Recurring payments, auto pay, recurring credit card processing – whatever you call it, it’s all the same. Your customer provides their payment method – typically a credit or debit card or bank account information – to you upfront and authorizes you to bill them at regular intervals for goods or services. You might be billing them weekly, monthly, quarterly or annually. Recurring payments systems are useful for a wide variety of businesses – from tanning salons and music streaming subscriptions, to monthly pet supply boxes and gym memberships.

When Sally Jenkins launched her subscription makeup box business in 2015, she didn’t even think to use recurring payments. And, she quickly discovered the headaches involved with charging her customers’ accounts each month – along with the hassles of expired cards, invalid CVV codes and NSF declines. She knew there had to be a better way to bill her makeup box subscribers each month, so she took her challenge to her payments processor.

Don’t make these 3 rookie recurring payments mistakes

In the early years of her business and before she partnered with an experienced processor to use recurring payments, Sally suffered from the following pitfalls that many other merchants do:

  1. Not using an account updater service to automatically gather new card information. Once you’ve swiped your customers’ credit card once for recurring sales, you may think you are set for months or even years. But, this isn’t always the case. Sally quickly learned that. Without an account updater service, she ran into multiple declines each month and was losing revenue for her business.

    Now that Sally works with a merchant services provider that offers an account updater service for recurring payments, she can reduce and recover declined authorizations by automatically seeking a new authorization with the updated payment information. Consumers get new cards for a myriad of reasons – fraud attack, lost wallet and cards hitting their regular expiration date. Make sure your systems are ready to capture the updated payment data so you don’t miss a sale when one of your customers has a new card.

  2. Not requiring signed contracts/terms of service while completing new subscriber setup. When you have the type of business that bills customers on a recurrent basis, it’s critical that you have a signed and completed contract or terms of service agreement in place before proceeding with the relationship. Signed contracts can help you streamline billing, establish your positive reputation and protect your bottom line.

    In the case of recurring billing businesses, signed contracts are particularly important to help protect your business in the event of a chargeback. All contracts should include a clear explanation of how recurring billing works, including when billing occurs, what happens to the customer’s account in the event of repeated declines, and how the customer can terminate the contract.

  3. Not fully protecting her systems with a comprehensive security suite. Whether you’re swiping cards at your POS terminal for each transaction or working on a recurring payments model, your business is vulnerable to fraud. Don’t make the mistake of thinking that you are somehow immune to fraudsters. Work with your payment processor to ensure your systems are protected with payment security measures like encryption and tokenization.

    Beyond protecting payment data, you should also adhere to best practices to protect additional customer contact information, including mailing addresses, telephone numbers and email addresses. For example, if you ship customers’ orders to them, you don’t want to have to worry about accidentally sending items to the wrong address. Do so, and you will likely forfeit those goods – and risk losing a customer who is frustrated with your business practices.

Benefits of recurring payments to customers

Sally’s makeup box subscribers enjoy the convenience of auto payments that automatically debit their account each month. They don’t have to worry about logging online to pay for each month’s box, or receiving an invoice in the mail. Here are some other recurring payments benefits that Sally’s customers enjoy:

  • Receipts that are automatically emailed to them
  • Ability to update payment method(s) and amounts online, according to their budgeting needs
  • Ability to choose from expanded payment options, including ACH transfer from a checking account

Benefits of recurring payments to business owners

Business owners like you and Sally can enjoy many benefits of using a recurring payments engine, including:

  • Increased accounting efficiencies and fewer clerical errors
  • Fewer late payments and improved cash flow
  • Boosted customer loyalty due to simplified payments
  • Reduced costs associated with manual billing, mailing and postage
  • Personalized billing schedule
  • Less risk of storing sensitive payment data, because your processor handles it
  • Access to a secure online portal with helpful reporting and detailed transaction data 24/7/365
  • Peace-of-mind with compliance with PCI-DSS requirements