Recurring billing
DEFINITION
Recurring billing is the practice of automatically charging a customer at regular intervals for ongoing access to a product or service, rather than requiring a new purchase each time. It is the model most subscription businesses run on, with the collection method (automatic or manual) and net terms determining exactly when and how each charge is collected.
RELATED TERMS
Recurring billing is the practice of automatically charging a customer at regular intervals for ongoing access to a product or service, rather than requiring a new purchase each time. It is the model most subscription businesses run on: revenue arrives on a predictable schedule for as long as the customer stays active.
How recurring billing works depends on how each charge gets collected, not only on the schedule it follows. A charge can use an automatic collection method, where a transaction runs against the customer's stored billing information at the same time the invoice is created, or a manual collection method, where the invoice is created without a corresponding transaction and the merchant enters payment separately, or the customer submits payment directly through a method like credit card, PayPal, Amazon, or ACH bank payment.
Payment timing is spelled out too. Net terms set how many days an invoice has before it becomes past due, counted either from the current date or from the last day of the current month. Manual collection method invoices get an extra 24 hours built into that due date, so the customer has the full last day to pay. Automatic collection method invoices do not, since collection is attempted the moment the term is up.
Why it matters
Recurring billing is what turns a one-time sale into an ongoing revenue relationship. Getting the mechanics right, the collection method, the due dates, and the handling of automatic versus manual payment, is what keeps that relationship from breaking down into missed charges, confused customers, or delayed cash flow.
Because recurring billing runs largely unattended, small configuration mistakes compound. A due date calculated incorrectly, or a collection method set for the wrong payment path, shows up on every billing cycle rather than as a one-time error. Keeping the billing schedule and the collection mechanics as separate, explicit settings, rather than folding them into one generic recurring charge, is what prevents that. When the platform handles the due-date math consistently, giving manual invoices the extra 24-hour buffer and restricting eom terms to a defined set of values, there is little ambiguity about when a recurring charge is past due.
How to use
Choose a collection method for each subscription or invoice: automatic, if payment should run against stored billing information immediately, or manual, if the merchant or customer will handle payment separately.
Set net terms using either a net or an end-of-month (eom) type, depending on whether the due date should count from the invoice date or from month end.
Remember that manual collection method invoices get an additional 24 hours added to their due date, while automatic collection method invoices do not.
When using eom net terms, restrict the value to one of the supported options: 0, 15, 30, 45, 60, or 90 days.
Monitor whether invoices are collecting successfully under their assigned collection method, since a failed automatic charge and an unpaid manual invoice require different follow-up.
Benefits and examples
A monthly SaaS subscription with an automatic collection method and net terms of 0 is charged immediately at the start of each billing period, with no manual step required.
A B2B customer on invoiced terms uses a manual collection method with net 30, giving them 30 days from invoice generation to pay by bank transfer or check.
Because collection method and net terms are both first-class fields on the subscription and invoice objects, a single recurring billing model can support card-based automatic billing and invoiced manual billing side by side.
An eom net terms invoice created on the 20th of the month with a 30-day term becomes due 31 days from the last day of that month, rather than 30 days from the invoice date itself.
A manual invoice due "on receipt" (net 0) still gets a full extra day before becoming past due, giving the customer the entire day to submit payment.
Frequently asked questions
What is the difference between recurring billing and a one-time charge? Recurring billing charges a customer repeatedly at set intervals for ongoing access to a product or service. A one-time charge bills once for a single purchase with no further recurring obligation.
What is the difference between automatic and manual collection method? Automatic collection method runs a transaction against the customer's stored billing information at the same time the invoice is created. Manual collection method creates the invoice without a corresponding transaction, requiring the merchant to record payment or the customer to pay through a method like credit card, PayPal, Amazon, or ACH.
Why do manual invoices get an extra day before becoming past due? The additional 24 hours ensures the customer has the entire last day of their net terms window to submit payment before the invoice is considered past due, which does not apply to automatic collection, since that charge is attempted immediately at term end.
What net terms values are allowed for end-of-month billing? End-of-month (eom) net terms are restricted to 0, 15, 30, 45, 60, or 90 days.
How can I tell if an invoice is linked to a recurring subscription charge? We recommend using a data export. If you have Credit Invoices enabled, use the Invoices - Summary export and check the invoice_type column to identify invoices from 'renewal' charges. If you don't have Credit Invoices enabled, use the Transactions export and check the origin column to see if the transaction is associated with a 'recurring' charge.
