Subscription billing procedures may make or break an average finance team as a customer base expands—previously reasonable duties can soon get out of hand. Many accountants struggle to manage influxes of new accounts, recognize revenue accurately, and create accurate, timely invoices due to the expansion of the subscription economy. Teams frequently introduce SaaS pricing models without first establishing the financial procedures and tools necessary for effective invoicing. In other words, few companies go through the financial changes that subscription charging necessitates.
Accounts teams quickly get overburdened by the administrative demands of rapid expansion due to the sheer number of moving pieces to take into account. Numerous techniques used in well-liked price plans can result in an unheard-of surge of new members. Limited free trials, for instance, might create administrative snags when teams need to upgrade to billing after the special offer expires. This is quite simple if only 10 users enroll, but if the campaign is successful, this might mean that hundreds or even thousands of new accounts need to be updated. Even the happiest subscribers will be difficult to keep if the billing change is not smooth and consistent.
Any effective subscription pricing strategy starts with billing, and certain fundamental procedures are essential to its success. The typical customer demands a great deal of independence when handling payments. A list of some of the typical assumptions is provided below.
What clients demand of your billing procedures:
- Simple, transparent billing that makes it apparent how much is owed and when payment is due
- The capability to automate the billing cycle so that they can establish a payment plan and forget it
- Simple changes are possible, including altering credit card payments or canceling a payment.
- When needed, access to their transaction history and bills
- A simple user interface that enables users to handle billing on their own
- Accurate and consistent billing without any extra charges or surprises
- Prior to any billing changes, there is clear communication
- A protected setting where they can safely store payment details
- Customer service hotlines to support them if something goes wrong
Although the specifics of the perfect subscription billing process can differ from business to business, there are certain best practices and factors that apply to all businesses. This blog deconstructs the essential components that effective processes share.
Your subscription charging procedure will not succeed without these 8 best practices.
1. Automate everything you can! Scaling with manual billing is impossible.
Some people may become contrarian after hearing this statement, while others may feel personally attacked and have ideas such, "We've always done it that way before, of course we can scale!" All of these responses to the ongoing need for automation are understandable. However, the reality is that manual billing cannot be sustained in order to grow a strong subscriber base.
Processes frequently have more time-consuming tasks than teams realize, and they pile up. Finance teams must evaluate manual processes that, if eliminated, may free up time each month for them. A personalized ERP checklist that contains the manual procedures that take the most time and can be automated will be a significant step forward for overburdened teams.
Ask your team a lot of questions. Do you manually enter data? Do even minor updates necessitate manually adjusting each account? Is income recognized on a regular basis? Do you have a lot of errors, and if so, why? You may readily determine where the bottlenecks or issues originate by carefully reviewing the issues that frequently occur.
2. Allow customers to sign up without the assistance of the sales or accounting teams
With subscription billing management, one of the major process changes is that the sales and accounts team should only sometimes need to set up new customers. The majority of consumers are now accustomed to controlling their billing and subscribing in contactless settings where they feel in charge of their usage and the platform. Although there can be other choices for more complex products where it is impossible to present bespoke prices.
However, for simpler offers, it's advisable to let subscribers sign up without having to contact a member of your staff. The best method to increase subscriber numbers without adding to the team's labor is with a registration page that links to frequently asked questions, shows pricing and information in conversion-friendly content, and guides the user through each step. The accounts staff can concentrate on crucial billing strategies instead of troubleshooting when sign-ups are enabled.
The process for enrolling in billing should include:
- Adequate information, including frequently asked questions, to enable customers to make decisions
- Simple billing options that let users choose a billing cycle, payment method, etc.
- Payment gateway with a secure environment for them to enter payment information
- Automatic confirmation emails with invoices and payment details upon registration
- A simple user experience that makes signing up simple
- All of this information ought to immediately connect with your ERP on the back end.
