Recurring billing: how it works and how to set it up

Recurring billing means charging or invoicing the same client on a repeating schedule, such as monthly, instead of creating each bill from scratch. There are two models: recurring invoices you send for the client to pay, and automatic charges to a saved card or bank account. Pick the model that fits the client.

Where recurring billing fits

Recurring billing suits any work that repeats and is priced the same or nearly the same each period:

• Retainers. A marketing consultant who bills a fixed amount for 10 hours a month.
• Subscriptions. Software, memberships, newsletters, maintenance plans.
• Rent and leases. Equipment, studio or storage space.
• Managed services. Website hosting and care, bookkeeping, cleaning contracts.
• Payment plans. A large project split into equal installments.

Variable work, such as hourly billing where the total changes each month, can still be recurring in timing. The schedule repeats, but the amount is edited before it goes out.

Two models: recurring invoices and auto-charge

People often say “recurring billing” and mean one of two quite different things.

Item	Recurring invoice	Automatic charge
What repeats	A document is created and sent on schedule	A payment is collected on schedule
Who triggers payment	The client	You, using stored payment details
Client consent needed	Agreement on the schedule	Explicit authorization to store and charge a payment method
Best for	Business clients with approval steps	Small, predictable amounts, consumers and subscriptions
Main risk	Slow or forgotten payment	Failed charges, disputes if the client forgot they signed up
Admin effort	Reminders and chasing	Updating expired cards, handling failures

Many businesses mix the two. A consulting retainer for a large company is a recurring invoice with Net 30. A 29.00 dollar monthly plan for a small customer is an auto-charge.

How to set up recurring billing

Getting consent right

A client who forgets they signed up is the main cause of recurring-billing disputes. Avoid it.

• Spell out the terms before collecting payment details. Amount, how often, when it starts, how to cancel.
• Get an explicit yes. Not a pre-checked box buried in the terms.
• Send a confirmation. Email a copy of the terms and the payment method details, such as the last four digits.
• Send a receipt every time. A reminder of what was charged prevents surprise disputes.
• Make cancelling easy. A clear link or a reply to an email is better than a phone maze.

For consumers in the US, the FTC’s guidance on negative options says sellers of online subscriptions need to clearly disclose the material terms before taking billing information, get the buyer’s express informed consent, and give a simple way to cancel. It is a good checklist even for business clients. Rules differ by state and country, and card networks and bank-debit rules add their own requirements, so read your processor’s terms and ask a lawyer about your situation. This is general information, not legal advice.

What happens when a payment fails

Auto-charges fail for ordinary reasons: an expired card, a changed card number, a limit, insufficient funds. Treat the first failure as a data problem, not a dispute.

• Day 0. The charge fails. Send an email with a link to update the payment method.
• Day 3. Retry once. If it fails, send a second note.
• Day 7. Retry or switch to a regular invoice. Warn the client that service will pause on a specific date.
• Day 14. Pause or end the plan according to your terms, and say how to restart it.

This process is called dunning. The dunning glossary entry explains the term. Keep the tone friendly in every message: the client usually wants to pay. Your agreement should state what happens to service while payment is overdue.

For recurring invoices, a missed payment is handled like any other late invoice. See how to ask for payment.

Prices, proration and changes

• Proration. If a client starts mid-month, charge only for the days left. For example, a 300.00 dollar monthly plan starting on day 11 of a 30-day month covers 20 days, so 300.00 x 20 / 30 = 200.00. Show the calculation on the invoice.
• Price increases. Give written notice, say the new amount and the date, and let the client cancel before it takes effect.
• Pausing and skipping. Decide whether clients can pause. State how it affects the billing day.
• Upgrades and downgrades. Credit unused time or apply the change at the next period. Pick one rule and write it in the plan.
• Taxes. If you charge sales tax or VAT, calculate it on every invoice, since rates and rules can change. See how to add sales tax to an invoice.

What it costs

Costs fall into three buckets:

1. Software. A flat monthly price or a percentage. Stripe’s public pricing page, checked on 2026-10-24, lists Billing at 0.7 percent of Billing volume on the pay-as-you-go plan and Invoicing at 0.4 percent per paid invoice. Other tools charge a flat monthly price.
2. Payment processing. Cards and bank debits have their own fees. The same page lists 2.9 percent plus 30 cents for a domestic online card payment and 0.8 percent, capped at 5.00 dollars, for ACH Direct Debit. See ACH vs credit card.
3. Your time. Updating cards, chasing failures and answering “why was I charged?” emails.

Prices change and depend on your volume and processor, so confirm current rates before you decide.

A worked example

Noor runs a small SEO consultancy. She agrees a monthly retainer of 1,200.00 USD with a local dentist’s office: 8 hours of work per month, billed on the 1st, Net 14, with a 50.00 USD tool fee passed through at cost.

The retainer worked because the plan, the billing day, the numbering and the price change rule were all in the agreement. If the dentist had asked to pay by card on file instead, Noor would have needed consent in writing and a way to handle failures.

Common mistakes

• No written plan. Vague retainers lead to arguments about what is included.
• Charging before consent. Never store a card or debit a bank account without clear authorization.
• Forgetting the receipt. Surprise charges become chargebacks.
• Ignoring expired cards. A few reminder emails recover many failed payments.
• Silent price increases. Always give notice and a chance to cancel.
• Letting scope drift. If the client uses 12 hours on an 8-hour retainer, say so and bill the extra.
• Skipping tax changes. A rate that was right in January may be wrong in July.
• Using one numbering series for everything. Keep recurring invoices traceable with a clear prefix.

Checklist

• The plan states scope, price, period, billing day, term and cancellation.
• You chose recurring invoices or auto-charge for each client, with a reason.
• Auto-charge clients gave recorded consent to the amount, schedule and cancellation terms.
• Invoice numbers are unique and follow one scheme.
• Reminders and failed payment steps are written down.
• Clients get a receipt or invoice for every charge.
• Price changes need written notice and a cancel window.
• Sales tax or VAT is checked on each invoice.
• You review the plan with the client every quarter.

Where PayToMe fits

Recurring invoices are one of the features in development in PayToMe, see recurring invoices. Until then, you can create each invoice in PayToMe, now in public beta, or with the free invoice generator, with exact totals, so you can run a retainer by hand. Sign in to PayToMe.

Sources

This is general information, not legal or tax advice. The consent, disclosure and cancellation points are from the FTC’s business guidance on negative options. Fee figures come from Stripe’s public pricing page, checked on 2026-10-24. They are examples, they change, and your own rates may differ. Subscription, tax and consumer-protection rules vary by state and country, so check yours before you rely on any example.