Category: Subscription Billing

Growing your business is an exciting and nerve-wracking endeavor. Maybe you’re planning to pour resources into building your customer base, or you’d like to introduce fresh and exciting products and services. Or perhaps you’re considering expanding into new markets and regions. Regardless of your method, scaling up can cause some growing pains. Even the most successful businesses can become derailed during the process.

Here, you’ll discover some of the top challenges and pitfalls businesses encounter along the way. All of them can be overcome, or avoided altogether, with proper planning and groundwork.

If you think your business is ready for growth, consider these potential challenges before taking the leap. A little proactivity can save your business a lot of headache on the scaling journey.

1. Scaling at the wrong time

Success can come in waves. Sometimes, when your business is riding a big one, it can seem like a great time to scale up. However, many businesses fail to realize when the prosperity they’re experiencing is temporary. As a result, they mistakenly invest in more capital, take on higher fixed expenses, and push for growth in ways that may turn out to be unsustainable.

Consider RewardMe, one of the first businesses to bring gamification to the offline retail/restaurant market using a digital loyalty program.

The company had great product metrics compared to its competitors, and garnered a lot of interest from the media and potential investors. However, it became too focused on scaling up quickly with big chain restaurants instead of growing incrementally and establishing success with smaller mom-and-pop operations.

The business landed a $1.5 million deal with a large chain. However, it didn’t have adequate cash flow to retain the talent it needed to complete the contract’s 6-month implementation phase. With no resources to continue forward, RewardMe was forced to shut down its operations.

While it’s important not to let fear keep you from thinking big and taking calculated risks, make sure the risks are in fact calculated. Don’t get trapped in “failure won’t happen to our business” wishful thinking. Look long and hard at the market data, as well as inward at your own historical data.

Part of succeeding in business is being able to predict demand and sales. Be watchful for indications that sales or margins might take a hit. This starts with comprehensive tracking and reporting capabilities.

Supporting your business with a dynamic recurring billing platform will give you deep reporting functionality. These platforms gather data from across all of your business segments, housing it to form your financial system of record—and a dependable single source of truth for your business. You need to review the data regularly, forecast your future cash flow, and adjust your fixed and variable expenses as necessary. This will enable your business to stay profitable, and continue to scale up, regardless of what the market is doing.

It’s also prudent to be flexible with your business’s expenses; namely, those that are non-strategic. Having the ability to cut costs where and when necessary helps a business ride out leaner times.

2. Imbalanced cash flow

Cash makes your business run. It enables you to buy the materials you need, pay your staff, and cover your rent and operating costs. While it’s always important to know how much cash will be coming in and going out of your business, it’s especially imperative if you’re planning on scaling up.

Zirtual is a subscription service that offers virtual assistance for individuals, entrepreneurs, and businesses. In 2015, this growing business failed to forecast its cashflow properly—an error that ultimately caused it to implode.

Zirtual was functioning using an outside consulting firm for CFO functions. According to founder Maren Kate Donovan, the consulting firm improperly projected Zirtual’s burn rate, entirely missing two payroll cycles. As a result, Zirtual was unable to cover its salary obligations. It was forced to cease operations, let go of hundreds of employees overnight, and was subsequently acquired by Startup.co.

Using your historical data, carefully perform a rolling cash-flow projection. Forecast for the next three to four months (if not more), taking into consideration your prospective scaling-related investments. This will give you a good indication of whether or not it’s a good time financially to take an upward leap.

Comprehensive recurring billing software can forecast all of your projected invoices for the next year. You’ll be able to see, down to the day, how much you can expect to invoice, and how much you can expect to collect from those invoices. This is invaluable revenue predictability.

As the old adage goes, you have to spend money to make money. Of course, sometimes it takes a while before businesses see a return on their investments into growth. A cash flow imbalance that goes on for too long can kill your business before it ever has the chance to see returns.

3. Inefficient processes and time management

Before you make the decision to scale your business, it’s important to review your operations. The processes that work well with your current quantity of employees and customers won’t necessarily work if you end up doubling or quadrupling those numbers. You may need to simplify certain processes and build out others to satisfy the scale of your business.

Understandably, many business owners want to be heavily involved during the early stages of growth. But as a business scales, there comes a time when delegation is imperative. Outsourcing can be a great way to bridge gaps without the added fixed expense of more in-house resources.

In terms of managing customer growth, using a service provider can grant your business the support it needs to scale with success. For example, using a customer service and engagement platform can reduce the amount of time your staff spends handling and resolving customer issues. 

