What is the proper way to run recreate function in a cron job?

Yes, your implementation looks good. Placing this code inside your custom_module.module file within the hook_cron() implementation will ensure that the recreate() method of the entity_usage.batch_manager service is called during each cron run.

1.) Define the function
2.) Implement hook_cron()
3.) Call the function within hook_cron()
4.) Set the cron frequency

/**
 * Implements hook_cron().
 */
function custom_module_cron() {
  // Recreate the entity usage batch manager service.
  $entityUsageBatchManager = \Drupal::service('entity_usage.batch_manager');

  // Call the recreate method if it exists.
  if (method_exists($entityUsageBatchManager, 'recreate')) {
    $entityUsageBatchManager->recreate();
  }
}