As a customer base grows, subscription billing processes can make or break the average finance team—previously manageable workloads can quickly spiral out of control. Given the subscription economy’s growth, many accountants struggle to handle floods of new accounts, recognize revenue appropriately and produce accurate, timely invoicing. Teams often launch SaaS pricing models without first putting the financial tools and processes critical for efficient billing in place. In short, few undergo the financial transformation that subscription billing requires.
With so many moving parts to consider, accounts teams soon become swamped by the administrative burden of accelerated growth. Many of the tactics used in popular pricing strategies can lead to an unprecedented influx of new subscribers. For instance, limited free trials can cause administrative hiccups when teams need to upgrade to billing once the special offer is over. If only ten users subscribe, this is relatively easy, but if the campaign is successful, this might mean hundreds or even thousands of new accounts require updating. Companies will struggle to retain even the happiest subscribers if the transition to billing is not efficient and reliable.
Billing is at the heart of any good subscription pricing strategy, and several core processes are critical for success. The average customer expects a lot of autonomy when managing payments. Below is a list of some of the common expectations.
What customers expect from your billing processes:
- Straightforward, transparent billing that clearly states the amount owed and the date payment is due
- Ability to automate the billing cycle so they can set and forget payment schedule
- Easy to make adjustments such as updating credit card payments or cancelling a payment
- Access to their transaction history and invoices when they need them
- A hassle-free interface that allows them to manage billing without assistance
- Accurate, consistent billing without the addition of surprises or hidden fees
- Clear communication before any changes take place to the billing
- A secure environment where they can store payment details safely
- Customer helplines to assist them if things do go wrong
Though the anatomy of the ideal subscription billing process can vary from company to company, there are universal best practices and considerations. This blog breaks down the core elements that successful processes have in common.
8 best practices your subscription billing process will fail without
1. Automate, automate, automate! You can’t scale with manual billing
This statement may bring out the contrarian in some, others may feel personally attacked, and thoughts may run through the mind such as we’ve always managed it that way before, and of course, we can scale! These are all understandable attitudes toward the constant call for automation. But the truth is that manual billing is not tenable for building a healthy subscriber base.
There are often more time-draining activities in processes than teams think, and they add up. Finance teams need to assess manual tasks, which, if eliminated, could save them time every month. Many billing tasks can be automated, and creating a custom ERP checklist that includes those manual tasks, which are the most time-consuming, will be a decisive step forward for overwhelmed teams.
Ask lots of questions of your team. Do you input data manually? Do even minor updates lead to someone having to adjust each account manually? Is revenue recognized automatically? Are there lots of errors in your system, and why? By closely examining the problems that commonly arise, you can easily trace where the bottlenecks or issues originate. These pain points are the perfect place to begin the automation process.
2. Empower subscribers to sign up without the sales or accounting team
One of the significant process changes with subscription billing management is that the sales and accounts team should only sometimes need to set up new customers. Most people are now used to subscribing and managing billing in contactless environments, where they feel in control of their usage and the platform. Although with more complicated products where it’s impossible to display custom pricing, there may be other options.
Still, with more straightforward offerings, it’s wise to empower subscribers to sign up without worrying about talking to someone on your team. A registration page that links to common FAQs, displays pricing and information in conversion-friendly copy, and walks the customer through each step, is the ideal way to sign up more subscribers without adding to the team’s workload. Enabling sign-ups frees the accounts team to focus on critical billing strategy rather than troubleshooting.
Sign-up billing process should include:
- Enough information to empower the customers to make a decision (including common FAQs)
- Clear billing options to allow them to select a billing frequency, payment type, etc.
- Payment gateway where they can safely enter payment details in a secure environment
- Automated confirmation emails with receipts and billing information upon sign up
- A straightforward user journey that makes signing up intuitive
- On the back end, all this data should automatically communicate with your ERP
3. Enable customers to self-manage billing with a payment gateway
Usually, with subscription billing, customers can sign up at any time and choose various payment frequencies and tiers. The more complex the pricing options, the harder it can be to manage. If your team is responsible for scheduling and tracking invoices and payments over the phone or email, they will quickly become overwhelmed when your services get popular.
