Subscription businesses have been growing exponentially over the last several years. From 2011 to 2016, the subscription e-commerce market grew by 100 percent every year, and in the spring of 2018, there were 40 million visitors to subscription sites alone.
It’s no secret that the subscription marketplace is on the rise, and trends indicate that the popularity will keep growing as businesses promote their goods and services to all demographics, from children to adults. One of the largest percentage of consumers is the Generation Z consumer, who not only makes up more than a quarter of the US population, but also contributes $44 billion to the economy.
It is not enough to be able to sell your products on a subscription basis, though. In order to fully benefit from the subscription business market, businesses need to be able to manage their recurring billing customers seamlessly.
What is subscription management software?
Subscription management software, or recurring billing software, is a platform which manages the subscriber experience through sign-ups, automated billing and invoicing, automated notifications, and payment facilitation processes.
When companies start to grow, they realize that the billing processes that they might have initially been able to manage in house are unwieldly at scale. Recurring billing software allows companies to manage billing, invoicing and payments on an automatic, recurring basis.
Without recurring billing software, subscription management can become a nightmare. The accounting department would be doing extra manual work and managing cumbersome spreadsheets, which can create huge billing-related bottlenecks.
However, by employing a robust subscription management software, those bottlenecks are eliminated and a business can focus on growth.
Additionally, this subscription management software helps companies launch products faster because the software provides the flexibility to expand their catalog of products.
So what should a business look for when considering recurring billing software?
Top 7 features of an efficient subscription management software
Fusebill recently generated a comprehensive guide for recurring billing software, which includes a convenient checklist of qualities a subscription business should look for in their software. Below are the 7 top features subscription management software should offer.
1. The subscription management platform has the flexibility to change pricing plans easily and when I need to.
Educator Jessie Potter once said, “If you always do what you’ve always done, you always get what you’ve always gotten.” Subscription businesses have been growing in popularity because they fill a need for their consumers.
However, customer demands can change and subscription businesses continue to thrive when they scale their offerings to continue filling these needs. Consequently, pricing plans can change accordingly.
Recurring billing software can handle those pricing changes easily and seamlessly, which would otherwise be difficult to manage manually.
2. The platform handles discounts, promotions, and coupons.
Often, subscription businesses want to offer special promotions on their products through discounts, price breaks or coupons. This changes the price of a product for a certain period (i.e., 25% off for 6 months). It can be difficult to track and manage these price reductions manually. If the discount is not removed on time, businesses lose money by keeping that discount in place, or if the discount is removed too early and customers are charged full price when they expected a discount, this can result in customer churn or costly chargebacks.
In the same vein, a business may want to experiment with bundling products or offering volume or tiered discounts, which can be very difficult to track manually over the customer lifecycle.
An efficient subscription management software can easily incorporate and monitor any discounts, promotions or coupons a company wants to offer to their customers.
3. The platform supports bulk operations (e.g., usage meter updates across entire customer lists).
A business is in a constant state of flux, between adding products, removing items and making price adjustments to account for overhead changes or production costs. For example, several years ago, shipping costs skyrocketed because of higher fuel costs. Consequently, many companies were forced to incorporate a fuel surcharge to offset those expenses.
Without a billing system, these changes would have to be made manually on each and every invoice, which takes time and opens a business up to potential costly mistakes. However, with a robust recurring billing platform in place, these changes are made in a matter of seconds, impacting all customer invoices efficiently and accurately.
4. The platform allows me to add my corporate branding on invoices.
Corporate branding is essential to any successful business. Not only does it add a level of professionalism and credibility to a business, but it also builds a stronger relationship with customers, as they can relate to a specific brand. All of these qualities work together to help increase profits for a business.
In fact, 89% of B2B marketers consider brand awareness the most important goal of any company, even before lead generation and sales.
It’s common sense for a business to use that strategic branding across their own material, from sales literature to letterheads and business cards, but what about the other point of contact with the customer: the invoice?
Recurring billing software can incorporate the same branding on invoices, giving an additional level of quality to the transaction. It reminds a customer of the value they realized when they started a relationship with that business.
5. The platform allows my customers to choose their preferred payment method.
Customers are becoming increasingly selective about purchases and other business transactions. They come to a purchase armed with the confidence that if they are not satisfied with a product or receive poor customer service, they can go to the competition to make their purchases.
This fastidious attitude includes their payment method. If they prefer to use a mobile wallet, such as Apple Pay or PayPal, versus a credit card, they will not be happy if a transaction requires them to reach into their wallet for their Visa card.
Offering a variety of payment methods is not only good business sense, but it serves to enhance the overall customer experience, which reduces the incidences of customers churning out.
Subscription management software supports this growing customer trend by allowing a variety of different payment methods.
6. The subscription management platform is PCI compliant.
The Payment Card Industry (PCI) was formed in 2006 to ensure that consumer’s financial information is protected and cannot be stolen.
To a business in the subscription e-commerce market, PCI compliance is critical because recurring billing holds that financial data in order to automatically bill a customer during the billing cycle. In fact, the bank tied to a business that is not PCI compliant can face fines of $5,000 to $100,000 per month for violations. While the fines hit the bank, the cost will inevitably trickle down to the business.
Recurring billing software should absorb the burden of PCI compliance, so the business does not have to worry about these mandates.
By shifting the PCI responsibility to the subscription management platform, a business avoids the time-consuming and potentially costly audits that they would have to deal with if operating independently of a PCI-compliant subscription management platform.
7. The subscription management platform handles deferred and earned revenue.
A powerful ledger-based platform will allow one to control revenue recognition at the product level, earn one-time fees immediately or over a period of time, etc.
Generally Accepted Accounting Principles (GAAP) insist on businesses tracking revenue, but it can get more complicated when differentiating between deferred and earned revenue. What is the difference between the two revenue streams though?
Most SaaS (Software as a Service) companies tend to charge customers at the beginning of a billing cycle for services that the customer will use throughout that billing cycle. At the time of the sign up, all revenue for the recurring service is considered deferred revenue. At the end of that billing cycle, when the services have been fully used, the funds become fully earned revenue. In other words, a small amount of revenue drips daily from the unearned to the earned revenue bucket. You need a system that fully automates this for you or your accounting team will be screaming come audit time.
Tracking deferred and earned revenue can be very difficult and cumbersome. However, the right recurring billing software can easily monitor this revenue recognition schedule for you in real-time.
Download the Complete Guide to Subscription Billing
These seven points are critical when comparing different recurring billing platforms. However, there are even more things to consider with subscription management and recurring billing software.
Remember that ignorantia juris non excusat—ignorance of the law excuses no one. Recurring billing businesses are held to certain standards to protect their customers so it is critical to be fully educated with how a subscription management and recurring billing platform can keep your business thriving.
For more points to consider, download the subscription checklist found in the NEW Complete Guide to Subscription Billing.