What is Recurring Billing?

Recurring billing is a payment system that facilitates businesses in automatic and periodic collection of payments for products or services at a set of regular intervals (weekly, monthly, quarterly, or annually), typically through a subscription payment.

This essential strategy offers predictability, convenience, and sustained revenue streams, making it a pivotal tool for businesses across various industries.

Examples of Recurring Billing

1. Pet Supplies

You may establish recurring billing with a pet store for dog food delivery every three months. The arrangement charges your credit card automatically at the scheduled interval, ensuring a seamless supply of pet products without manual reordering.

2. Prevalent Industries

Recurring billing is widespread in various sectors, such as utility bills (electricity, water, etc.), communication bills (phone, cable TV, etc.), and services like Internet subscriptions. It ensures consistent payments without the need for manual intervention.

Recurring billing simplifies purchases by automating regular orders, reducing the need for manual payments, and ensuring a continuous supply of essential services. Many companies encourage recurring billing by offering a small monthly discount, motivating you to opt for automated payments and mitigating the risk of missed payments.

Types of Recurring Billing

1. Fixed Billing

Fixed billing involves collecting a consistent, predetermined amount from customers in each payment cycle. It is particularly suitable for services with steady and unchanging pricing structures. For example, newspaper subscriptions and gym memberships often employ fixed billing. This approach ensures stable and predictable revenue streams and creates opportunities for upselling additional services or features.

2. Variable Billing

Variable billing, however, allows for fluctuations in the customer’s payment amount from one cycle to the next, based on their product or service usage.

It can be further divided into two subcategories:

1. Metered billing

Metered billing, often referred to as usage-based billing, charges customers based on their actual service usage. Examples include internet services, utility bills, or cloud services that have a base plan with additional charges for exceeding usage limits. Metered billing is common in situations where usage varies widely, and customers pay for what they consume.

2. Quantity-based billing

Quantity-based billing involves charging customers based on a pre-agreed quantity, such as the number of licenses, seats, or storage capacity purchased. SaaS providers, for instance, use quantity-based billing models, charging organisations based on the number of user licenses they acquire. Similarly, volume-based cloud storage services bill customers according to the amount of storage space they use.

How Does Recurring Billing Work? 

Recurring billing systems for subscription-based products or services involve processing regular payments from customers who have subscribed.

Payment gateways play a crucial role in ensuring secure payment processing. After authorisation and processing, transactions contribute to accurate revenue recognition through accounting and reporting.

The following is the process via which recurring billing takes place:

1. Automation

1.1 Minimization of manual errors

Recurring billing software automates the entire billing process. This reduces the likelihood of manual errors associated with manual data entry or invoice generation. Automation ensures accuracy and consistency in billing cycles, thus enhancing overall efficiency.

2. Complex Scenarios

2.1 Adaptability to upgrades and downgrades

The software adeptly manages complex scenarios, such as customer account upgrades or downgrades, adjusting billing cycles and amounts accordingly. This flexibility ensures a seamless experience for customers, accommodating changes in service levels without disrupting the billing process.

2.2 Add-ons and extras

It handles add-ons or additional services seamlessly, automatically adjusting the billing amount based on your chosen extras. This capability enables businesses to easily customize and expand their services while maintaining precision in billing.

2.3 Tax calculations

Recurring billing software incorporates tax calculations into the automated billing process. It ensures accurate and compliant tax assessments, alleviating the burden on businesses to manually calculate and apply taxes for each transaction.

3. Control

3.1 Business empowerment

It provides businesses with complete control over billing and invoicing processes without requiring constant developer intervention. Anyone can easily configure and manage billing settings. This empowers businesses to adapt to changing needs independently.

3.2 User-friendly interfaces

Intuitive user interfaces allow businesses to navigate and control billing parameters effortlessly. Customization options are designed to be user-friendly, allowing businesses to tailor billing processes to their specific requirements without technical expertise.

Recurring billing software not only automates routine processes but also navigates through complex billing scenarios with precision. This combination of automation, adaptability, and user control empowers businesses to manage their billing processes efficiently and accurately.

What Types of Businesses Utilise the Concept of Recurring Billing?

1. SaaS (Software-as-a-Service)

Recurring payment for SaaS companies offers subscription-based access to software solutions. For instance, Slack, a team communication platform, charges its customers on a per-user basis monthly or annually. Dropbox, a cloud storage service, offers premium subscriptions with recurring payments. These businesses ensure you have access to their software while maintaining a consistent revenue stream through recurring billing.