Billing is another potential gap that a service provider can fill. If you’ve been managing your billing with a labor-intensive legacy system, moving to a responsive recurring billing solution can automate many of your business’s processes. This eliminates the need for additional workforce and reduces the risk of revenue leakage and reporting mishaps.

For example, On The Map Marketing builds high-functioning business websites using state-of-the-art SEO techniques. However, it was struggling with a not-so state-of-the-art legacy billing system. This resulted in a great deal of manual work for its employees.

Since implementing an intelligent and cohesive billing platform, On The Map has been able to reduce its time spent on billing by up to 15 hours a month. It has also noticed an increase in its revenue recovery, with an average of $600,000 recovered per year.

Furthermore, proper support services enable your current and future staff to use their time and abilities in more effective ways. This can have the added benefits of increasing job satisfaction, improving productivity, and promoting opportunities for creativity and growth within your business.

4. Loss of focus

It can be easy to get distracted by fresh opportunities such as a new sales channel, market, or product line. Even as you scale up, however, it’s important to stay focused on what matters most to your business. Branching out in unique ways can be lucrative, and may be necessary in order to remain competitive. As you explore growth options, remember to allocate your best resources to your best opportunities.

Instream is a B2B SaaS (Software as a Service) business that creates tools and services for the dental community and insurers. When the business’s customer base began to scale, Instream realized it needed to reduce the amount of manual work required to perform its tracking and billing processes. These processes were key for smooth functioning; if the business was going to grow, it first had to focus on improving them.

Instream invested in a subscription billing platform that pulled all of its registration, billing processes, and customer relationship management activities into one integrated system. Not only did this introduce a more user-friendly experience for its customers, it also reduced the amount of necessary manual work, saving the business time and money.

A dynamic subscription management platform will give you the ability to review your individual revenue streams to see exactly what matters most for your business. For example, it can tell you:

• how much money is coming in by product and service
• sales by subscription or pricing tier
• which customer cohorts are bringing in the most revenue

The right information will keep your business focused on its core opportunities, regardless of when and how you choose to scale up.

It’s also important to perform regular strategic planning and create a structured process for working toward your growth goals. For example, if you’re engaging in planning each quarter, be wary of making an emotional decision to jump quickly on new opportunities mid-quarter.

How can you tell if an opportunity is worth pursuing now? You can discuss it with members of your staff, but you also need to get an outside opinion—someone who will challenge your ideas. Whether it’s a single business coach or a board of advisors, seek another perspective on your proposed new allocation of resources.

5. Lack of business alignment

The core parts of your business need to work together toward the same strategic objectives. When businesses are scaling up, they often lose this collaborative unity. Siloed units of the business can even begin to work against one another.

Effective communication is a key part of avoiding this, and management needs to put in the effort to ensure it’s built into the daily culture of the business. Scaling up can unavoidably create more defined departments, but it’s important to ensure these departments don’t become isolated. Quarterly planning sessions are a great time to check in and ensure the entire team is aware of and working toward common goals.

A lack of unity can also become an issue if a business is working with a legacy billing system that separates billing functions from all other aspects. Mistakes happen when different departments make decisions based on disparate data. Your subscription billing software should create a link between all areas of your business to ensure a single set of accurate data is being collected and used to guide the entire business as it grows.

Ultimately, the solutions and strategies used by your entire business need to support and reinforce one another.

6. The need to trim down as you scale up

Scaling isn’t about growing in all areas. It’s also about recognizing the areas of your business which aren’t contributing toward your success, and cutting them out as necessary.

For example, as your business grows, you may find that certain employees no longer align with your vision, or certain departments no longer serve a function.

One of the best-known examples is when Steve Wozniak parted ways with Apple. As a co-founder, Wozniak was happiest when the business was small. He could focus his efforts on individual projects such as Apple II—one of the first successfully mass-produced microcomputer products.

Steve Jobs, on the other hand, was a skilled negotiator, marketer, and editor of ideas who had bigger visions. As Jobs began pushing the first iteration of the Macintosh, Wozniak felt the Apple II wasn’t getting the respect it deserved as the workhorse of the business. The two began clashing over where to focus efforts and how Apple would grow into the future.

Wozniak made his fortune when Apple went public at the end of 1980, and he walked away several years later to pursue other interests.

Don’t be afraid to admit when something isn’t working. Don’t hold on for the sake of sentimentality. Focus on being effective and efficient as you grow.

Your business processes are another area that may require transformation as you scale up. Intelligent billing solutions can automate many time-consuming tasks, from drafting invoices, to sending out email notifications, and more.

This addition to your business can uncover a number of staffing redundancies, which can ultimately save you time and money. Again, it can enable your core staff to focus their efforts in more meaningful ways.

