your customers’ payment data and tokenize the info for future billing. There’s no need to store the credit card’s 3-digit CVV code. That’s because the CVV is simply for card verification so once you‘ve used it once there is no reason to have it every time.
Pro tip: You should always enter as much address info as possible on your stored card profiles. The more info you have, the lower the interchange rates. And lower rates and fees can lead to sizeable savings.
Payment Depot supports the following gateways:
- Authorize.net
- PayTrace (for level 2 and level 3) B2B
- SwipeSimple
How to set up recurring payments in your business
Every payment gateway is a little bit different in how you need to set up your recurring charges. So, we’ve compiled a quick rundown on how to for:
- PayPal
- Stripe
- Square
- Authorize.net
- Quickbooks
How to set up recurring payments on PayPal
PayPal has more than 346 million active users on the platform. Merchants use it to help them collect payment for products and services. PayPal Subscription Payments later launched to allow merchants to set up recurring payments.
Creating PayPal recurring payments is actually quite simple. Once your account is properly set up, it’s as easy as creating a button you can put on your website or other marketing materials and direct potential customers to sign up. You’ll need a PayPal Terminal or Payments Pro account to set up recurring payments, and both of these have a $30 monthly fee.
- Under the “Tools” drop-down, select “Recurring payments.”
- From there, you’ll be able to create a recurring payment for a product or service as well as create that “Subscribe” button you can embed on your site. Whenever someone clicks that button, PayPal will request customer profile information from your new clients.
How to set up recurring payments on Stripe
Stripe is an online payment processor used by millions of businesses around the world. It has a focus on ecommerce but can also accommodate in-person payments. Stripe Billing allows merchants to set up recurring payments.
- Log in to Stripe Billing and select a product or service for which you want to enable recurring payments.
- Assign your product a pricing plan.
- Now you can subscribe a customer to that pricing plan. Any customers assigned to that pricing plan will be automatically sent a detailed email about their subscription plan.
Note, that with Stripe recurring payments you can also add setup fees and other charges on an ad hoc basis. Customers can choose to pay by ACH transfer as well as credit or debit cards and echecks, which provides them with more flexibility. And like PayPal, you can add a form embedded on your website or email so people can sign up natively (i.e. without being redirected to another site).
How to set up recurring payments on Square
Square offers in-person and online payment processing, along with a complete POS system. It’s a popular tool for merchants who sell in person. Here’s how to set up recurring payments with Square:
- From your dashboard, select the option to create an invoice.
- Hiy “Recurring” from the drop-down menu, where you’ll specify the frequency for the payments. From there, check “Automatic Payments” and customers with credit cards on file will be billed automatically.
- If the customer doesn’t have a card on file, you can select the option to “Allow customer to save their card.”
- At this point you’ll be able to complete the invoice with their information including any discounts you’d like to provide.
- Then select the schedule option to ensure your payments are set to recur on the right date.
How to set up recurring payments on Authorize.net
Authorize.net is a payment gateway provider that works with other tools and technologies to allow merchants to process credit card transactions. You can also use it to set up recurring payments. Here’s how:
- Log in to your merchant interface and under products and services, and click on automated recurring billing (ARB).
- Click on sign up for ARB at the bottom of the page.
- From here, you’ll be able to create new ARB subscriptions, integrate it with your website, view the status of your ARBs, as well as configure your email notifications and more.
How to set up Quickbooks recurring payments
Quickbooks is an accounting and bookkeeping software that includes payment processing features. One of those features is the ability to set up recurring payments:
- Log in to your account and navigate to Customers.
- Click on Credit Card Processing Activities and then Set Up Recurring Charges.
From here, you can add, edit, delete, pause, and manage customers’ recurring payments.
Recurring payments and your business
Recurring payments are a great way to generate recurring revenue and increase customer lifetime value. But you need payment processing technology that can make it happen automatically, so you’re not painstakingly processing payments each month by hand.
With Authorize.net and Payment Depot, you can set up recurring payments and get access to wholesale payment processing rates for one low monthly cost.
Quick FAQs about Recurring Payments
Q: What are recurring payments in a business context?
Recurring payments are transactions that happen automatically on a set schedule, as consented by the customer. These are typically used in businesses that require regular payments from customers, such as subscription services, utilities providers, and financial institutions.
Q: Why are recurring payments important for businesses?
Recurring payments are crucial for businesses as they eliminate the need for manual data entry and payment processing, save time, and guarantee regular revenue.
Q: Which types of businesses benefit most from recurring payments?
Businesses that benefit most from recurring payments include banks and financial institutions, car dealerships, gym memberships, subscription services, utilities providers, educational institutions, Software as a Service (SaaS) providers, and businesses offering payment plans.
Q: What are the pros and cons of having recurring payments in a business?
The pros of recurring payments include receiving payments on time, eliminating the need for sending monthly invoices, and saving time because of automation. The cons include potential issues like expired credit cards requiring follow-ups, possible fraud, billing errors requiring refunds, extra data protection needs, and possible non-sufficient funds (NSF) charges.
Q: How can businesses set up recurring payments?
Businesses can set up recurring payments through their payment provider. Most payment gateways support recurring billing. The process may vary slightly depending on the payment gateway used (such as PayPal, Stripe, Square, Authorize.net, Quickbooks, etc.).
Q: What are some tips for setting up recurring payments in business?
Businesses should always enter as much address info as possible on stored card profiles to lower interchange rates. Moreover, they should ensure pricing and repayment policy transparency, offer flexible payment methods, and check for regulatory compliance.
Q: How can recurring payments impact customer lifetime value?
Recurring payments can significantly increase customer lifetime value by generating regular revenue and ensuring customers stay engaged with the business over a longer period.
Q: Are there any fees involved in setting up recurring payments?
Yes, depending on the payment gateway used, there might be associated fees. For instance, PayPal requires a Terminal or Payments Pro account to set up recurring payments, and both of these have a $30 monthly fee.
Q: How can businesses handle expired credit cards in recurring payments?
Expired credit cards require follow-ups. Businesses need to have a system in place to identify and notify customers about expired cards and request updated information.
Q: How do businesses ensure data protection and payment security in recurring payments?
Businesses must adhere to data protection regulations and implement secure payment solutions to safeguard sensitive customer information. They may also use tokenization to secure stored payment data.