If you are a business who takes a lot of payments that are the same amount each month or on regular intervals throughout the year, you could be automating those payments with your clients. If you manage apartments or condominiums and are receiving payments from tenants each month, the same automation can be used to offer your tenants a value added benefit.
The challenge to any business is predictable and timely cash flow. Even when you have a business that relies on consistent recurring payments, you will always have a certain number of customers whose delayed payments can cause a financial burden to your company’s cash flow.
By using automated recurring billing solutions, you can reduce the cost of manually inputting and managing client payments and at the same time offer a value added benefit to your client by eliminating the need for your client to send in a check via postal mail each month.
Recurring payments can be set up using a variety of mechanisms all depending on what your merchant provider offers as options.
There are two general electronic payment types used for recurring payments, credit card and ACH. Depending on the amount of your recurring payment amount, one or the other may be more cost effective for you.
If your recurring billing amount is $100 or more, an ACH payment will provide you with the ability to automatically deduct funds from your clients bank account for a flat fee typically less than $1.00 per payment and in some cases less than $.50 per payment. If you were to take the same automated $100 payment from your customer and they paid with a credit card, you could be paying in excess of $3.00 per transaction depending on what kind of card your client is using.
If your client payment is less than $100 each month, the differences in payment cost between credit card and ACH diminish. In fact, if your payment is less than $10.00 per month you may actually end up paying less if you chose to accept a credit card rather than an ACH payment. ($0.45 for credit card versus $.50 for ACH).
They type of payments you take and the mechanisms you use to collect those payments can make a significant difference in how much profit flows to your bottom line each year, especially if you are taking a high volume of structured payments from your clients.
If you have questions about this article or the information and solutions provided, please contact me at ben.wallace@thepaymentpedia.com.
The goal of this website is to provide the information business owners and managers need to make good business decisions. While I am a merchant services professional, there is never an assumption or obligation on my part that I will be chosen to provide you with merchant services when you contact me.
Have a great day!
Ben Wallace
