Every business owner knows the importance of a reliable telephone system. Whether you’re just starting out or are in the midst of running a small business, a good phone is essential for effectively communicating with prospects, customers, and suppliers. And for startups or small businesses, one dilemma they often face in choosing a phone system is whether they should opt for a pay as you go service or sign up for an annual contract.

In the past, making the decision was easy. Signing up for an annual phone contract was preferable because of predictable monthly billing and lower monthly rates in addition to billing bonuses and credits. Also, a pay as you go option wasn’t readily offered by any traditional telecommunication providers, so businesses are usually stuck with lengthy annual contracts. But today, with the popularity of Voice over Internet Protocol (VoIP) solutions, the trend has significantly shifted and businesses now have the option to pay as they go instead of committing to an annual plan.

Here are some reasons why small businesses should consider getting a pay as you go VoIP service (also known as a one-month rolling contract) instead of committing to a long-term phone contract.

A big advantage of pay as you go is that most providers give users the freedom to choose their own phone equipment or device to use with the service. This means if you already have a SIP-enabled handset, you do not have to buy a new one just for your phone service. You can seamlessly connect your current phone to your service. Even analog phones are supported, too. All you need is an analog telephone adapter (ATA) to turn your old landline into a VoIP phone.  Furthermore, most providers also offer mobile apps so you can access your phone system and its features directly from your smartphone or tablet.

This is so much more convenient compared to signing up for an annual contract, where most providers would insist you get exclusive equipment to use with the service.

Startups face a unique set of hurdles, particularly a lack of stability. Business needs and requirements change easily, and operations may grow or decline at unexpected rates. Therefore, choosing a long-term phone contract when you are uncertain of your company’s future may not be a wise business investment. With a pay as you go service, you can enjoy the freedom and the flexibility of using phone features and services only when you need them. You can upgrade or downgrade as you wish without having to pay for unnecessary charges and other associated penalties. Plus, there are usually no upfront fees you need to settle in order to avail of the phone service.

When your small business fails or if you’re not satisfied with your service and want to try a different provider, cancelling your contract can be a painful process. Aside from the paperwork you need to complete, you may also be charged with hefty termination fees. For instance, if you signed up to a two-year or 24-month contract and want to stop in the third month, you might have to pay 21 months' worth of fees. With a pay as you go VoIP service, you can cancel your service anytime without all the hassles and headaches of breaking free from a contract.

For some businesses, long term phone plans are advantageous because you get discounted billing and other perks. But for companies that value freedom and flexibility, and are still not willing to commit, a pay as you go VoIP service makes the most sense. Plenty of providers today, such as Vonage, OnSIP, and RingCentral, offer feature-rich, affordable, and flexible pay as you go plans.