As a subscription-based business, choosing the right payments processor and setting up a recurring payment system for your customers is critical to running a successful company.
In this guide, we'll go over how to set up recurring payments and handle invoicing in a manner that's streamlined, convenient, and low on fees.
Define Your Subscription Options
Setting up recurring payments begins with defining the subscription options you hope to offer.
This is an important first step, as the number and complexity of the options you'd like to provide to your customers may influence your decision regarding which platforms will work for your business' recurring invoices.
When defining your subscriptions, be sure to note the following:
- Are subscriptions always a fixed dollar amount or will there be variables that may change a user's cost from month to month (i.e., usage)?
- How many levels or tiers are there to choose from? Should a customer be able to downgrade/upgrade on their own?
- Do you want to charge everyone on the same day (i.e., first of the month billing cycle)? If so, you'll need to be able to prorate subscription fees for the first/last month of every subscription. This plays a big role in your payment model.
- Should subscription go on indefinitely until cancelled or is a user locked in for a certain number of months before they can cancel or renew?
- What payment methods would you like to accept during checkout? If you're taking credit card payments, do you prefer a fixed fee structure or interchange-plus pricing?
- How many customers do you have now? How many do you plan to have in the future? Finding a processor that can scale with your small business or startup is crucial.
SaaS businesses, in particular, tend to have a number of subscription complexities to deal with that, at first, might not seem like a big deal.
For instance, if you charge a user a flat monthly fee in addition to variable usage fees, this is something your recurring payment processor needs to be able to integrate, calculate, and handle properly.
Use Baremetrics to measure churn, LTV and other critical business metrics that help them retain more customers. Want to try it for yourself?
Choose a Payments Processor
Once you have clarified exactly what your subscriptions entail, you'll have a better idea of what features to look for in the payment processors on the market. However, before you start reviewing billing systems, you should first understand the different types of payment processors out there.
While you're comparing options, also be sure to check out Baremetrics. With our 14-day free trial, we make it easy to gain insights that will drive your business' growth without ever straining your budget.
Baremetrics Pricing Options: Pricing and Features
Payments Provider vs. Merchant Account Provider
A third-party payments provider, like Stripe, will process payments on your behalf, putting all of the money into their own merchant account before passing it on to you.
Once a transaction is completed, the turnaround time is typically 2 business days. That means revenue will take 2 days to get from Stripe (or the payment providers of your choice) and into your business' bank accounts.
A merchant account provider, on the other hand, provides your business with a dedicated merchant account. This means you have revenue in-hand instantly, but it also means a long underwriting and approval process. Whereas you can set up a payment provider like Stripe in under a day, getting a dedicated merchant account may take a few weeks.
Recommended reading: Tiered Pricing Model
Popular Payment Processors
Comparing the pros and cons of payment providers and merchant accounts providers will prove very helpful in narrowing down your options, as your selection will ultimately change your choices entirely.
Popular third-party payments service providers include:
Popular merchant account providers include:
- Payment Depot
Taking the time to compare the services that interest you is the essential next step. Each one will have its own documentation and customer service to help get you up-and-running.
Integrate & Track Metrics
Finding the right payment provider to handle your recurring billing and invoices is just the first half of the equation.
As you begin processing your automatic payments, whether, by credit card or any other payment options you choose to provide, it's important that you know exactly when that money is coming in and how you can earn more of it.
When it comes to your business, automatic billings are anything but hands-off. While they provide "set and forget" convenience for your customers, you need to be paying close attention to your subscriptions to measure things like conversions, retention, and what you can do to recover lost customers.
That's where the power of Baremetrics comes into play.
Having a customer's credit card on file simply isn't enough to keep you in business. If you want to keep subscribers happy and coming back month after month, you need metrics on your side powering your insights.