Billing in the Subscription Economy

The process of billing customers is essential and must be accurate and efficient. This basic is no different for subscription trading.

However, the rest associated with billing is very different. Therefore, when entering subscription commerce, the functions and features of the billing engine necessary as the backbone of the business must be updated.

There are recurring billing tools on the market that might seem applicable for subscriptions. However, subscription commerce requires superior flexibility to accommodate the complexity of direct and indirect channels, billing across diverse ecosystems, pricing based on a variety of usage scenarios, acquisitions or agreements with other organizations with different processes and other aspects that appear as the market evolves.

The characteristics of a billing prepared for the subscription trade is:

• Billing in three dimensions
• Based on customer usage
• Agile and holistic rather than product-centric
• Ready for ecosystems and channels
• powerful and connected

Billing in three dimensions

One-time transactions have two main variables: price and quantity. Most existing billing capabilities in enterprise (ERP) systems were designed with these two dimensions in mind.

With subscription trading, billing becomes significantly more complex due to the time dimension. The company bills a customer for an amount on a regular basis based on a certain pricing model.

For example: In addition to selling an industrial item on an assembly line, the company sells subscriptions to the data generated by the component, as well as predictive maintenance. These add the third dimension to billing, time, because the customer is charged at set intervals (for data subscription) and for services (maintenance) to be performed periodically that cannot be predicted.

In subscription commerce billing, the price of a product or service may be fixed or variable depending on whether part or all of the price is based on the customer's actual consumption. Timing also plays an important role for certain contractual or sales terms, such as initial discounts that are effective during the first few months of the subscription.

The impacts of the time dimension would be the following

Based on customer usage

The trend in subscription commerce is to move to consumption-based pricing, where customers only pay for what they actually use.

Companies with a broad solution may charge a combination of a flat, recurring fee for the core product and usage-based billing for transactions, features, etc.

Many different metrics can be used to define usage, from the number of concurrent users to daily transaction volume, the number of times a service is used, and the number of minutes a product or service is used.

The business should have usage-based pricing from the start so that its products and services have a way to track and report usage to its billing system. The billing engine must be able to understand and use consumption data to calculate the accurate and appropriate price for each period and customer, including fixed or recurring fees (often billed in advance) and usage fees (billed after know the use by the client).

Agile and holistic rather than product-centric

Traditionally, commerce has been product-centric, with a catalog of physical goods being sold and shipped to customers. Therefore, back-office processes and systems, such as ERPs, were built around the concept of products, catalogs, inventory, and one-time transactions to sell those products to customers. To summarize, ERP systems and other billing tools are designed to automate invoices and collect payments for products.

Subscription trading is dynamic. It goes beyond one-time transactions and can easily support customer relationships that change over time. Subscribers can purchase additional products and services, decrease or increase the number of users accessing your service, increase usage, or want to add new modules, just to name a few changes. Your subscription billing engine should be able to easily and automatically handle relationship changes as they happen.

For example, a technology service provider growing its subscription business in the cloud kept its old processes. The systems, ERP and processes, were not prepared for subscriptions. Each transaction was billed separately, and solution packages, supposedly bundled together for convenience, had to be billed separately. This led to customer frustration and significantly higher costs, both for the company and its customers.

The bottom line is that customers want a seamless experience across the entire lifecycle, from service awareness, quoting, purchasing, billing, payment, provisioning, and access, across any sales channel. Automation is the only way to achieve this kind of experience.

Systems and processes for subscriptions must be automated. If any part of moving from a product-centric business to a subscription model requires manual processes, growth will not be sustainable.

Ready for ecosystems and channels

Not all products or services that are sold must belong to the company. It is more effective to take a platform-to-market approach, in which your core product is complemented by complementary capabilities delivered through products and services from third-party providers. This allows you to reach customers faster with new features that solve their problems, which not only increases your revenue but also increases loyalty.

Similarly, revenue can be increased through cross-channel sales, with resellers helping customers buy and use your products and services.

The billing engine must offer all the necessary capabilities to support both scenarios: third-party products and services, as well as sales agents.

For example, the billing engine must understand when to apply any markups or rebates to third-party products or sales made through resellers to its customer base.

Another aspect of ecosystem and channel readiness that is often overlooked is that invoicing, the ability to produce invoices, must be branded with the registered merchant's logo.

For example, if a reseller sells a product and is the merchant of record, the billing system must be able to customize the invoice for the reseller. Similarly, if the company that makes the product is the merchant of record, the solution needs the flexibility to customize the invoice as the merchant's company, even if the product is sold by a partner.

Finally, to truly be ecosystem and channel ready, subscription billing data needs to be shared across organizations. Many teams, from finance to sales to marketing and more, will need access to underwriting information, so you need a way to extract and share relevant data with the other systems that teams use to manage their part of the business and deliver appropriate results. Customer Service.

It must be easy to access the data, customize it, automate reports or offer development components (APIs) to share it with other systems.

powerful and connected

In addition to easily handling all of these complexities around subscription commerce, the billing engine must also include advanced billing capabilities that support modern commerce and its evolution, including, for example: taxes, vendor and reseller reconciliation, different types such as credit cards, other forms of payment and invoices, among others.

Summary

The best path to success in subscription trading: construction and constant revision of the platform.

You have to understand why traditional billing systems can't support subscription commerce, and at the same time know that stand-alone subscription billing tools aren't enough.

You need a robust subscription commerce platform that supports and integrates everything you need to deliver a seamless experience to your customers: onboarding, marketplace commerce, identity and access management, billing, relationship management, expense management, data and analysis, and more functions that a constantly evolving market demands of us.