Setting up recurring payments for service-based businesses
Recurring payments are a simple but highly effective tool to streamline your business management. Find out about how to use them and how they can work for your business, making your monthly financial tasks easier than ever.
Why chasing payments hurts service businesses
When your work is regular, your payments should be, too. Unfortunately, that doesn't always happen. If you've got a small business in the service industry, you might find yourself chasing invoices month after month.
There's nothing more frustrating than chasing payments over and over again; it's inefficient, it can cause delays to your bookkeeping records, and even lead to cashflow problems. It also takes up valuable headspace that you could use to focus on the bigger picture and other parts of your business.
As a small business owner, you've probably asked yourself if there's a better way to deal with this problem. Luckily, there is.
What recurring payments are (and why they help)
Recurring invoices are exactly what they sound like: straightforward, simple bills that get sent automatically each month. With the customer's approval, these may be expanded to include recurring direct debits, which function as a subscription payment system. In this case, the money will be automatically deducted from the customer's account each month and credited to the business.
It’s no surprise that recurring payments are a common, low-stress way to handle customers who must regularly pay the same amount. Here are a few reasons why businesses choose to embrace them:
They help maintain cash flow
Staying on top of cash flow means staying on top of your business plan. If you know when money is coming in, you can spend it more effectively, keep your business account from getting overdrawn, and prevent ongoing problems.
With recurring payments, you'll know exactly when to expect money in your account. This is particularly important for small business owners, as you may be running your company with tight margins.
They save time
Every small business owner is always looking for ways to save time. Well, we've found one. Why waste your valuable working hours creating manual invoices when you could set up a recurring payment instead? By automating a system that you used to do manually, you'll save yourself time and effort.
When you use recurring invoices, you can stop chasing late subscription payments. That means you'll save even more time later in the month, too. We reckon that's a real win-win.
They give customers a predictable billing schedule
Nobody likes getting a bill to pay, but using recurring invoices can make your customers much happier. If they know that they'll be billed on a particular day each month, they can plan accordingly. After all, they may have their own cash flow to organise.
As an added bonus, a predictable billing schedule helps your business appear more professional. This can be particularly important for a small business, as you want customers to take your operation seriously. Little details, such as reliable recurring payments, can make a big difference. Businesses that send invoices on irregular time frames may seem like they don't care that much; this encourages customers to stop caring about payments, too.
How to set up recurring billing with SumUp
If you're already using a SumUp Business Account for your finances, then setting up recurring payments is a quick and easy process.
To create recurring invoices, use the Invoices tool. It's easy to set up repeat billing. You'll need to fill in all the mandatory invoice information, which will remain the same each time. You'll also need to include the date of the first invoice, the time period between invoices (once a week, once a month, and so on), and how long you want the recurring invoices to continue.
To make your customers' lives easier and ensure that you get paid on time, think about including different payment options in your invoices. One of the simplest ways to pay is by payment links. Add one of these to your recurring invoices to give customers a low-effort, ultra-fast solution.
What types of businesses benefit most
Do you need to automate service billing? If you have customers paying the same amount for regular, repeat services, your business will probably benefit from recurring invoices. Here are some examples:
Coaches, consultants and other professional services. Setting up recurring invoices for regular clients is particularly important for these white-collar jobs, as it carries an air of professionalism.
Beauty salons or wellness centres where customers can book an ongoing series of treatments.
Home tutors, personal trainers, and other services that work closely with clients on a regular basis.
Freelancers or contractors with regular clients. If you'll be doing steady work for one company for a period of time, use recurring invoices to simplify things.
No matter what the nature of your business is, when setting up recurring invoices, it's a good idea to have a contract in place with your customers. You should discuss this with them for clarity, to ensure that everyone is on the same page. A contract encourages customers to take you seriously, which can otherwise be a problem for service businesses like home tutors or personal trainers.
There are several things to consider when entering this kind of business relationship with a customer. For example, if you run a home tutoring service, will you continue to send invoices as a form of retainer during the school holidays? If someone cancels their monthly appointment at your beauty salon with plenty of notice, what happens to their bill? Recurring invoices can really help your business, but everyone needs to understand them first.
Best practices for recurring payments
Using recurring invoices is a great way to make your business look more serious and professional, but only if you use them appropriately. Follow these guidelines to keep your customers happy:
Be clear about terms
Before setting up any kind of recurring invoice, get the terms and conditions down on paper. Are you using direct debits, or do you expect customers to pay manually? If so, how long do they have to make their payment? Both parties should agree on terms like:
Frequency of invoices
Acceptable payment methods
Amount to be billed each month
Terms and conditions affecting cancellations or changes
Best practice involves putting all this information into a contract, which both parties sign and keep copies of. After doing this, ensure that you stick to the terms and conditions you've agreed upon.
Even if you have a great relationship with a customer, keeping terms and conditions in writing will offer you some protection that you may need if a dispute arises at some time in the future.
Create a paper trail
Sending an invoice isn't enough. Once a customer has paid, you should send them a receipt to confirm the date and the amount received.
It's also a good idea to send payment reminders after an invoice has been issued, if necessary. Keep the tone polite and professional, but make sure you issue reminders for late payments. You'll want to keep these for your own business records, too, just in case.
Let customers choose the format
When it comes to business, a little flexibility can go a long way. Offering customers multiple payment options is a good way to keep them happy and to ensure they pay sooner rather than later. Some customers may prefer to set up a direct debit and forget all about making payments; others would rather use a credit card. Some prefer to pay online through bank transfers.
If you can provide customers with convenient options for payment, they're more likely to respond to the invoice in a timely fashion.
Forget the stress and start using recurring payments
When you've got automated invoices up and running, you'll have more free time. That means you can focus on the important aspects of your service, rather than the admin, which is probably why you started this business in the first place.
