You’ve likely already noticed that subscription-based services are now commonplace. Even everyday consumable necessities like groceries can be purchased with this pricing model instead of via traditional, one-off purchases.
In fact, according to data compiled by the Subscribed Institute — a dedicated think tank focused on the subscription economy — monitored subscription-based businesses realized a 17% compound annual growth rate (CAGR) over the past decade, considerably outpacing the S&P 500. Consumer satisfaction with and loyalty to these recurring services is also trending up.
This guide explores what subscription billing software features you should look for should you be looking to offer a subscription service plan of your own, including a B2B subscription billing model.
What is subscription billing software, and what does it do?
If you do choose to offer — or completely shift to — a subscription-based billing strategy, investing in specialized subscription billing software can ease that transition, as traditional financial platforms often lack the features and flexibility to accommodate the various pricing models, product catalogs, and tiered plans common in this emerging market sector.
The tools and applications on the market designed with subscribers in mind can make the management, tracking, invoicing, and payment of these services much easier for your accounting department and customers. Some of the more robust platforms that are currently available can even expand the scope of your catalog to support broader payment strategies and types.
In particular, subscription billing software can help simplify and streamline your efforts related to:
- Account management
- Market incentives (e.g., discounts, free trials)
- Payment processing
- Reporting and analytics
What is the difference between recurring billing and subscription billing?
Recurring billing identifies a particular subscription payment strategy — when a customer signs up for a recurring good or service and pre-authorizes payments that will occur at regular intervals until the subscription is canceled or suspended.
General subscription billing doesn’t require pre-authorization, so it also covers billing plans requiring the customer to authorize each payment individually.
Features to look for in subscription billing software
1. Automated payment collection, reminder notifications, and more
If you want to offer recurring billing options to your customers, you’ll need a platform that can handle this regularly-repeated process smoothly and efficiently — preferably without human intervention. Therefore, you should choose a solution that can automate payment collection and related notifications, such as reminder notices that the provided credit card is set to expire soon.
If you opt out of recurring billing, you’ll want to pick a solution that can seamlessly generate, deliver, and collect payment for your invoices. Look for an offering that provides automated invoice workflows, integrated validation checks, and n-way matching. After all, if your billing system can help prevent errors or discrepancies from ever showing up on your invoices, the payment process will be much calmer and more convenient for your customers.
2. Chasing and dunning capabilities
Assuming that you are sending out regular invoices, you’ll need to follow up on outstanding bills after the initial payment request is sent. The chasing — or dunning — of these debts should ideally incorporate consistent, reoccurring, multi-channel reminders. But such persistence often demands a labor commitment that can quickly eat into your profits.
However, with the right billing platform, you can establish enterprise-wide schedules for these touches and, through automation, remove unneeded delays while encouraging prompt responses from your subscribers.
3. Integration with your other platforms
When shopping for a subscription billing platform, the most important criteria you need to consider is how well the solution can play with other software. The offering must seamlessly integrate with your existing customer relationship management (CRM) and enterprise resource planning (ERP) systems.
You should also consider how beneficial or critical it will be to select a tool that can communicate with the software that controls your:
- General accounting
- Inventory management (for subscriptions using tangible goods)
- Payment gateways
- Tax preparation
Connect Invoiced with virtually any on-premise ERP or accounting system using Invoiced ERP Connect.
4. Reporting and analytics when and where you need them
Do you know if your subscription billing software is helping rather than hurting? Well, if you’d like current, real-world insight into what is going on within your business, a comprehensive reporting feature can prove invaluable. You should look for a mature product that can capture, digest, and document key metrics from your subscription and billing processes.
Some common metrics you should be able to monitor include:
- Annual recurring revenue (ARR)
- Cart abandonment
- Deferred revenue
- Monthly recurring revenue (MRR)
- Subscriber acquisition
- Subscriber churn
Learn more about what subscription metrics Invoiced can help you monitor.
Beyond simple reporting, consider a platform that can provide trend analysis and other business intelligence functions to help drive better-informed decision-making.
5. Role-based access that mitigates security risks
While your software search will almost always focus on the functional improvements the solution can bring, you shouldn’t overlook the potential security risks and opportunities for fraud bundled with your purchase. And when the affected operations intersect with company finances, you should be doubly sure that you are making a smart, safe choice.
As you evaluate available platforms, explore what cybersecurity features they might offer to keep your customers’ payment information secure. Typically, you’ll want a system that can restrict data and system access depending on the responsibilities of the individual user. For example, your customer support teams will likely only need to view general subscription details about a given account. In contrast, your accounting staff will need more profound access to sensitive payment records. By limiting who can see what, you can limit opportunities for potential malfeasance.
6. Subscription management that’s flexible and accurate
One of the primary reasons to shift to subscription-based services is to focus your business on long-term customer relationships rather than just one-off transactions. As these relationships progress, your customers’ needs will change, and you’ll need to change with them. For instance, subscribers might want to pause their current plan as they work through existing inventory or rein in spending. Or they might want to upgrade or downgrade between service tiers to match their business growth.
Choose a platform that empowers customers to modify — sign up, cancel, upgrade, downgrade — their subscriptions on demand. Not only will this convenience boost satisfaction with your service, but it will also simplify your internal processes when fulfilling these plan adjustments.
Should you build your own subscription billing system?
Do you have a team of competent, dedicated software engineers on staff, along with an adaptive development architecture? If not, the obvious answer is no. But if you do, you’d need to examine whether it was cost-beneficial to divert these developers away from revenue-focused projects to custom-build a system that could be readily purchased on the open market.
Admittedly, designing your own subscription billing platform will typically offer greater control, enabling you to match software capabilities with business processes precisely. However, the associated support time and underlying costs can quickly make that customization an expensive benefit.
In particular, as your business grows — adding customers, expanding subscription options, or introducing new services — the necessary code for your platform will scale exponentially, demanding a larger development investment. In addition, new code takes time to create, meaning any changes you want to implement will need to be planned far enough in advance to offer sufficient development time. And that delay between planning and implementation may mean you’ll miss out on the industry condition or market trend you were hoping to capitalize on.
Not to pile on, but another factor you’ll need to consider is the need for features outside of the specialty or capabilities of your design staff. As already outlined, process automation can deliver significant cost and time benefits and consistency in your billing processes. Still, these capabilities routinely demand specialized knowledge to function correctly. Similarly, your home-grown system (and staff) may only be able to easily integrate with some third-party ERP systems on the market, artificially limiting your choice of back-office software.
Invoiced: Subscription billing software with metrics you can count on
As you add subscription plans to your portfolio, accurately and efficiently tracking the related financials should be a top priority. Not all platforms are created equal. So, when narrowing down your choice for subscription billing software, you should focus on only those solutions that deliver the features and capabilities that will keep your customers happy and make your recurring services successful.
Our Subscription Billing Software can deliver the speed, consistency, and quality you want without fees that bog down your revenue. Our subscription metrics, including MRR, churn, and lifetime account value, make your subscription billing efforts easier to monitor, modify, and control.
To learn more about how Invoiced can help you build your subscription billing business, schedule a demo today.