How can small businesses benefit from automated recurring billing? Learn practical strategies to optimize your billing process.

Switching to automated recurring billing can be a real game-changer for small and medium businesses (SMEs). By automating frequent payments, you can simplify your operations, boost cash flow, and keep customers happy. 

But even with all these perks, many businesses hit a few bumps when trying to adopt a subscription model.

There are four main challenges SMEs may face when executing automated subscription systems: technical, customer-related, financial, and operational. 

Let’s take a closer look at each as we also discuss practical tips to help you smoothly make the transition.

Automated Recurring Billing: Common Pitfalls and How to Avoid Them

Technical Challenges

The first stumbling block is ensuring that existing systems can integrate with the billing software. This may require upgrading or replacing some structures. Moreover, businesses need to verify that their data is secure and that the software is compliant with all relevant regulations.

Integration Issues

The invoice automation software needs to accommodate existing accounting software, CRM, and payment gateway.

Data Security

Businesses need to ensure that customer data is safe and secure.

Compliance

Automated billing systems need to comply with all relevant payment regulations. 

In the Philippines, this includes Bureau of Internal Revenue (BIR) compliance, Data Privacy Act of 2012 (Republic Act No. 10173), Anti-Money Laundering Act (AMLA), Consumer Act of the Philippines (Republic Act No. 7394), Electronic Commerce Act of 2000 (Republic Act No. 8792), as well as Bangko Sentral ng Pilipinas (BSP) Regulations.

To overcome technical issues, start by selecting a reputable software provider known for offering reliable customer support. 

Choose something that seamlessly integrates with your existing systems to avoid disruptions. Work with your IT team (or seek expert advice if you don’t have an in-house IT department) to ensure data is secure and everything complies with all relevant regulations. This will safeguard your assets and your customers.

‍

Customer-Related Challenges

Another challenge that small businesses face is managing customer churn and cancellations. When people cancel their service agreements, it can lead to loss of revenue. Offering discounts or incentives can help keep customers engaged.

Customer Churn

People cancel their payment commitments for a variety of reasons. It could be due to price changes, customer dissatisfaction, or a lack of need for the service.

Payment Failures

This can happen when there are billing errors (i.e., wrong details such as card number, expiration date, or CVV code), client has insufficient funds, invoice disputes, or there’s delayed communication. Payment failures can lead to revenue loss, increased churn rates, and additional administrative work.

Customer Support

Businesses need to provide reliable customer support to help customers with billing issues and answer their questions.

To tackle these obstacles, begin by offering a range of payment plans tailored to different needs, so every customer can find the right fit. 

Deliver top-notch customer service to quickly resolve disputes, answer questions, and build trust. Make sure terms and pricing are transparent to avoid confusion. Consider providing a free trial or money-back guarantee. This will make it easier for customers to choose your service with confidence.

‍

‍

Financial Challenges

Financial challenges in subscription management can significantly impact a business’ stability and growth.

Tax Calculation

Managing taxes and compliance can be a stumbling block, especially for businesses operating in multiple regions with varying tax laws. 

Ensure that taxes are calculated and applied accurately on all recurring billing transactions. Without proper tax calculation features, you can run the risk of non-compliance and receive costly penalties.

Discount and Fee Application

Make sure that discounts and fees are applied correctly to all subscriptions.

Revenue Leakage

This leads to revenue loss from billing errors. Moreover, the costs associated with implementing and maintaining automated invoicing software can strain financial resources, particularly for smaller businesses.

Cash Flow Management

Cash flow fluctuations can arise due to failed payments, customer churn, or delays in processing transactions. 

There are days when you may have income coming in at regular intervals. Other days, you’ll have expenses that need to be paid all at once. These inconsistencies make it difficult to predict revenue and manage expenses effectively.

Don’t let these complications get in your way. Go with payment processing software that already has tax calculation features to keep everything accurate and compliant. 

Make it a habit to regularly check billing reports to catch and fix any mistakes before they hurt your profits. It’s also smart to have a budget buffer in place to act as a cushion for slower times or unexpected costs.

‍

Operational Challenges

Finally, SMEs need to consider the operational impediments, such as scaling for growth, maintaining accurate customer data, and employing effective invoicing workflows.

Scaling the Billing Process

As small businesses grow, the number of subscriptions will also grow. The billing system needs to be able to scale to accommodate for expansion and development.

Data Maintenance

It’s vital to maintain accurate customer data to ensure invoices are sent to the correct clients and that payments are processed correctly.

Billing and Invoicing Workflows

Establish clear workflows for invoicing. This includes processes for handling new sign-ups, cancellations, and changes to subscriptions.

Handle operational obstacles by picking invoice automation software that can grow with your business. Having a solid customer data management system is key to keeping everything accurate and consistent. Clear and straightforward SOPs will help avoid any mix-ups.

Implementing automated recurring billing can be a significant advantage for small businesses. By carefully planning, choosing the right tools, and establishing clear processes, small businesses can reap the benefits while overcoming the associated challenges.

‍

Curious about what automated recurring billing can do for you?

Mochi Solutions simplifies automated recurring billing for small businesses. Our user-friendly platform handles everything from subscription management to payment processing, allowing you to focus on expanding your business. Experience the difference with a 60-day FREE trial.