To accept credit card payments online, most startups look for billing solutions that can handle recurring billing. However, billing is not the only function that needs to addressed. Other crucial functions such as accurate financial reporting and deferred revenue are part and parcel of the company’s financial management.
Going for the first subscription billing system that you come across without doing adequate research may be adding an unwarranted expense to your startup instead of making enabling you to manage financial matters more efficiently. Below are some reasons why a particular subscription billing system may not work for your business:
1. Reporting and Metrics
Regardless of the type of business you are running, you will want to track different subscriber metrics. For example, you should know the number of new signups, cancelations, upgrades, downgrades, failed subscribe attempts, missed payments and so on.
The billing system you choose should have the reporting capability that is important for your business. Most out of the box billing systems do not provide these reports.
2. Rigid Billing Systems
Handling the ever-changing direction of your business models, customers and company can be difficult with a particular billing system. An inflexible solution may limit the implementation of various ideas that can help you take advantage of new market opportunities.
Dunning management is an important aspect that your recurring billing system should feature. In case of declined payments, will the system alert the user or cancel the subscription? Moreover, will it continue billing the user or will it stop until their payment information is updated?
An inflexible system can lead to a poor customer billing experience and hinder your ability to collect optimum revenues.
3. End-to-End Process Requirements
When selecting a recurring billing system, most small companies mainly consider the billing capability. However, your business has other financial management needs that revolve around billing. For example, you may need credit card reporting, sales analysis and financial reporting, collections and cash receipts. The billing solution you choose should be able to handle these standard accounting processes.
Moreover, the system should provide an easy way for users to upgrade, downgrade, or cancel their subscriptions. You do not want customers to feel “locked up” in a particular package. Also, enabling customers to manage their service consumption and billing will save you time and reduce billing support queries.
4. Line-of-Business Application (LOB)
If you already have an in-house application that is unique to your business model, adding a new subscription billing system may not work the way you expected. Integration with legacy systems is usually a problem with most subscription systems. Therefore, find a system that will integrate with most of the important applications that you use for your business.
Apart from this, look for a solution whose company offers a robust API that can be used for various in-house custom functions. On the minimum, the billing solution you go for should have a developer platform for you to create or integrate your own apps.
5. Proper Revenue Recognition
One of the important records you need when managing subscription payments is tracking recognized revenue and deferred payments over time. Most custom legacy systems and off-the-shelf billing systems will not update your general ledger for accurate, up to date report or perform other complex calculations. Doing these functions manually can result in high internal costs and time wastage From a VAT compliance standpoint, these calculations are vital for the business to have strong audit trails.
6. Customer Service Tools
The billing system should enable you to look up and modify customer accounts as necessary. Sometimes, subscribers will contact you via email or phone, requesting for changes to be made on their subscriptions on their behalf. Other customers will expect refunds or credits if something goes amiss. Your support team should be able to handle these requests immediately to keep customers happy and prevent charge backs. Having a billing system that does not support account modifications is not using resources efficiently.
Get the Right Billing System
To ease the transition from your current billing system to a different one, determine your business’ needs to know the solution that will make the transition easier. With so many billing solutions available in the market, it pays to research your favorites to know their capabilities and limitations. Remember, no two businesses are the same. You may be looking for a particular feature while another business may be looking at price. The solution you go for should address your most important requirements.