Planning to scale with success

Although business growth can bring about challenges, a well-informed plan can help you anticipate issues, avoid pitfalls, and ensure smooth scaling when the time is right.

Make sure you have sufficient resources to go the distance. Streamline your processes, put the right support in place, and keep your primary focus on what’s driving your business at its core. And of course, surround yourself with a team of individuals who are on board with your vision for future success.

Scaling up can certainly be daunting, but it’s an important part of growth. Commit to your plan, and when you’re ready, take the leap.

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FAQs about Business scaling

Q: What is the main challenge of scaling up a business?

The main challenge of scaling up a business is ensuring sustainable growth. This includes not scaling up during temporary prosperity periods, maintaining balanced cash flow, improving time management and processes, staying focused on core opportunities, maintaining collaborative unity amongst teams, and being open to cutting out non-contributing areas.

Q: How does a business know when it’s the right time to scale up?

Businesses can identify the right time to scale up by thorough analysis of market data and their own historical data. They should track, report, and predict indicators of sales and margins. Accurate forecasting of future cash flow can provide clear indications whether it’s financially viable to scale up.

Q: What issues may arise from scaling at the wrong time?

Scaling up at the wrong time, such as during temporary prosperity periods, could lead to unsustainable growth, leading to higher fixed expenses that might not be supportable in the long run. One example was the company RewardMe, which had to shut down due to inadequate cash flow caused by scaling at the wrong time.

Q: How could a business prepare itself internally before scaling up?

Before scaling, businesses should reassess their operations and might need to simplify or build out certain processes to manage possible increases in employees or customers. Delegation and possibly outsourcing could become necessary. It’s also crucial to maintain focus on core business opportunities and engage in regular strategic planning.

Q: How important is cash flow during a business’s scale-up process?

Cash flow is crucial during the scale-up process as it enables the company to cover expenses like staff salaries, rent and operating costs. A cash flow imbalance continuing for too long could potentially harm the business before returns from the investment into growth are seen.

Q: Can a business cut down certain areas during the scale-up process?

Yes, scaling up also involves identifying and eliminating areas in your business that aren’t contributing to success. This could include processes, departments, or employees that no longer align with your vision.

Q: How can implementing intelligent billing solutions assist in the scale-up process?

Intelligent billing solutions can automate many time-consuming tasks, reduce the risk of revenue leakage and reporting mishaps, and potentially uncover staffing redundancies. This can save time and money, allowing the core staff to focus their efforts more efficiently. 

Q: How critical is having the right support during business scaling?

Proper support services are crucial during business scaling as they allow the business to operate efficiently and manage growth effectively. For example, customer service and engagement platforms can help manage customer growth, while recurring billing software provides invaluable revenue predictability.

Q: What role does effective communication play during a business’s scale-up phase?

Effective communication is key to maintaining collaborative unity among different departments during the scale-up process. It ensures that all parts of the business are working together towards the same strategic objectives, thereby avoiding any internal discrepancies that could hinder growth.

Q: Is there a time when a business should not continue scaling?

Yes, if business indicators such as sales, margins or cash flow are forecasted to take a hit, it might be an indication to pause scaling efforts. In addition, if processes become too complex as the business grows, it might be necessary to halt growth to reassess and simplify processes.

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For any SaaS (Software as a Service) or subscription-based business, growth is almost always the main goal. The best way to get there though is to have a clear picture of what is driving growth and contraction in your business so you can make strategic and empowered decisions that will help you scale.

This is where Monthly Recurring Revenue (MRR) comes in.

In the subscription world, MRR is the blood that keeps the heart of your business pumping. It’s one of the most important metrics you can measure.

TL;DR

• MRR is a measurement used to track the health and growth of a subscription-based business along with customer behavior. It’s also a way to place a value on your customers or billing entities based on how much they are contributing to your business.
• Calculating MRR can be quite straightforward if your company offers a simple pricing strategy. However, more complex pricing strategies, flexible billing frequency, discounts, free trials, refunds, cancellations, plan upgrades, downgrades, and churn—all have an effect on accurately measuring  MRR.
• Gaining a thorough understanding of MRR will help you strategize and put in place effective plans to not only increase monthly revenue but also drive growth for your SaaS business. 

What Is MRR?

Simply put, MRR is the total monthly revenue coming in from all recurring subscriptions. It combines both annual and monthly subscriptions as a single measurement.

While MRR is not a GAAP (Generally Accepted Accounting Principle) measurement, it is one of the most critical metrics and KPIs (Key Performance Indicators) for SaaS and other recurring billing businesses.

