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recurring_invoicing

How can SMBs enhance cash flow with recurring invoicing, and more benefits

Cash flow is the fuel for business existence and growth. Having a steady flow of monthly income ensures that a business continues to operate, meet obligations to employees and partners, and can grow. At the same time, it is the number one source of concern for business owners – a shocking 61% of small and medium businesses worldwide regularly struggle with cash flow. Many things cause this struggle, among which those connected with accounts receivable, i.e., payments that a business receives from its operations, play the leading role. 

Unpaid invoices or late payments negatively affect accounts receivable, producing bigger gaps in billing cycles and leading to significant revenue leaks. That’s why many businesses start looking at recurring invoices as a way to handle late payments and other invoicing issues and streamline their invoicing processes.

Below, I gathered some most prominent benefits that a business can get with recurring invoices. I will also show how you can easily implement and set up recurring invoices and save loads of time on the whole process.

What is recurring invoicing?

But first thing, to be on the same page, let’s clarify what’s recurring invoicing. 

In a nutshell, recurring invoices are the payment invoices for your products or services that you send to your customer regularly – weekly, monthly, yearly, etc. – depending on how often you need to get paid by this customer. It works pretty straightforward: you schedule a day when you bill a certain customer and send an invoice each of the scheduled days. The invoicing period depends on your choice. Each option has its advantages and drawbacks – you can read more about it in the comparison of monthly and annual subscriptions. And yes, recurring invoicing is ideal for businesses with subscription-based pricing models. But any other business that needs to regularly bill customers can profit from recurring invoices. And I’m getting right to the point.

Benefits of recurring invoices for small businesses

Frankly, recurring invoicing is not an option that fits for all, and there are some drawbacks that you need to bear in mind (I’ll touch upon some of them at the end of the article). However, many businesses can find this option extremely beneficial. Let’s take a closer look at the most prominent of the benefits.

benefits of recurring invoices
  • Cutting down late payments

Where do late payments come from? First, there can be undisciplined customers who often fail to pay on time. Another reason, however, is that you, as a business owner, may overlook sending an invoice on time. Whichever reason caused them, late payments can hamper your cash inflows, so you can end up facing the inability to pay your bill on time, letting down your suppliers, employees, or partners.

Recurring invoices are usually sent on a strict schedule, making your customers lock into the same payment routine. Moreover, with recurring invoicing, you won’t miss sending an invoice to a customer, ensuring that you’ll get paid on time. Of course, you won’t fight all the late payments, but you’ll make a huge step to cutting their amount.

  • Having predictable revenue estimates

Being able to predict your revenue makes every aspect of your business much simpler. And here is where recurring invoicing can help you. You can set up sending invoices on a schedule that will allow you to have a steady cash inflow throughout a month. It will help you to estimate your revenue more accurately and make informed growth decisions, plan for marketing activities or investments with less risk of overspending.

  • Reaching costs flexibility

One time pricing for a product or a service, especially when we talk about a longer-time commitment or a subscription, can be sometimes too high for a customer to pay. So it can fear people away from what you offer, even though the initial buying intent was high. Reviewing your pricing and applying recurring invoices can help you make your product or service more affordable for such customers. By simply dividing the one-time payment into smaller chunks, you can drive more sales. Even if customers may pay a larger amount over the long term, they can get immediate access to the product. Besides, you can reach more flexibility in pricing, making little tweaks depending on the situation on the market and customer feedback to find the best option – the one that will be driving you a steady customer flow.

  • Saving time and effort on invoice processing

Let’s not speak of paper invoices. But even if you are using powerful accounting tools like QuickBooks, for example, how much time do you usually spend on creating a single invoice? And if you have to do this regularly, each week or each month, it makes quite a load of time spent on entering and rechecking customer and payment data. Add here the time you need to process the invoice after it was paid – finding the open invoice and applying the payment to it, and you’ll admit that invoicing is a pretty time-consuming process. 

