The subscription business model continues to thrive, with growth most recently fueled by advances in artificial intelligence (AI), machine learning, and the Internet of Things (IoT). It’s all about creating more flexibility, more scalability, and enhanced usability for both businesses and their customers.
As the industry evolves, traditional billing solutions and legacy systems are coming up short. Fortunately, robust subscription billing platforms have risen to the challenge. They offer advanced tools and features which continue to progress with the market, and they integrate with and enhance a business’s entire revenue operations infrastructure.
What makes subscription billing platforms so special?
Ultimately, it boils down to capability. Recurring billing software is designed with subscription businesses and their various pricing models in mind. That design requires innovative features in the following areas.
1. Product catalog
Between one-time, recurring, and usage or consumption models—not to mention hybrid pricing, combining any or all three models—managing a subscription business’s product catalog and plan offerings is a complex task. Add in discounts, promotional rules, and product updates and it’s easy to understand why these business teams demand both comprehensive and flexible solutions.
What’s more, because subscription businesses rely on recurring revenue projections to manage their finances, they require the ability to safely and independently test new product roll-outs and changes to pricing models. All of this must happen without having to alter the active billing and accounting systems still managing the existing models. Agile subscription billing software makes this possible.
Ultimately, subscription businesses simply need billing solutions that can test complex catalogs, and manage them once made available to customers. Some things a comprehensive recurring billing platform should be able to do in this regard are:
- change pricing plans easily when needed, both broadly and at the customer level
- handle discounts, promotions, and coupons with automation, and
- offer the flexibility to add, remove, and change products in plans and in customer subscriptions.
2. Customer communications and notifications
Subscriptions have changed the business-consumer relationship. Traditional business models center around one-time purchases; the business-consumer relationship ends once a transaction is complete. Subscription businesses, by contrast, must cultivate a long-term relationship with customers to minimize churn and ensure the recurring revenue upon which they rely.
In some ways, this is actually better for business. It’s easier to get customer feedback from subscribers, who hope to benefit from sharing their thoughts by getting an improved product down the line. This benefit and others, however, come at the cost of increased need for efficient customer communication.
The dunning process provides an excellent example of customer relationship management. With the ubiquitous use of stored credit cards for recurring payments, tactfully notifying customers of failed payments is a delicate balancing act of phrasing, timing, and frequency.
Comprehensive subscription billing management platforms help businesses handle this with ease and automation.
Some other notifications subscription billing platforms should handle well include:
- subscription activations/welcome notices
- billing/statement notifications
- subscription expiration warnings
- upcoming credit card expirations notifications, and
- collection reattempts for failed payment.
When one platform enables you to automate all billing-related customer notifications in a unified manner, the business-to-customer relationship is poised for success.
3. Automated invoicing
On the topic of customer communications, invoices are the other side of the product catalog management coin. Just as a comprehensive subscription management platform should be able to handle the various complexities a business’s catalog presents, so too should it be able to translate delivered products clearly and concisely to customers through invoicing.
This is especially important in usage- or consumption-based pricing models. Invoicing becomes considerably more complex, for example, in telematics businesses which may use distance traveled and drive time on top of fixed recurring fees and one-time charges for specific products and services.
Calculating these charges using an internal algorithm is one thing; presenting it clearly to a customer on an invoice can be quite another.
Fortunately, robust subscription management platforms have sophisticated invoice design tools at their disposal. A strong platform should provide a business with various means of usage data presentation, allow for invoice customizations and adjustments, including corporate branding on invoices.
Invoicing based on usage means, of course, that a billing solution must be able to handle the raw usage data generated by customers and translate that usage effectively into the billing process. This is metering and rating—essential capabilities which ensure each customer is billed appropriately based on their usage and pricing plan.
- Metering: the tracking of usage data by user, account, transaction, or another designated measure—i.e., tracking individual users on a shared mobile phone account, versus a payment portal charging a percentage per transaction.
- Rating: the measurement by which the payment will be determined—i.e., some mobile service providers charge per minute, while many other services are known to charge per hour.
Subscription business is still an evolving model, so change is inevitable. What happens when metering or rating charges must be updated across the board for all existing subscribers? Comprehensive subscription billing platforms support these kinds of bulk operations, absorbing large tasks such as adding or removing products or updating pricing rates and billing models.
5. Finance management
We touched upon recurring revenue projections earlier, but the importance of robust recurring billing software’s role in finance management cannot be understated.
The right platform should be able to measure and report on metrics uniquely significant to subscription businesses.
These metrics are different than the ones used by traditional billing solutions, which focus on one-time measurements such as selling price, gross revenue, and close rates.
Knowing anticipated revenue and costs is crucial to running a recurring revenue business. While accounting solutions are usually designed with double-entry general ledger bases, their other features fall short of subscription business’s billing needs.
Fortunately, adaptive subscription billing platforms like Fusebill are also built on ledger-based double-entry accounting foundations, while also tracking and reporting the right metrics for subscription business success.
6. Subscription business intelligence and analytics
Agile subscription management platforms should be able to provide insights on:
- annual recurring revenue (ARR)
- monthly recurring revenue (MRR)
- subscriber churn
- subscriber acquisition,
- and more.
All of these metrics combined are important, not only to revenue and cost prediction, but also to the testing and actual roll-out of new products. Businesses need to fully understand their cash flow situations before they can confidently invest in new developments.
What’s more, subscription management analytics can provide insights to customer segments, real-time revenue snapshots, and product popularity. This data helps managers keep a finger on the pulse of a subscription business, ensuring long-term health.
7. Recurring billing automation
Of course, a subscription billing platform had better get the main thing right: billing.
While traditional billing solutions may have the ability to store customer contact information, and perhaps even credit card information, they typically still require manual input of goods or services rendered during the billing cycle. This can make common tasks such as reactivation, difficult to keep up with at scale.
Comprehensive subscription billing platforms, of course, automate the billing process. They also offer additional automated services related to billing that are hard to compete with, such as:
- upcoming credit card expiration reminders
- card number updating for expired or replaced cards
- card payment retries for declined transactions
- customer self-service portal functionality, and
- advanced tracking of aging accounts receivables.
Automated billing reduces revenue leakage by ensuring recurring charges are never missed and sent invoices get paid or can easily be followed up on, thanks to advanced dunning management.
The process is “always on,” in real-time, so that all hours are business hours for customers.
8. Account management
Comprehensive subscription billing platforms are also subscription management platforms.
The distinction is important: the software doesn’t just automate the billing and crunch the financial data—it integrates other essential account management functions such as sign-up, activation, upgrades, downgrades, cancellations, and even re-activation.
The agility doesn’t end there. In the case of business-to-business subscription providers, the ability to separate the end-user from accounts receivable when sending invoices is paramount. If the wrong person receives an invoice, there’s a chance it’ll never get paid.
In the same token, multiple users on one account still need their usage reported on one invoice to reduce confusion and bottlenecks when requesting payment. Some users may also have access to products which other users do not, despite being on the same subscription. They may still need their varying usage consolidated during invoicing.
All of this is handled smoothly with a robust subscription billing solution, which, based on payment (or lack thereof) can automatically handle provisioning, cancellation, downgrading, or pausing as dictated by the terms of the subscription.
As subscription business models continue to evolve, so will the billing solutions which support them. No matter the direction, however, one thing is certain: businesses and solutions will need to continue to focus on their relationships with customers.
Acquiring customers with attractive products and retaining them with considerate and efficient communication and self-service abilities are practices which light the path to subscription business success. All of this can be enhanced and automated with a digital transformation to an adaptive subscription billing platform.