Five Steps to Selecting the Right Subscription Billing Platform
The benefits of subscription-based billing are becoming apparent that almost anyone can start making a rock-solid business case.
Recurring revenue, fewer late payments, a better customer experience — there are plenty of reasons to make the move. The problem is the business case is it’s step one of a long journey.
This includes the time it takes to research options and select the right subscription billing platform. You can choose a system that is reliable, customizable, and scalable and still run into headaches.
It is important to consider the broader impact that a subscription model will have on your company and to manage the transition accordingly.
For example, in most organizations, many of the most essential business processes were established to support individual or one-time kinds of transactions. Entering the subscription economy could involve significant changes in technology but other resources needed to manage, including your team members.
Consider the level of manual work that might be involved in managing data and serving customers before and after a sale. Automation brings incredible advantages, but only if it’s clear to everyone what the new workflows will look like, and where you’ll need to integrate your billing system with other sources of truth across your business.
None of this should put you off from adopting a subscription-based billing system, of course.
The keys to successful implementation can be counted on one hand:
1. Clearly define your business model
Every successful IT project is a “before” and “after” story.
In this case, you should begin by developing a comprehensive vision of what “after” will look like. This includes account types (e.g. commercial, residential, wholesale) and classes (e.g. currency, internal systems, tiers), and all the services subject to recurring billing.
A critical part of subscription-based billing is the flexibility that it offers you and your customers in how services are managed and experienced. Beyond documenting the service’s name, value, and SKU code, think about the unique characteristics of each subscription.
For some services, for example, an annual bill might be more compelling than a monthly bill. Customers may expect you to allow proration so they can upgrade, downgrade or make other changes to their subscription at any time.
Depending on what you’re offering or what your customer base will support, billing in advance will make more sense than billing backward.
Subscription-based billing affects sales and your marketing strategy, where you might offer discounts or referral codes that need to be integrated into the experience.
How often will customers take advantage of their subscriptions? You’ll want to charge different rates based on usage in certain cases, so it is important to understand the degree of variability in this area.
Regardless of how much you’re charging, there will be other differences in whether you’re billing at an account level or service level for a subscription, along with discounts and price tiers.
Unless you’re a local business, you’ll need to be prepared to support payments in multiple currencies and all the tax compliance, exemption handling, and fees or levies that come with them.
Internally, a successful subscription billing system deployment will align with key accounts receivable (AR) handling processes. Review how you currently work with invoices, payments, adjustments such as credit or debit, interest, write-offs, and credit back.
Finally, come back to the moment of truth for most subscription-based businesses: which is the payment.
Take into account what your model requires in terms of credit card authorization, PAD/ACH setup, and check processing. Don’t forget to factor in late payment fees.
2. Identify if your existing accounting/enterprise is capable of delivering and supporting an in-house billing process
Offering subscriptions can be a huge catalyst for growth — but with growth can come unexpected trade-offs.
Conduct a “Day in the life” exercise in consultation with your accounting team. What level of invoices do they typically handle versus the larger volume that a subscription model might generate within 24 hours? How will an automated payment collection system help them or allow them to focus on other activities?
Beyond your team, examine what order creation and support systems are currently in place and how you’ll ensure real-time integration with the subscription billing system you’ve selected.
Given that many of these processes are tied to those with institutional knowledge, this is an excellent time to draw upon the internal expertise of your best people. Try to identify an in-house specialist who understands billing and who will help ensure you piece all the elements together as the project moves along.
3. Look on the market for turn-key billing software or solution that will address your needs (SaaS or an enterprise system)
As mentioned earlier, this may be where some organizations start. But if you’ve gone through the previous steps, you’re in a much better position to make a suitable investment. Even here, though, there’s other homework to complete first.
All companies have some kind of existing legacy technology. Review your existing solutions’ functionality and the features that will be affected by the move to subscriptions.
Next, determine who will be the internal champion for this project outside of IT. This helps in having a single point of contact for feedback and encourages collaboration and buy-in across different stakeholders and lines of business.
If you haven’t already done so, estimate your implementation costs along with your target go-live date for the new billing system. Expect the unexpected, though, whether it is changes to deadlines or hidden costs that spring up along the way. You may need to decide whether to hire consultants to assist with your deployment.
4. Decide if you are in a position to hire your own software development team to write custom billing software for your unique requirements
Build-vs.-buy is always a debate within companies, and subscription billing software is no exception.
The best way to figure out if a bespoke application is appropriate for your organization is to map out the full set of resources that are typically required and how that will affect your ability to reach the desired outcomes.
It can take between one to three years to produce an initial release of custom subscription billing software. It will be a team effort that involves a project manager and developers and a data analyst, a user experience (UX) and user interface (UI) analyst, and DevOps engineers and testers to ensure quality.
The cost to create a system also needs to be balanced with what it will take to run the team that supports it annually.
Longer-term, think about what it will take to retain any of these specialists because when they leave, you may not have the complete documentation of the billing system you need.
5. Engage with a reputable billing solution partner
All this seems overwhelming, but it doesn’t have to be, especially when you recognize that you don’t have to go through this journey alone.
The right partner can answer many of the key questions and address many of the considerations outlined in this post. As long as they have a proven track record and a deep level of experience, they can provide guidance based on best practices they’ve learned from supporting other customers in similar industries or contexts.
A reputable billion-dollar solution partner can offer an enterprise-class system and provide the kind of customer support that maximizes the benefits of using it. Your move into the subscription economy will be as seamless as it is successful.