What is subscription billing?
When customers sign up for a service or product, they are paid a set amount regularly. This is called subscription billing. Billing for subscriptions is an integral part of managing subscriptions well. This billing method is mainly used for services or goods you subscribe to, like software-as-a-service (SaaS) or video streaming services.
Customers are usually charged with subscription billing at the start of each billing cycle. The charge will happen regularly until the customer cancels the membership. Customers may find this payment type helpful because it helps them plan for regular costs. It can be suitable for businesses because it keeps customers longer and keeps them from leaving.
Synonyms
- Recurring billing
- Subscription billing model
- Subscription payment processing
Models for Subscription Billing
Companies charge their customers for subscriptions in several different ways. Per-use, subscription, and usage-based billing are the most popular ways to charge for subscriptions.
Customers are paid for a service only when using it, called “per-use subscription billing.” One customer might be charged ten cents for every text they send. Email and other contact services often use this way of billing for subscriptions.
Customers are charged a set monthly amount based on how many people use their account. This is called “per-user subscription billing.” Businesses with many employees may find this type of payment valuable because it lets them track how much each employee uses and plan their budgets accordingly.
With standard subscription payments, customers pay the same amount every month or year, no matter how much they use the service. Internet service providers and SaaS companies often use this payment type for subscriptions.
Users with usage-based subscription fees are charged based on how much they use the service. One user might be charged $10 for every gigabyte of data they use. Cell phone companies and cloud storage services that use pay-as-you-go or consumption-based prices often use this type of subscription billing. Customers pay different prices based on how much they use a service. This is called usage-based pricing or tiered contract billing.
Lifecycle of Subscription Billing
The subscription payment lifecycle is the process of getting paid for a subscription. One way this works is that the customer signs up for a subscription and keeps using it while being charged for it until they stop it.
Subscription billing goes through several steps, which are:
- Activation: This is the first time a customer signs up for a service. As part of the registration process, the customer may need to prove who they are and set up an account.
- Use: The customer can use the service once it has been enabled. Payments and using the service are usually done at this stage.
- Termination: At some point, the customer may decide they no longer want to use the service. They can end their subscription if they want to, or it may be canceled for them if they don’t renew.
Why subscription billing is a good idea
Subscription billing is better than other ways of setting prices in several ways:
Businesses can better guess how much money they will make with subscription billing because customers are regularly billed. Businesses can better plan for future costs and make long-term investments when they know how much money they will make.
- More money coming in: Another good thing about monthly billing is that it can help businesses grow. People who sign up for a subscription are more likely to keep paying for it than people who have to buy each thing or service separately.
- More loyal customers: Customers are likelier to stick with a business if they know they will be charged the same monthly amount. This helps to keep customers longer and makes them worth more over time.
- The renewal process is easier. It is easy for both the customer and the business when subscriptions are renewed automatically. This makes it less likely that subscribers will quit and money will be lost.
- More chances to sell extra products or services: Since subscribers are likelier to stick with a service, companies have more chances to sell them extra goods or services. This could help a business make more money overall.
Tips for Quick and Easy Subscription Billing
When businesses start using subscription billing, these are some of the best things they should do:
Tell customers how much it costs.
Businesses that use subscription billing need to ensure customers know all the fees that come with their contracts.
Putting all fees and taxes that apply on the pricing page of the business and being transparent about when they will be paid are examples.
Paid again
How refills are handled is another essential thing to think about. Customers should always be able to cancel their subscription before it renews, and they should never have to agree to have it renewed immediately.
Also, you should give customers a grace period after their subscription ends, during which they can still use the service without being charged.
Most of the money most businesses make comes from people they know. For B2B companies, the pre-renewal time is a chance for the sales team to get in touch with customers, especially those who are about to leave or could benefit from new features or different price stages.
Also, renewal is a great time to make money by cross-selling, upselling, and bundling goods.
Automating Things
The software for subscription billing should be able to automate tasks based on each user’s account, such as billing and recognizing income. Putting manual processes into automated systems can help companies make billing more accurate and faster.
Simple management of subscriptions
If a customer no longer needs your service, you should make it easy for them to change their payment information or stop their subscription.
Customers can quickly and efficiently take care of these jobs when they can manage their subscriptions online. By following these best practices, you can ensure your users have a smooth and easy time.
Why subscription billing software is helpful
The Subscription & Billing Management Global Market Report 2022 says that the subscription and billing management market will reach $10.10 billion in 2026.
The market for subscription and billing handling is expected to grow because more people are using electronic media and devices.
Customers who use electronic media and devices like cell phones and laptops can easily access goods or services online. This means that customer billing and subscription management need to be improved.
By automating the billing process and making it easier to keep track of payments and membership, subscription billing software helps improve subscription management.
Also, automated payment helps ensure that bills are paid on time, leading to better relationships with customers.
Another benefit of subscription billing software is that it can often give you information about how your customers use your membership services, which can help you improve them.
Billing and payment processing by computer
Subscription billing software can handle all billing aspects automatically, such as charging customers’ credit cards and sending bills.
Because of this, the process works better, takes less time, and helps customers pay their bills on time.
Better service to customers
Customers may find it hard to keep track of recurring payments, especially if they have more than one contract.
Clients can get help from subscription billing software, which provides an easy-to-use online area to see their current subscriptions and payment history.
This can help people stay on top of things and avoid paying late.
More money is coming in.
By automating the payment process, subscription billing software can help businesses get paid faster and make more money.
This software can also help companies find and monitor subscription trends. This way, they can change their prices and services to stay ahead of the competition.
Better following up and reporting.
Software for subscription billing gives companies detailed reports on all parts of their subscription business, from individual customer payments to total sales trends.
This data can help rev ops teams report on income, which helps them make intelligent choices about how to grow the business and improve sales and marketing.
Gives information on subscription billing
Software for subscription billing keeps track of how many current subscriptions there are, how much money is made, and how much is lost.
This kind of income information can help companies decide how to bill for subscriptions and how to make it better.
Adding third-party features
Subscription-based companies often use third-party integrations to give their customers the best billing experience.
Companies can connect to different software platforms through these integrations. These platforms can help companies handle quotes, subscriptions, billing, charges, and other tasks.
Apps that bill for subscriptions can connect to many different third-party services. Integrations with CRM platforms like SugarCRM and Salesforce, CPQ software like DealHub, eCommerce platforms like Shopify and Magento, and payment processors like Stripe and PayPal are some of the most common.
Subscription billing solutions can give users a smoother experience by connecting to these platforms.
This helps speed up the billing process and makes it easier for customers to control their subscriptions. This way, they can save time and money while giving customers a better experience.
How CPQ can help automate billing for subscriptions
It is easier to make and manage quotes and orders with CPQ software, which helps automate subscription payments. When sales teams set up new accounts or renew old ones, this can save them time and trouble.
When CPQ is used, sales reps can quickly and accurately make quotes for customers, and when those quotes are accepted, they are automatically turned into orders.
This streamlined method can help cut down on mistakes and ensure customers are billed correctly and on time.
CPQ software can also help companies determine the best way to set prices. Businesses can quickly try different pricing scenarios to find the best price point that makes the most money while still attracting customers by automating the subscription payment process.
In general, CPQ software can help businesses automate and streamline the process of paying for subscriptions, which makes it easier to use and faster. This can help bring in more money and make customers happier.
