The subscription business market has been growing exponentially over the last decade.
From 2011 to 2016, subscription e-commerce grew by 100 percent every year, and in the spring of 2018, there were 40 million visitors to subscription sites alone. Then, with the rise of remote work and life in 2020, subscription SaaS businesses began to boom—even more than they already were!
A recent report from Gartner shows global end-user spending on public cloud services was at $257.5 billion in 2020 and is forecasted to grow over 18% to $304.9 billion in 2021.
So it’s no secret the subscription marketplace is on the rise, and trends indicate 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 U.S. population, but also contributes $44 billion to the economy.
It’s not enough to be able to sell your products on a subscription basis, though. To fully benefit from the subscription business market, businesses need to be able to manage their recurring billing customers seamlessly.
One way to do this is with adaptive subscription management software.
What is subscription management software?
Subscription management software—or recurring billing software—is a platform that manages the subscriber experience through sign-up, automated billing and invoicing, automated notifications, and the entire payment facilitation process.
When businesses start to grow, they realize the billing process they might have initially been able to manage in house becomes unwieldly at scale. Recurring billing software enables businesses to manage billing, invoicing, and payments on an automatic, recurring basis with ease.
Without recurring billing software, subscription management can become a nightmare. The accounting department would be doing extra manual work and managing cumbersome spreadsheets or legacy billing solutions, both of 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, subscription management software helps businesses launch new products and pricing strategies faster because the software provides the flexibility to expand and adjust their catalog of products in real time.
So what should a growth-minded subscription business look for when considering recurring billing software?
Top 8 features of an efficient subscription management software
Fusebill generated a comprehensive guide for recurring billing software, which includes a convenient checklist of the qualities a subscription business should look for in their software.
Below are the eight 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 change and subscription businesses continue to thrive when they scale and evolve their offerings to continue filling these needs. Consequently, pricing plans need to change accordingly.
Recurring billing software should offer adaptive catalog flexibility that enables you to iterate on pricing, test various price points simultaneously, and create entirely new subscription plan offerings as needed.
The right software should also have the ability to handle your customers’ subscription plan migrations 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 price reductions manually. If the discount isn’t removed on time, businesses leak revenue 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, volume or tiered discounts, or offering usage based billing, all of 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, coupons, or pricing models a company wants to offer to its customers.
3. The platform supports bulk operations (e.g., usage meter updates across entire customer lists).
Subscription businesses are in a constant state of flux, between adding products, removing items and making price adjustments to account for overhead changes, production costs, and new feature and product development.
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. And as businesses in the SaaS space build on their product and add value for their customers, they often raise prices to reflect that value increase.
Without an adaptive 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 subscription business.
In fact, 89% of B2B marketers consider brand awareness the most important goal of any business, even before lead generation and sales.
It’s common sense for a business to use strategic branding across its 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 and other automated communications, 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 aren’t 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 won’t 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 consumers’ 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 so it can automatically bill customers during the billing cycle. In fact, the bank tied to a business that’s 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 doesn’t 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 they’d 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 subscription management platform allow a business to control revenue recognition at the product level so it can differentiate between earned and deferred revenue on subscription products while also earning one-time fees immediately or over a period of time as desired.
Generally Accepted Accounting Principles (GAAP) insist businesses track revenue, but it can get more complicated when differentiating between deferred and earned revenue. What’s the difference between the two revenue streams though?
Most SaaS (Software as a Service) businesses charge customers at the beginning of a billing cycle for services the customers will use throughout that billing cycle. At the time of 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 your business or else 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.
8. The platform automates dunning management to improve collections assurance.
At the end of the day, your subscription business must predictably collect on its recurring invoices to succeed.
Manually tracking failed payments, managing payment re-attempts, and communicating with customers about any payment issues is time consuming and error prone. The result is often revenue leakage, a less-than-ideal customer experience, and in the worst cases, involuntary customer churn.
Adaptive subscription management software automates the dunning management process. Re-attempts on failed payments can be automated according to a pre-set schedule. And any aging accounts receivables can be easily tracked with an automated detailed report.
Additionally, email and SMS messages can be triggered automatically to notify customers of failed payments and to give them easy access to a self-service portal where they can take action. These messages can also notify customer when their payment method is approaching expiry to avoid payment issues before they ever happen.
Download the Complete Guide to Subscription Billing
These eight 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’s critical to be fully educated on 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 Complete Guide to Subscription Billing.