There are several ways to approach recurring billing – and your company must make the right choice for success. Taking into consideration what type of recurring billing your company needs to support, you need to make sure the solution you choose matches your way of doing business.
When deciding on a recurring billing solution, consider:
- Ease of payment plan setup through the user interface or API
- Ease of adjusting existing payment plans, including changing the billing date, freezing the payment, deferring billing, canceling immediately or in the future, partially canceling and more
- Availability of revenue forecasting to estimate how much money will be coming in on any future day
- Ability to analyze billing history
- Support for decline recycling and other collections process functionality.
Three Types Of Recurring Payments Businesses
Some features may be more important to you than others. Does your company fall into one of the three most common categories of companies dependent on recurring billing? They are:
Subscription-based online businesses. Using the open payment plan model and billing on the yearly, monthly or weekly anniversary of the subscription, these companies simply suspend a customer’s service if there’s a problem with a payment, taking little or no collections effort. These companies typically offer a limited number of payment plans and therefore have relatively modest recurring payment feature requirements. Forecasting and analysis are simple because there are a limited number of plans and no adjustments, deferments or freezes.
Sales force businesses. Dealers with physical locations and a sales force may use a term or open payment plan and often have complex recurring payment needs, including the ability to pay commissions to salespeople, analyze seller performance and forecast. Determining the reasons for billing differences from one seller to another can require billing difference analysis, a feature not available from all recurring billing solutions.
Businesses that make collection efforts. Businesses that require committed agreements and potential payment plan adjustments need a recurring billing solution with deep and wide collections functionality. This includes carefully created collections logic and decline recycling to collect past due accounts and retry declined transactions. These businesses usually have a sales force and need to analyze results carefully as well.
Recurring Billing System Software Architecture
Taking into consideration the kinds of businesses that use recurring billing and the features they often need, recurring billing solutions have developed along three lines of software architecture:
The payment-based model. Organized exclusively around payments, all recurring billing focuses on payment plans. This model focuses on what a customer pays and not what they owe. This model is simple to implement and easy to use. When billing terms are mostly unchanged and no complex logic related to freezes or cancellation is needed, this model works well.
The invoice-based model. With this model, the focus is on what customers owe. Outstanding balances are tracked, and multiple payments can be handled. Past due charges are accrued through invoices and then taken care of with payments. Customer debts and future billing dates are recorded in the form of invoices, and it’s easy to manage cancellations, freezes, pre-payments and other adjustments. But when there are several payment plans associated with a single customer, distinguishing between invoices can be difficult. While great for recurring billing, having a separate system for one-time payments is usually required.
The charge-based model. This model includes both payment plan and invoice functionality, but invoices are used only for tracking purchases made in the past. A charge tracks future payments. At the appropriate time, a charge becomes an invoice. This model offers all the advantages of both other models, but there is no risk of intermingling, and it’s easy to track how much a customer owes at a particular time. Plus, forecasting, adjustments and other changes and reporting are easy. With the charge-based system, invoices and payment plans are clearly separated, reducing confusion.
Your business must choose a recurring billing company that offers features and a software architecture model that meet all your current and anticipated future needs. To learn more about the recurring billing features of UniPay, a complete payment processing solution, please contact us.
We’ll help you make sense of recurring payment solutions.