When you set up recurring invoices in QuickBooks, for example, you need to fill in all the necessary data one time, and then reuse the same invoice data for future billing, which can save you hours on manual work. Moreover, it will minimize the risk of errors that always comes together with manual data entry. You will still need to manually apply the received payment to the invoice. But here comes another great thing to help.

I am talking about automation.

Many accounting tools allow automatically sending recurring invoices. So all you will need to do is to set up an invoice for a customer and schedule a day it should be sent each month, for example. And many small businesses are leveraging this option to streamline invoicing. But what if you go the extra mile and automate the whole invoice processing? I mean not only sending invoices but also automatically close them in accounting upon payment? There can be various ways to handle it, as some applications available on the market allow for this. I will show how it can work for you on the example on Synder, as it perfectly well integrates with both accounting and payment joining them into a single workspace.

So, upon signing up to the app and connecting the payment system (systems, if you are using several) and, for example, a QuickBooks accounting company, you can set up recurring invoices.

In Synder, just go to the Receive Payments tab in the left-side menu and choose Invoicing.

 recurring invoicing tab in Synder app
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Click the New Invoice button to enter the workspace for creating invoices.

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Fill in all the necessary invoice fields. Switch the Recurring option to On and set up the Start Date and Frequence for the invoice. Click the Create invoice button at the bottom of the page, and you’re done.

Fill in all the necessary invoice fields

You can also enable recurring to your existing invoiced. To do so, you need to get back to Receive payments > Invoicing, choose the needed invoice from the list and click Edit in the Recurring column. Make the necessary setting in the pop-up window that will open and click the Update button.

enable recurring to your existing invoiced

Now, the invoice will be sent to the customer on the scheduled date. As soon as the customer pays, and the payment gets into your payment system, Synder will automatically synchronize it with your accounting and apply it to the open invoice, changing its status to paid. That’s it. I mean that you only create and set up a recurring invoice, all the rest works automatically, freeing your hands for other business-critical tasks and saving your time and efforts.

Any drawbacks?

Okay, now let’s get to it. Not every business needs recurring invoices. So if your business implies that customers pay one time for a product they buy from you and that there are no regular payments, or people buy various products for different prices, then, definitely, the recurring payment is not what you need.

But if you work on a subscription-based model, or you provide support and maintenance for your products and need to regularly charge customers for that, or you are providing services and need to charge users for a fixed amount of hours weekly or monthly – and many more of the kind – recurring invoicing will become a great time-saver for you, able to offer you more accurate invoicing, enhance your cash flow, and facilitate your overall cash flow management.

However, a couple of things can turn recurring invoicing from a time-saver into a nightmare.

Mistakes

An error in a recurring invoice is a recurring error. And to make things worse, customers may be overlooking the error for quite a long time. As a result, it can be complicated to define how much you will need to refund. To prevent the case, you need to double-check your initial invoices before sending them to customers.

Customer ignorance

Switching to recurring invoicing can scare your customers (surprise, surprise). There’s no secret that everything that requires long-term commitment, especially when comes together with charging people’s cards in an automated mode, can look suspicious, especially to a conservative audience. That’s why it is critical to communicate every change in your policies and pricing models with your customers before implementing them.

Limited payment options

If you limit people with how they can pay your invoices, you can end up dealing with card denials or unsubscribing because you do not support a payment method that your customers find more convenient. To prevent such issues, it can be wise to let people pay your invoices in several various ways, so they can choose what suits them best. One of the easiest ways to provide this can be a simple payment link included in the invoice. It is usually powered by an online payment system, the majority of which allow for accepting various ways of payments.

Final word

As I have already told, recurring invoicing can not be suitable for all business models. And that’s ok, there’s never a one-fit-for-all solution. However, if you’re running a subscription-based business or your products or services require regular payments of the same amounts, you need to take a closer look at recurring invoicing and technical solutions that can automate the invoicing process. Because it can really save you significant time on creating and sending your invoices, and processing payments.

Volha Belakurskaja

Volha Belakurskaja

Volha is a Head Editor of the Synder Blog, copywriter, and a big fan of all things digital and technology. She loves learning how technology helps to make life better for business and ordinary people and sharing it with everyone eager to learn.

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