Introduction 

It's hardly surprising that many businesses wonder how to handle recurring payments more effectively, given how SaaS migration is sweeping the globe. The growing use of subscription billing models makes it difficult for many accounting teams to keep up. They are not using the best practices and technologies necessary to manage the overwhelming number of invoices produced by providing a range of billing cycles.

A strong foundation in compliance standards, automation of repetitive and time-sensitive processes, and a thorough comprehension of revenue recognition and deferral schedules are all necessary for managing recurrent payments. There is plenty to learn. The intricacy of implementing a new payment plan is only a necessary component of meeting changing consumer demands.

Few businesses can afford not to implement the appropriate tools and best practices due to the expansion of SaaS migration and billing choices across industries. Nine best practices for handling recurring payments are shown below.

1. Recognise the subtleties of recurring billing revenue recognition.

Varied revenue streams can be introduced at varied frequencies using modern billing models. You must postpone the recognition of that revenue until you get it because some clients might pay for it a year in advance. On the other hand, some might stretch out the subscription fee across time so that you can earn and recognise revenue simultaneously.

 Being adaptable is essential for success. You will likely be able to sign up more users if you provide more options. It's important to remember, though, that offering a variety of choices may put pressure on the accounting division. In order to maximise their efforts and minimise manual labour, the team should be briefed on revenue recognition for subscription billing.

2. Make security investments to safeguard private client information and payment details.

Businesses cannot undervalue the need to safeguard consumer data from threats, especially with regard to payments and bills, given the increase in cyberattacks. Since no one is immune, it would be irresponsible to forego investing in security measures that allow you to gather and save billing data for future payments while preserving the integrity of your data.

Make sure to take into account the reputation of your partners because many astute consumers will look at the ratings of the payment portals and systems you use. Customers will be more inclined to trust your system with their payment information if you collaborate with well-known, established businesses. Although users will prioritise this metric differently, many will never sign up if they don't feel comfortable in the early stages of the payment cycle.

3. To boost client confidence, implement clear payment procedures.

Have you ever subscribed to a service and then later found yourself having some questions? Perhaps you need to change your credit card information, are unsure about the service and want to confirm the cancellation terms, or are unsure about how refunds operate. Most likely, all of this was covered by the payment terms you checked when you signed up, but you were too busy to read them carefully.

Making payment terms and procedures clear on your website is a smart practice. In the modern world, there aren't always enough customer service representatives available to address every query from our clients. By making the majority of the information that clients need transparent, creating knowledge bases will lighten the strain for your staff, especially regarding important information like payments. By preventing customers from having to endure lengthy wait periods or interact with a flawed chatbot, actions such as these contribute to the development of client confidence.

4. Invest in unambiguous communication across the whole billing cycle.

When it comes to properly communicating small changes to our clients, there is frequently a disconnect. Because SaaS migration best practices are so heavily automated, it can be simple to overlook the human element.

As you refine your SaaS pricing strategy and adapt to external factors like inflation, significant changes will take place. You must make an effort to inform your user base clearly and concisely of any changes to the billing or payment procedure. No matter how "inconsequential" you believe a change may be, let customers know about it. Examples include security enhancements, updates to the cancellation policy, new invoicing alternatives, or a switch in the payment processor.

5. Use a good dunning technique to cut down on income leakage.

Payment failures are inevitable in the corporate world. Your bottom line is impacted whether the issue is a technological glitch or expired cards. Recovering as much revenue leakage as possible is essential, especially with subscriptions, in order to increase monthly recurring revenue (MRR). Your team can more successfully guard against revenue losses with an efficient dunning plan.

Effective dunning management is necessary for modern invoicing to increase revenue and avoid unintentional subscriber churn. Pre-dunning communications tactics to notify clients that impending payments may not be successful because expired cards are an important part of sound plans. For a detailed explanation of how dunning management stops revenue leakage and strengthens your subscriber base against churn, see our guide to mastering it.

6. Use real-time reporting to track subscriber churn numbers.

A key element of successfully collecting recurring payments is efficient reporting. Businesses should invest in software that automatically provides reports that represent key churn metrics because it's easy to lose track of subscriber attrition when user bases are large.

These figures are crucial for comprehending financial health and growth, and they can be useful instruments for attracting and keeping customers. Manually reporting on these indicators is viable, although time-consuming; however, scaling businesses might not find this method practical. After your free trial, have you noticed a significant rise in churns? Investigate and discover why. The churn rate likely indicates a problem that your team can resolve.

7. Give clients the option to select the day and frequency of their preferred billing.

Increasing the flexibility regarding billing frequency is one of the most important changes that most businesses need to make to their recurring payments. Various cash flow constraints will frequently apply to users. Smaller businesses or individuals, for example, may find it difficult to pay an annual fee upfront and would rather spread the payment out over the year. More well-known businesses may decide to pay in advance and operate within a set quarterly or annual budget.

The important thing is that your customers expect to select, not just like it. Giving clients the option to choose the day of their payments is made possible by offering variable terms and frequencies. Reducing unsuccessful payments is just as important as raising customer happiness. Additionally, it's one of the finest ways to guarantee that clients have adequate money on hand when their bills arrive.

8. Keep an eye on earned vs deferred revenue to adhere to GAAP accounting rules.

For most accountants, one of their top worries is GAAP compliance. Some businesses may be hesitant to adopt the new revenue recognition rules for recurring revenue due to ASC 606 and IFRS 15. Monitoring earned and deferred revenue is essential to success, and there are many standards available to help your team adjust. Compliance doesn't have to be difficult if there is clear, auditable reporting in place. You can learn more about the requirements for recurring payments by reading this guide to ASC 606.

Also read: What are SWIFT and BIC Codes? How Do They Work?

9. Use subscription management software to control recurring payments.

Modern billing is nearly impossible to keep up with without subscription management software. If they continue to use outdated accounting procedures and systems, even the most flexible teams will find it difficult to meet month-end deadlines. Customers should be able to simply halt payments, alter billing details, or switch to a higher service tier using your program. To update accounts automatically and prevent needless confusion, all of this functionality needs to be integrated with the backend.