Recurring invoices are becoming a trendy option among modern businesses because this practice involves automatically charging customers at regular intervals.
- What are recurring invoices?
- Advantages of issuing recurring invoices
- Disadvantages of raising recurring invoices
- Recurring invoice format, templates and contents
- Workflow of recurring invoicing
- How to know if recurring invoicing is suitable for your business?
- How to implement an ideal recurring billing system for a business?
What are recurring invoices?
A recurring invoice is shared with the customer at regular intervals of time. They are usually sent every month by the cut-off date. Under this billing method, the supplier initially gets permission from the buyer to regularly charge a fixed invoice amount up to an agreed date for any ongoing service contract. This invoicing technique is very popular among online software businesses, cable firms, gym and magazine subscriptions.
Advantages of issuing recurring invoices
Recurring invoicing becomes convenient as the supplier does not need to wait for the buyer or follow up for payment information. Further, the customer is not needed to send manual payments repeatedly. A few of the other advantages of issuing recurring invoices include:
- Improved cash flow promises steady monthly income, allowing the business to meet their monthly overheads, both fixed and variable.
- Automation of the payment process- A company can create an invoice once, link the buyer’s credit card details to the same and schedule the invoice sharing on time. It reduces any duplication of tasks and ensures peace of mind enabling prompt payments.
- Improved customer relations- The technique builds recurring relationships, and the buyers will view you as their extended team instead of an ad-hoc supplier.
- Saves time and removes other hidden costs- Even though invoicing takes up only a few minutes, overall, it would take enough time and money to manage invoicing over some time. Efforts and time go into creating, tracking and processing every bill or invoice. One can cut down the unnecessary costs by adopting the recurring invoice system.
- Let’s the organisation focus on important business matters- Recurring invoicing helps save time. Therefore, one can shift their attention to other crucial business areas like marketing and sales. Undoubtedly, there are multiple advantages. However, every business organisation must decide if the recurring invoice system is necessary.
- Payment collection becomes faster and follows ups reduced- Recurring invoices or recurring billing expedites the payment collection by allowing parties to teach good habits. The organisation will tend to spend less time following up on payment collections. The customers will also benefit from this. They need not remember to pay and can avoid any late fees for delays. It is human nature to pay bills regularly, such as utility bills. Hence, if the organisation is sending bills at recurring or regular intervals, they encourage customers to fix a payment routine. A popular invoicing software always allows you to link to a customer’s credit card or will enable you to generate a payment link for invoices. These practices encourage prompt payment and make it for the other party to pay conveniently.
Disadvantages of raising recurring invoices
The recurring invoices involve the setting up of a standard invoice template. Hence, it becomes difficult to trace any errors as it is used regularly and sent to the buyers within fixed dates. However, under any other invoicing method, the supplier shares the invoice with the buyer, and in case of any error, the buyer sends it back for resubmission. Therefore, the error is resolved immediately without delay. Under the recurring invoicing method, identifying and rectifying errors is difficult. For some businesses that send out recurring invoices, the switch to electronic invoices can be especially beneficial. By using electronic invoices, businesses can automate the process of creating, sending, and tracking invoices, eliminating the need to manually track and reconcile invoices each month. This automation can save businesses time and money, while also reducing the risk of errors that can occur with manual processes.
Recurring invoice format, templates and contents
Some of the templates of recurring invoices are provided below:
A recurring invoice contains all such details required for any given normal invoice. It includes-
- Name, address and contact number of the supplier
- Name, address and contact number of the buyer
- A unique tax invoice number
- The PAN and GSTIN numbers of the supplier and customer
- Date of raising the invoice
- Place of supply of products sold as per the GST law
- Rates of tax, Harmonised System of Nomenclature (HSN) code and tax values
- Description of products sold supplied with quantity and description
- The taxable value, together with the gross assessable value of goods sold
- Discounts rate and value
- Whether the Reverse Charge Mechanism (RCM) applies
- Supplier’s signature or signature of the authorised signatory
Workflow of recurring invoicing
The workflow for recurring invoice issues is as follows:
- Select a customised template for sharing the recurring invoices.
- Add the invoice details in the template.
- Fix the time interval for sharing the recurring invoices.
- After sharing one invoice, the next one will automatically be shared after a fixed period.
- Note down the buyer’s credit card details or any convenient mode for getting payments.
- One can stop sharing the invoice after the agreed period.
How to know if recurring invoicing is suitable for your business?
The aspects of recurring invoicing depend upon the nature of your business. A few examples of companies using recurring invoicing systems are given below.
- It works best for businesses providing repairs and maintenance services. For instance, software or IT companies render monthly support services to their customers.
- Companies render online resources and training material for a fixed period. For instance, LinkedIn Learning.
- Companies that render monthly service packages.
- Software providers or IT companies charge for the monthly license fees.
- Businesses that run on subscription-based models.
The above examples help you decide whether the system suits your business requirements.
How to implement an ideal recurring billing system for a business?
A perfect example of the recurring billing system has the following qualities:
- It is flexible- The invoicing system should adapt to your business processes and changing business needs. It must support any business development plans.
- It saves time by improving efficiency- If the invoicing details are updated once in a standard format, it can also be used in the future. Further, a recurring invoicing system helps set up schedules for regular payments. These save huge time and improves efficiency.
- It simplifies the entire invoicing process- Recurring invoice captures all the essential details for invoicing or billing with robust technology and automation. Therefore, it simplifies the entire invoicing process.