There are four types of MRR you should be looking at:

1. New Business MRR.  This is revenue earned from new customers.
2. Expansion MRR. This is new revenue from existing customers when they upgrade their subscription plans.
3. Contraction MRR.  This refers to revenue lost from existing customers that have downgraded their subscriptions.
4. Churned MRR. This is revenue your business loses when a customer ends the relationship.

With monthly subscription plans, the MRR value assigned to each customer would be the amount of money they are paying you every month. For annual plans, you would divide the price of the plan by 12 months to calculate the MRR for these particular customers.

Let’s say your business only offers one monthly and one annual subscription plan. For customers that have purchased a $75 monthly subscription, they would be assigned an MRR value of $75. If a customer has a $900 annual subscription, they would also have a $75 MRR value. With this MRR value, if your business has a customer base of around 200, then your total MRR would be $15,000.

Why Is MRR Important for SaaS Businesses?

Unlike other reporting metrics such as sales, cash, and revenue that speak to a business’s accounting team, MRR allows non-finance people like CEOs to determine if a business is growing or declining and it helps project future earnings.

The reporting metric is a unique measurement used to track the health and growth of a subscription-based business along with customer behavior. It’s also a way to place a value on your customers or billing entities based on how much they are contributing to your business. It tells you how much these customers may contribute to your business in the long term.Without a reporting metric like MRR, it’s difficult to get a good idea of your business’s true health. Regular monthly revenue doesn’t account for annual subscriptions and customer upgrades or downgrades, which can create a false sense of growing or declining business health.

Here are a few scenarios to illustrate the challenges of tracking monthly revenue without the MRR metric:

Scenario #1

When Susan signed up for a Netflix account in January, she was thrilled to learn that the streaming service offered her a one-month free trial. After that 30-day period, Susan selected the $9 a month plan that allowed her to stream on just one single device.

By June, Susan had married and the couple decided to share one Netflix account. Now that two people would be using the account, Susan upgraded her plan and started paying $13 a month, so both she and her husband could stream on their own individual devices.

Fast-forward a few years later when Susan and her husband had a child. Susan upgraded her plan again so her 5-year-old son could watch children’s content on an iPad.

When users are constantly upgrading or downgrading their plans throughout the customer lifecycle, this gives the impression that your revenue is constantly going up and down even though you haven’t lost or gained any customers. The 4 types of MRR factors in subscription upgrades (Expansion MRR) and downgrades (Contraction MRR), can give you a better idea of the health of your business.

Scenario #2

A SaaS company offers a mixture of annual and monthly plans with various pricing levels and has around 300 recurring customers.

At the beginning of the month, they acquire a new customer, an accounting firm, that signs up for an annual plan priced at $2,400. The SaaS business also has 12 other new customers paying $200 a month for a monthly subscription plan. This means that for that particular month, their revenue from all those customers will be $4,800.

Since the accounting firm signed up for an annual plan and paid upfront, the following month, the SaaS company’s revenue would only come from the monthly subscribers. This means their revenue would drop to just $2,400, and appear as if revenue is decreasing, which is not the case.

MRR takes into account these annual subscriptions. By dividing the price of the annual subscription by 12 months, this business would be able to recognize $200 as MRR.

Scenario #3

Kate has been a customer of the same SaaS company for 5 years and has consistently renewed her $200 monthly subscription from year to year. As a gesture of appreciation to Kate for being a loyal customer, the company offers her a 25% discount on the next three months of her subscription.

That same month, the company offered a prospective customer a $200 discount as an incentive to sign up for an annual plan.

Revenue reporting doesn’t take into consideration these discounts and again, will appear as if revenue is constantly going up and down, potentially giving the impression of customer dissatisfaction.

How to Calculate MRR for Your SaaS Business

The calculation of MRR can be quite straightforward if your company offers a simple pricing strategy. The reason is that when you only offer one type of subscription and pricing option, all customers are contributing around the same amount and have equal value. In such cases:

MRR = total number of customers x average billed amount per customer

However, with more complex pricing strategies or flexible billing frequency—think mobile phone and data plans, cloud storage, etc.—there are many different facets of MRR to track. Promotional offers like discounts and free trials, refunds, and cancellations, plan upgrades, downgrades, and even churn all have an effect on your MRR. 

Consider the following mistakes when calculating MRR if your business offers flexible billing or more complex pricing models.

Common Mistakes in Calculating MRR

Here’s a breakdown of the common mistakes you should avoid when you calculate MRR for your SaaS business.

Including quarterly, semi-annual, or annual contracts at full value in a single month

This is a basic mistake that can skew your reports and strategies. Keep an eye out for multi-month contracts and make sure not to apply the entire contract amount to a single month. 