2. eCommerce & DTC (Direct-to-Consumer)

e-Commerce and DTC companies frequently leverage recurring billing for subscription services. Amazon’s ‘Subscribe & Save’ feature allows you to schedule regular deliveries of products, such as toiletries or pet food. Subscription box services like Birchbox for beauty products and Barkbox for pet supplies provide curated, recurring shipments. This simplifies customer experience while ensuring steady revenue.

3. Entertainment

The entertainment industry heavily relies on recurring billing, especially in the realm of streaming services. Netflix, Amazon Prime, and Hulu offer monthly subscription plans to access a vast library of movies and TV shows. Recurring billing is instrumental in providing uninterrupted entertainment while securing stable income.

4. Health and Fitness

Recurring billing is pivotal in the health and fitness sector. For example, Practo is a healthcare platform that offers subscription-based services for access to telehealth consultations and medical records. Gyms like 24-Hour Fitness utilise recurring billing for monthly membership fees, ensuring consistent cash flow while offering customers access to fitness facilities and services.

5. Education and e-Learning

Education and e-learning platforms such as Udemy and Shaw Academy utilise recurring billing for courses and learning materials. Students pay regularly to access their content, fostering long-term engagement while providing a reliable source of revenue for these platforms.

6. Publications

Publications, both traditional and digital, employ recurring billing for subscription models. The New York Times, for instance, charges subscribers regularly to access its online content. Email newsletters like ‘A Media Operator’ often have subscription options with recurring payments to support quality journalism.

What are the Advantages and Disadvantages of Recurring Billing?

Advantages of Recurring Billing

1. Customer retention

Recurring billing often necessitates customer consent. This enhances customer retention as discontinuing services requires canceling recurring charges, a process some may find cumbersome.

2. Prompt payment and cash flow

Recurring billing ensures timely payments, benefiting merchants by maintaining a healthy cash flow and reducing billing costs. Predictable revenue streams contribute to financial stability.

3. Efficiency and automation

Automation streamlines accounts receivable, reducing administrative tasks and collection costs. Merchants can allocate resources more efficiently and focus on business growth.

4. Customer convenience

Recurring billing offers convenience and time savings for customers. You only need to sign up and provide payment details once; there’s no need to repeatedly enter your financial information on the platform.

Disadvantages of Recurring Billing

1. Billing errors

Correcting billing errors can be cumbersome. Mistakes can result in automatic overcharges, necessitating time-consuming refund processes and causing frustration.

2. Overlooked expenses

You may forget about recurring charges for some subscriptions and not factor them into your budget. Some people might not thoroughly review their bills, resulting in payments for services they no longer need.

3. Scamming concerns

Recurring billing has been associated with scams targeting vulnerable individuals, such as senior citizens, who might be charged for services they didn’t knowingly sign up for.

4. Halted services

Recurring billing can lead to service interruptions if your payment method gets declined. Maintaining a high-balance payment account is crucial to avoid disruptions in essential services.

How Razorpay helps in Subscription Payment?

Razorpay streamlines subscription management for businesses by offering a robust recurring billing system. 

Here’s how it helps:

1. Simplified Setup

Create various subscription plans with ease, including trial periods, upfront charges, and add-on options.

2. Multiple Payment Methods

Offer a variety of payment methods to your customers, including credit/debit cards, UPI, eMandates, and more.

3. Automated Billing

Razorpay automatically charges customers at designated intervals according to your plan, eliminating manual work.

4. Seamless Integration

Integrate Razorpay’s subscription functionality into your website or app with their APIs or use subscription links for a user-friendly experience.

5. Management and Insights

The Razorpay dashboard provides a central hub to manage subscriptions, track payments, and gain valuable insights into your customer base.


Recurring billing offers a convenient way to pay for products or services, with automatic charges at set intervals. This simplifies budgeting for both you and the business, ensuring a steady stream of income for them and a hassle-free experience for you.

Frequently Asked Questions (FAQs)

1. What is the difference between recurring billing and invoicing?

Recurring billing involves automatically charging customers at regular intervals for products or services, while invoicing requires manually sending bills to customers, who then make individual payments.

2. How do customers sign up for recurring billing services?

You can sign up for recurring billing by providing payment information and consent through online forms, customer portals, or in-person registration.

3. Can customers easily cancel or modify their recurring billing subscriptions?

The ease of canceling or modifying recurring billing subscriptions varies by service provider. Some providers offer user-friendly processes while others may require contacting customer support.

4. Is recurring billing the same as subscription billing?

Recurring billing is a broader term encompassing various payment structures, while subscription billing specifically refers to regularly scheduled payments for ongoing access to products or services.

5. What payment methods can be used for recurring billing?

Common payment methods for recurring billing include credit cards, debit cards, bank transfers, and digital wallets like Google Pay or Apple Pay.

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    Author Chidananda

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