How to Reduce Accounts Receivable Costs by Over 50% with Auto Recurring Billing

Auto recurring billing enables businesses to automatically bill customers for balance due without sending invoices or obtaining payment information each any every time money is collected. With recurring billing programs businesses can utilize any electronic payment process including direct-debit ACH transactions and credit/debit card transactions. In addition, when businesses convert legacy payment systems to auto-recurring systems utilizing exclusively ACH direct-debit transactions, they typically reduce processing costs by over 50%.

Direct Benefits of Auto Recurring Billing for Businesses include:

  • Faster payment processing (you get your money faster)
  • Elimination of printing, mailing and postage costs
  • Elimination of defaults and associated collections activities
  • Streamlined data entry and bookkeeping
  • Elimination of time consuming trips to the bank
  • Normalized cash flow
  • 24-48 hour NSF notification
  • Improved customer service
  • Ability to accept payments funded from credit/debit cards, checking account and savings accounts.

Auto recurring billing systems can be used for both static recurring charges (the same amount each time) or for variable bills. In either case, the recurring billing system saves time and money by obtaining advance authorization from customers to charge their accounts on a regular frequency and by entering customer information into a database system only once. That data is then accessed whenever payments are processed, and the customer record is updated to reflect each payment collected. The two examples below provide the steps involved in auto recurring billing systems that process static and variable recurring charges.

Auto Recurring Billing: Static Amount

  1. Customer data is entered once (including amount, frequency, duration, type of transaction and account information)
  2. Payment Processing System charges/debits account on schedule and counts down payments left (system can also be set for indefinite duration)
  3. Payment processing system automatically generates an email receipt for the customer and copies the vendor.
  4. Payment Processing System automatically identifies all failed transactions and reconciles with main database.

Auto Recurring Billing: Variable Amount

  1. Customer data resides in external database that calculates payment due
  2. Data, including amount due and account information is exported to .csv file.
  3. .csv file is uploaded to payment processing system as a batch
  4. Payment processing system processes all transactions in batch
  5. Report is generated for all successful and unsuccessful transactions
  6. Report is exported and then uploaded back into original database, reconciling all open balances with processed payments

Why Your Customers Want Auto Recurring BillingAuto recurring billing is not only a time and money saver for businesses, but for consumers as well. In fact, many consumers are demanding it from the companies with which they do business–and if you don’t offer it, your customers may select a competitor who does.

NACHA.org, the organization that oversees all electronic payments, reports that 54% of all US households currently use ACH (a direct-debit from a checking or savings account) for at least one monthly bill. Auto recurring billing takes ACH to the next level–eliminating the need for the customer to actively pay a bill (whether by paper check or online).

Direct Benefits of Auto Recurring Billing for Customers include:

  • Bills are automatically paid on-time, every-time, even if customers are ill or out of town.
  • Late payment fees are eliminated
  • Time and expense of writing and mailing checks is eliminated
  • Customers can keep electronic records of all invoices and receipts
  • Electronic payments are more secure than paper checks

How to Implement an Auto Recurring Billing ProgramImplementing an auto recurring billing program is simple.

If you currently accept payments electronically via direct-debit from a checking or savings account, or via credit card, you can likely use your current payment processing system to implement auto recurring billing. The auto recurring program can be implemented in two ways.

  1. Use the auto recurring billing functionality in your business management software (such as QuickBooks), and export a batch (daily, weekly, monthly) for processing in your payment processing system. This is best for variable payments.
  2. Implement the auto recurring billing function in your payment processing program (note that some companies require an additional charge for this function.) This is best for static payments.

If you don’t already accept electronic payments, you will need to subscribe to this type of service. The simplest way to do this to find a service that will enable you to perform ACH transactions using your current business bank account. This system will enable you to set-up an auto recurring billing program for your customers where you can direct-debit their checking accounts for outstanding balances. (An additional benefit to this type of system is that you can electronically process any paper checks you still receive from customers who do not elect to participate in the auto recurring billing program.).

Marketing an Auto Recurring Billing Program to Your Customers

Once you have processing capability in place, you can open the auto recurring billing program to your entire customer base. Many consumers know about these programs and are excited to sign-up for the new offering. Others need to be educated about the electronic payment process, and the benefits it can provide them.

Note that you cannot enroll a customer in an auto recurring billing program without explicit permission. Each customer must provide you with bank account information and sign a form giving you permission to debit that account.

Electronicpayments.org provides a wealth of information about electronic payment processing, and also provides materials you can use to educate your customers.

Most organizations introduce auto-recurring billing programs by sending a letter to the customer base, and asking them to sign-up for the program. A sample customer letter is available here.

When customers have signed up, you stop mailing them paper invoices, they stop mailing you paper checks and all billing and collections are handled electronically.

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Lisa Hephner is the PaySimple marketing manager.

PaySimple provides effortless electronic payment processing via a simple web-based interface used to perform auto recurring billing, electronic check processing, direct-debit and credit card processing.

For more information on Auto-Recurring billing see: http://www.paysimple.com/auto_recurring_billing.html

For more information on ACH see http://www.paysimple.com/about_ach.html

To contact Lisa Hephner email lisa@paysimple.com

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