Challenges in Recurring Payments

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Recurring revenue brings many benefits but it also brings a few challenges.

Lookout for these issues with recurring payments:

Scalability -- traditional billing structures are designed for one-off payments and not recurring.

As your company grows it will need a scalable solution for taking payments.

Failed payments -- the customer's credit card is maxed out and can't fund any more payments.

Consider tools for dunning which is the process of retrying the card over time.

Invoices -- you’ll need to move away from manual invoicing to automated invoicing.

This requires a system for capturing the details of the invoice including the services charged and payment to be made.

Cost of service vs price charged -- to be profitable the business must charge more than the cost of the service.

Calculate the unit economics of your business to ensure the pricing is sufficient.

Revenue recognition -- revenue must be recognized for accounting purposes.

Recurring revenue has strict rules around revenue recognition which are different from one-off invoices.

Visibility -- many departments in a company need access to the recurring revenue payments from the customer.

Sales, marketing, support, and other groups need to know the current status of the payment for reporting purposes.

Consider these issues when setting up your recurring revenue business.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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