In this article, we will explore exactly what recurring invoice is, how it works and some of its benefits. Read on to learn more.
A recurring invoice is a bill sent automatically at regular intervals, such as weekly or monthly, for ongoing services or subscriptions. It simplifies payments for both businesses and customers by eliminating the need to create a new invoice each time.
Example: A subscription-based streaming service generates a recurring invoice each month for $15.99, charging users automatically for continued access to streaming services.
Here are some of the benefits of using recurring invoices:
Recurring invoices automate the billing process, reducing the need to create new invoices for repeat customers. This frees up time for businesses to focus on more important tasks.
With recurring invoices, businesses can rely on predictable payments from customers. This helps with financial planning and managing expenses effectively.
Customers appreciate the convenience of automated payments, as it eliminates the hassle of remembering due dates. This leads to better customer satisfaction and loyalty.
Automation minimizes the risk of errors in invoicing, such as incorrect amounts or missed invoices. This helps maintain professional relationships with customers.
For businesses offering subscriptions, recurring invoices streamline tracking and managing accounts. It ensures smooth operations and accurate billing for ongoing services.
Use our 8-step recurring invoicing process below to efficiently manage your invoices:
Create a template with all necessary details like customer information, product or service, and payment terms. This ensures consistency and saves time when generating invoices.
Example: A graphic design agency sets up a recurring invoice template for a client, specifying a $500 monthly fee for social media designs. The template includes the client’s name, project description, and due date.
Choose how often the invoice will be sent, such as weekly, monthly, or quarterly. This frequency aligns with the payment schedule agreed upon with the customer.
Example: A gym sets a monthly billing frequency for its $45 membership fee. The system schedules the invoice to be sent on the first of every month.
Specify the amount, payment methods, and any applicable taxes or discounts. This ensures the invoice is accurate and easy for the customer to understand.
Example: A subscription box service inputs $39.99 as the monthly cost, with an optional 10% discount for customers using PayPal. Taxes are automatically calculated and added.
Set the system to send invoices automatically based on the chosen frequency. This eliminates the need for manual follow-ups.
Example: An online language tutor schedules their $30 weekly invoice to be sent every Monday morning to all students enrolled in recurring lessons.
Program reminders to notify customers of upcoming or overdue payments. This helps reduce missed payments and ensures timely collections.
Example: A software company sends automated reminders for its $99 monthly subscription three days before the due date if payment hasn’t been received.
Monitor which invoices have been paid and which are still outstanding. This keeps financial records organized and helps with follow-ups.
Example: A cleaning service tracks payments for its $150 biweekly packages and sees that two invoices are overdue. The system highlights these for action.
Modify or stop recurring invoices if the customer’s requirements change. This flexibility is important for maintaining a good business relationship.
Example: A meal delivery service updates a customer’s recurring invoice from $100 to $120 after they switch to a larger meal plan.
Use the system to create reports on recurring invoice performance, such as total revenue and payment trends. This provides insights for improving operations.
Example: A SaaS company reviews a report showing that its $49 monthly plan has 200 active subscriptions, generating $9,800 in recurring revenue.
UrbanFitness Pro, a boutique gym offering premium fitness memberships and personal training sessions, wants to ensure consistent cash flow and provide a seamless experience for its growing membership base. Here's how they implemented our recurring invoice process:
The gym set up a consistent invoice template, including the $60 monthly membership fee, member details, and clear payment terms to ensure accuracy and professionalism.
UrbanFitness Pro established a monthly billing cycle that aligned with the start date of each member’s subscription for timely payments.
Invoices included the $60 membership fee, optional $40 personal training sessions, and a 5% tax, along with payment options like credit card and PayPal.
The gym set up an automated system to send invoices at the start of each billing period, reducing manual effort and ensuring consistency.
Automatic reminders were programmed to alert members of upcoming due dates, helping to avoid missed payments.
UrbanFitness Pro monitored payments to identify overdue invoices, ensuring efficient follow-ups and maintaining cash flow.
When members updated their services, such as adding personal training sessions or changing membership plans, their invoices were promptly updated.
The gym reviewed reports on revenue, overdue payments, and subscription trends to gain insights and improve their operations.
We hope you now have a better understanding of how recurring invoices work and its benefits. If you enjoyed this article, you might also like our article on purchase order vs. invoice or our article on invoice financing for small business.