Payment gateways are the perfect solution to this challenge. The majority of your customers will be able to log in and manage their payments. Not only this, but the best recurring billing software will integrate with a payment gateway, often expanding the number of payment options you can accept. These gateways are significant as the customer base grows, allowing you to handle more complex customer issues and let customers take care of standard billing procedures such as updating credit card details and activating payments in a secure environment.
4. Software that enables compliance with global accounting standards
Subscription billing presents the challenge of proving compliance with accounting standards such as ASC 606 and IFRS 15. Those still implementing manual processes will need help to produce error-fee audit trails and may spend a significant amount of their labour simply combing through data to fix mistakes—time better spent on strategic initiatives.
Accuracy is vital to proving compliance. With the right solution, automation is possible, and companies can keep up. Just think, competitors may already be investing in better billing processes saving themselves valuable time and money. This global movement leaves only one question for today’s finance leaders: why not free up critical budget and personnel with automation, so you can reallocate resources and drive strategy?
5. Reduce workloads with automated collections, revenue recognition and dunning
It’s worth calculating the time your accounts team sinks into collections, revenue recognition and dunning for subscription billing. Once you’ve got this information, it will be easy to establish an ROI on recurring billing software.
The three key subscription billing processes to automate
- Collections | Store payment details online in a secure payment portal, which is charged automatically on the appropriate date, and collections are collected immediately.
- Dunning management | Automatic retries to ensure customers’ payment details are current. This type of dunning management reduces revenue leakage and boosts revenue recovery.
- Revenue recognition and deferral schedules | Software should automatically recognize and defer revenue based on subscription cycles. This task can be cumbersome for teams to implement manually and can be high risk, resulting in non-compliance when executed poorly.
6. Educate your team and harness the expertise of subscription billing experts
There can be a steep learning curve for teams transitioning to subscription billing. If your accounts team has spent most of their careers managing manual, traditional billing, they may need to gain the expertise to handle complications presented by newer pricing strategies.
These teams may be the most reluctant to change the way they do business simply because they need the training to feel comfortable with the new processes. That’s why financial transformations and SaaS migrations require training, education and communication. Your team will need dedicated time to upskill to meet the demands of handling the growth in recurring billing accounts and experts to call on to ask those tricky accounting questions.
The nuances presented by advanced subscriber management mean that processes should be put in place so that even your most senior accountants can ask questions and discover practical ways to streamline billing. Invest in hiring a specialized expert on contract, or if you intend to invest in software, look for teams that offer a high degree of customer care, support and training.
7. Protect billing information in a secure, centralized environment
How are you storing billing information? What systems are in place to protect your customers from data breaches or attacks? Security is so important in the billing world that it needs consideration at every step. Even if this isn’t top of mind for you, it will be for your subscribers, who will likely look for safe, encrypted environments. Manual invoicing can be a red flag to those used to more robust billing solutions where their information is stored safely and securely by familiar payment partners through a gateway. Check out this blog on the security features to look for in your payment gateway.
8. Roll out billing updates with bulk updates and clear communication
One of the failures of most overwhelmed accounting teams is the need for more reliable customer communication. Customers want to know when changes are being made to their billing, when a payment has failed, or if a free-trial or special offer is about to end. Erring on the side of over-communicating is preferable when it comes to matters of payment.
Often teams are so consumed with rolling out updates across relevant accounts that the communication piece becomes haphazard and inconsistent. With robust software, it’s possible to automate notifications (for instance, a new billing cycle, a failed payment, etc.) and roll out bulk updates—giving teams plenty of time to consider the strategy for best-communicating changes.
Critical pieces of communication around billing
- Failed payments
- Accurate invoicing
- Upcoming billing notifications
- Changes to billing or payments
- Upcoming credit card expirations