Recurring Payments

Recurring payments are automated transactions where a business authorizes a vendor to collect payments regularly, typically monthly. This schedule ensures payments are consistent and accurate each time. Recurring payments can also include employee salaries or bills.

How do recurring payments work?

Organizations can set up and manage recurring payments by following the steps below:

• Company authorization: The company agrees to the recurring payment terms (such as an enterprise using a payroll platform to pay employees)
• Payment details: The business (in this case the payroll provider) sends their payment information, such as a credit card or bank account number
• Schedule and amount: The enterprise sets up the payment schedule and amount according to a contract
• Confirmation: The provider receives a confirmation of the recurring payment setup, detailing the schedule and amount
• Automatic payment: As per the contract’s specified date, the payment is automatically processed, and the provider receives a notification of the transaction

Benefits of recurring payments

Recurring payments are useful for several reasons. Here are a few benefits of recurring payments.

• Improved cash flow: recurring payments are automated so businesses can accurately plan finances based on upcoming payments
• Reduced admin: Automatic payments frees up time that businesses would otherwise need to spend on payroll admin. Payroll teams will only need to check payments if they need to change certain details.
• Better employee experience: Businesses that set recurring payments means employees or providers don’t need to worry about their payments arriving on time.

Recurring payment considerations

Payment providers charge recurring payment processing fees, which can consist of a percentage of each transaction or a flat credit card processing fee.

Some recurring payment solutions don’t notify businesses when supplier’s or employee’s cards are canceled or expired. This could hurt the vendor employees’ experience when they don’t receive payments on time and could even lead to fines, penalties, or employee churn.

Depending on the payment solution, correcting a payment error could be time-consuming and complicated. Employees or vendors could get paid incorrect amounts, requiring payroll teams to spend time looking through records and correcting the mistake.
To avoid human errors, businesses may want to consider recurring payments for expenses that are always the same amount and follow the same schedule.