Business

What is a recurring invoice? Definition and top reasons for use

Panna Kemenes

22.11.21 (updated more than 1 year ago)

Read time 2 minutes

The process of invoicing is one that many business owners struggle with.

Invoicing is one of the most challenging and time-consuming tasks small business owners and finance teams have to manage; from incorrect data, to missing invoices altogether.

If you have regular incoming payments, then one solution is to set up a recurring invoice to automate this process. A streamlined recurring invoice process minimizes the risk of human error, meaning you have more time to focus on the important parts of running your business.

This article will explore how recurring invoices work, plus tips for how to set them up in your accounting software.

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invoice payments with Wise

What is a recurring invoice?

A recurring invoice is an invoice that’s sent at a regular cadence to the same customer and contains the same information each time.

For example, You may have a customer that subscribes to a service you offer at $11.99 per month. A recurring invoice would ensure that the invoice is sent out on the same date each month.

The same applies to goods and anything else you sell to a customer on a regular, recurring basis.

How do recurring invoices work?

Before setting up a recurring invoice, this arrangement must be agreed upon with the customer.

Once the payment schedule and payment amount are agreed upon, a business can set up a recurring invoice. Recurring invoices are usually set up using invoicing software.

The software then sends out the invoice with all the correct details on the same date each month. The customer receives the invoice on time and can then pay the due amount.

💡 Top tip - You can include Wise Business account details on your invoice to make it easy for customers to pay you - whatever their local currency.

When should you use recurring invoices?

Any business can use a recurring invoice when there is a regular, repeating purchase made by a customer.

The only condition is that the expense should be the same every time, otherwise you will run into problems by under or overcharging the customer.

How do I set up a recurring invoice?

One of the easiest ways is to set up a recurring invoice through accounting or invoice software, such as QuickBooks or Xero.

Using QuickBooks as an example, here’s how you would set up a recurring invoice:¹

First, head to ‘Settings’ at the top of the screen and select ‘Recurring Transactions’
Next, Select ‘New’, and then choose ‘Invoice' from the ‘Transaction Type’ dropdown menu.
Enter a name for the template
Go to the ‘Type’ dropdown and choose ‘Unscheduled’
Select ‘Add New’ from the ‘Customer’ dropdown
Enter ‘Sample Customer', and then ‘Save’
Lastly, enter the appropriate invoice information and then click ‘Save Template’ to finish the setup process.

Pros and cons of recurring invoices

There are upsides and downsides to setting up recurring invoices. It’s worth weighing the pros against the cons before you go ahead and create them for your customers.

Pros:

By automating the invoice process for customers, you reduce the risk of human error.
With a recurring invoice, you won’t have to worry about forgetting to invoice your customers for goods purchased.
When you offer a recurring payment option to customers, you’re more likely to convince them to pay for goods on a regular basis.

Cons:

With a recurring invoice, you have to be careful not to issue the wrong price. This also goes for price changes that may come into effect around the time you set up the invoice.
Recurring invoices can be tricky to deal with if there is a failed transaction for whatever reason.

Get international invoices paid with Wise

If you have overseas customers, then you need to make it as easy as possible for them to pay you.

Get paid faster with Wise

With Wise Business, you can add your Wise account details to every recurring invoice. This way, customers know where to send the money when the invoice is issued.

What’s more, Wise lets customers pay the invoice in their local currency. When you have a Wise account, you’ll have access to up to ten local account details, so you can have a UK account number, and Euro IBAN details, for example, all in one place.

This can help speed up the payment process since it’s simplified on the customer’s end.

It also means you don’t lose out on costly exchange rate conversion fees, which means more money kept inside your business for more important things.

💡 For all you need to know about invoices, don't forget to read and bookmark the ultimate guide to invoicing from Wise!

Sources:

QuickBooks - recurring invoice set up

Sources checked November 9, 2021.

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