In the previous article we described recurring payment types and payment schedules. In this one we will focus on specific recurring billing features and provide examples to illustrate how these features work.
More and more present-day businesses use recurring payments as the foundation of revenue model for their business. In recent years recurring payment industry has grown significantly. As it matured, it defined several features that are common and more or less standard for recurring payment solutions.
Availability of these features within a payment system makes recurring billing process more flexible and smooth for a business.
Freezing of a payment plan
Payment plan freeze is an ability to pause recurring billing schedule for one or more billing periods.
Deferment of payment plan
Payment plan deferment is an ability to defer the first billing date of a payment plan.
Variable payment amount
This recurring billing feature determines the ability to specify different amounts based on a payment’s sequence number.
Ability to change billing dates
Subscription-based businesses rarely change recurrence frequencies (for instance, monthly payments cannot suddenly be replaced by weekly payments). However, some clients like to realign their billing dates to make it easier to track their expenses.
Advance cancellation (Future cancellation)
There can be two ways to cancel a subscription. Either cancellation can be effective the very day or it can become effective at some point in the future. While most businesses allow immediate cancellations, some businesses require support for future cancellations, as certain customers might like to cancel their subscription to a service in advance and continue to use the service several weeks after the cancellation request was made.
Pre-payment is the ability to make a payment against a future recurring payment, so that the future recurring payment doesn’t happen.
Support for buy-out
This recurring billing feature is applicable to term and roll-over agreements, where there is a commitment to specific number of payments, and the payment plan has an overall fixed value. Some companies, especially those dealing with loans and personal or business credit, may offer an option for an early repayment.
Support for service fees
Service fees under consideration include late fees, decline fees, cancellation fees. In some cases businesses need to surcharge service fees, and it is always convenient when the fees can be preset and automatically applied by the system when a certain event occurs.
Support for customer alerts and notifications
The feature under consideration means an ability to send out e-mail or printed letter notifications based on some events within recurring billing life-cycle.
When people use uncommitted schedules, unlimited plans or rollover plans in their rollover phase, there is a common practice of automatically writing off the account after several months of unsuccessful billing. The account gets closed and invoices are written off. This recurring billing feature is especially relevant if the outstanding debt is uncollectible (or difficult to collect) and the amount is not significant, so it is not worth trying to collect it.
These were the key recurring billing features to be considered by a subscription-based business while choosing a payment system to integrate with. Subsequent installments will cover such recurring billing aspects as account balancing and collections. Particularly, the next article will describe more advanced recurring billing features, such as accounting methods and account balancing methodologies.