Customers can often sign up at any time and select different payment frequencies and tiers with subscription billing. It can be more difficult to manage pricing alternatives that are more complicated. If your staff is in charge of making appointments and keeping track of bills and payments by phone or email, demand for your services will cause them to soon become overworked.
Payment gateways are the ideal response to this difficulty. Most of your clients will be able to sign in and handle their payments. Additionally, the best recurring billing software will interface with a payment gateway, frequently increasing the range of accepted payments.
As your client base expands, these gateways become increasingly important because they enable you to manage more complicated customer issues and help customers conduct routine billing tasks like updating credit card information and authorizing payments in a secure setting.
4. Program that facilitates adherence to international accounting standards
The problem of demonstrating conformity with accounting standards like IFRS 15 and ASC 606 when using subscription charging. Those that are still using manual procedures will want assistance to create audit trails that are error-free, and they might expend a substantial amount of time laboriously searching through data to find errors when that time would be better spent on strategic objectives.
To demonstrate compliance, accuracy is essential. Automation is feasible, and businesses can stay up with it with the proper solution. Consider the possibility that rival businesses are already investing in more efficient billing procedures to save time and money. For today's finance professionals, this worldwide movement raises only one question: why not automate important budget and people tasks so you can reallocate resources and advance strategy?
5. Automated collections, revenue recognition, and dunning reduce tasks.
It's important to estimate how much time your accounts team spends on revenue recognition, collections, and dunning for subscription billing. Once you have this knowledge, it will be simple to calculate the return on investment for recurring billing software.
The three main steps to automate in subscription billing
Collections | Store payment information online in a secure payment portal. Payments are automatically charged on the proper date, and collections are taken right away.
Automatic retries to make sure that clients' payment information is up to date. This method of dunning management increases revenue recovery and decreases revenue leakage.
Schedules for revenue recognition and deferral should be based on subscription cycles so that software can automatically do both. Teams may find it challenging to carry out this activity manually.
6. Educate your employees and use specialists in subscription billing to your advantage.
Teams making the switch to subscription billing may face a steep learning curve. Your accounts team may need to have the necessary skills to manage the challenges posed by modern pricing tactics if they have spent the majority of their time managing manual, traditional billing.
Because they require training to feel at ease with the new procedures, these teams may be the least willing to alter the way they conduct business. Therefore, training, education, and communication are necessary for financial transformations and SaaS migrations. Your team will require devoted time to upgrade their skills in order to handle the demands of managing the growth in recurring billing accounts as well as access to experts for those challenging accounting problems.
Due to the complexity of sophisticated subscriber management, mechanisms should be set up to allow even your most senior accountants to ask questions and find workable solutions to simplify billing. If you plan to invest in software, seek teams that provide a high level of customer service, support, and training. Invest in hiring a specialized expert on a contract basis.
7. Maintain billing data security in a centralized, safe location.
How are you keeping your billing data? What safeguards are in place to guard against data theft or assaults on your customers? In the realm of billing, security is so crucial that it must be taken into account at every turn. Even if you aren't thinking about this right now, your subscribers will be, and they will probably search for secure, encrypted surroundings. For individuals accustomed to more reliable billing options where their information is maintained safely and securely by well-known payment partners through a gateway, manual invoicing can raise red flags.
8. Disseminate billing updates with clear communication and bulk updates
The requirement for more dependable client communication is one of the failings of the most overburdened accounting teams. Customers want to be informed when their billing is changing, when a payment has failed, or when a trial period or special offer is about to expire. When it comes to payment-related issues, it is advisable to tread on the side of overcommunication.
Teams are frequently so preoccupied with distributing updates to pertinent accounts that the communication component suffers as a result. With the help of reliable software, it's feasible to automate notifications (such as those for a new billing cycle, a missed payment, etc.) and distribute bulk updates, allowing teams plenty of time to plan how to best communicate changes.
Important billing-related communication items
- Failure to pay
- Correct billing
- Upcoming billing reminder
- Modifications to payments or billing
- About to expire credit cards