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While recurring billing can be a boom to consumers and businesses alike, there’s a lot of room for mistakes.
As SaaS businesses rely upon customer subscriptions for a consistent revenue stream, it’s crucial to have a streamlined, near error-free collection process. Here are some tips to help your business avoid the most common recurring billing mistakes.
Brand all statements and processes
A great way to establish trust with customers is to brand all statements and processes, so customers know who is withdrawing money from their account. If a company doesn’t send statements, a simple automatic email should be sent prior to the recurring payment, just to remind the customer that they’ve set up a subscription for the service.
When an email is sent, itemize the purchase, so the customer is reminded of what, specifically, they’re being billed for. This will avoid potential chargebacks as well relive a confused customer from having to remember what they’re paying for.
Plan for unintentional churn
Unfortunately, the nature of recurring billing is such that churn is inevitable. Churn occurs when customers intentionally cancel their subscriptions, as well as when a credit or debit card is inaccessible.
Credit and debit cards typically expire at a rate of every three years, which would mean that roughly 36% of cards used for recurring billing expire over the course of a year. Add in the fact that cards are also canceled due to theft, loss, or suspicious activity, and you’re looking at a large number of unintended cancellations due to nonpayment annually.
When you will inevitably run into an issue where the card on file cannot be billed, it’s important to have a strategy in place on how to resolve that. The most efficient manner is through dunning emails, not only to have a clear record of the request, but to cut down the amount of customers who try to follow up via phone or social media to get an answer from a member of your team.
Compose effective dunning emails
Creating an automated dunning management system can achieve two goals: alerting the customer that they didn’t pay this month, and requesting that the customer make the payment.
Recurring billing is set up so that the consumer doesn’t have to think about it again, so it’s very likely that they’re not aware that the payment hasn’t been made. Sending an automated email will give the customer the gentle reminder that they need to update their information to resume, or prevent a lapse in service.
The email should be friendly in tone, not threatening, with a sense of urgency. Remind the customer that their service will lapse unless payment is received by a certain date, and provide a link to the online payment page to encourage immediate action. In some cases, a single email will do the trick. Others might require additional emails, but it’s likely that inadvertent cancellations will be reversed when the customer is notified of the issue.
Make cancellation simple
Regardless of the reason, it’s important to make the cancellation process as painless as possible. Not only will current customers appreciate the transparency, but it’s also a good method for reducing cancellations overall.
Avoid the technique of forcing the client to call to cancel the service. While that might delay the inevitable, it’s only going to infuriate the customer when they eventually do take action toward cancellation. Instead, remove the barrier and offer a straightforward method to cancel the subscription. That’s not to say they shouldn’t be reminded of the value offered by the service, but asking them to reconsider is different than making cancellation unnecessarily difficult. In the long run, you’ll leave customers with a better impression of your SaaS company by letting them go without making it an ordeal.
Mistakes are bound to occur, but taking steps to avoid the most common recurring billing errors can minimize the impact on your SaaS business’s customers.
FastSpring’s e-commerce platform offers businesses a recurring payment solution that will make selling digital products and services online easier than ever before. Interested in seeing FastSpring in action? Request a demo today.