Instead, find the amount per month while calculating MRR. For example, if your company expects customers to pay for a full year upfront, you should only count one-twelfth of the amount each month, not the entire annual payment.

Including one-time payments

One-time payments like special fees or setup charges are sometimes erroneously incorporated into MRR. Avoid including such payments in MRR calculations as this can distort not only the monthly revenue amount but also your revenue projections.

Incorrectly accounting for non-monthly billing intervals

SaaS businesses often offer various subscription plans where customers are charged annually or quarterly. Ensure that you add only the monthly share when calculating monthly recurring revenue. Failing to adjust for non-monthly billing can lead to an inflated MRR figure and distort your revenue projections.

How to Use MRR Calculations to Grow Your SaaS Business

MRR is a useful metric that can show how well your business is doing—even to those who aren’t experts in finance. As such, MRR calculations are not just about tracking revenue, they can also guide your SaaS business toward sustainable growth.

Product-market fit compass metric

MRR can tell you how well your products or services are resonating with users. It helps to understand if your business offerings are reaching the right audience and gaining traction. 

As such, MRR serves as a key indicator of product-market fit. Once you’ve found the right product-market match, MRR can help you track the growth in your customer base.

Feedback for product teams

Product and R&D teams can track MRR data to assess how product updates and improvements are being received by existing customers. It’s a great way to track customer acquisition, retention, and expansion as a result of changes to your products and services. 

An advantage of tracking MRR is that product teams can use it to identify what customers like and dislike, and can use these insights to reduce churn. This is an excellent way to use MRR to ensure long-term revenue growth.

Insights for sales teams

Your sales team can leverage MRR to focus on higher-quality leads that can support your revenue growth the most. Nurturing prospects that are more likely to stay and expand their subscriptions allows sales teams to increase MRR over time. 

MRR helps you emphasize quality over quantity, and focus on long-term customer value and improving customer retention rates rather than short-term gains.

Key Metrics to Use with MRR

MRR is an essential metric to track but it’s not the only one. To get a complete picture of your business’s growth, it’s essential to track the following key metrics alongside MRR.

• Annual recurring revenue (ARR) – ARR is the yearly equivalent of MRR, calculated by multiplying your monthly recurring revenue by 12. It’s a valuable metric for assessing the long-term stability and growth of your business. It is especially useful when evaluating the value of long-term contracts.
• Net New MRR – Net New MRR tracks the change in MRR month-over-month. It allows you to gauge expansions, contractions, churn, and customer growth. Net New MRR tells you if your business is growing and if your customer retention and upselling efforts are paying off.

MRR Optimization Strategies

Now that you know how to calculate MRR and avoid the common mistakes in calculation, let’s look at ways to optimize it for your SaaS business growth.

Reinforce your value

Customer churn can impact your MRR. One of the best ways to reduce churn is to consistently deliver value to your customers. You need to stay ahead of your competitors and understand what features and services are appreciated by customers the most. 

Tracking MRR data can help your teams understand this, and you can use it to inform product strategies and rollouts. Understand customer needs, provide excellent customer support, and continuously improve your product to ensure long-term loyalty.

Get your pricing strategy right

Setting the right price and creating profitable subscription plans can be challenging. It’s a good idea to experiment a bit before you find the right balance between profitability and affordability. 

Be open to adjust your pricing based on customer feedback and market trends since the price of your products and services directly impacts MRR.

Make it easy for customers to scale their usage and spend

SaaS customers don’t want to spend a lot of time figuring things out. If they are unable to quickly upgrade to the features they want from your product, they’ll jump ship to a company that offers seamless upgrades.

Allowing customers to easily upgrade, add features, or expand their usage can boost MRR. Simplify the process and offer comprehensive customer support, which will increase revenue in the long run.

What MRR Doesn’t Measure

It’s good to track MRR, especially for SaaS businesses and those that rely heavily on subscription-based modes. However, it is also crucial to keep in mind that it doesn’t capture everything about your business’s financial health and can lead to misinterpretations if used incorrectly. For example:

• Accounting revenue – MRR measures the revenue you expect to receive each month. On the other hand, accounting revenue adheres to standardized rules and calculates income over time, not just when payments are received.
• Leads and trials – MRR calculations exclude non-paying customers, such as leads and those enjoying service trials. Once they become paying customers, they will contribute to MRR. However, information about leads and trials is important as efforts to convert them results in growth. 

How to Project Monthly Recurring Revenue

To project your MRR manually, you can analyze your business’s average revenue growth rate and revenue churn. Once you have this data, plug it into the formula that accounts for both the growth and loss of customers over time. 

This gives you a clearer view of how your MRR will evolve. Alternatively, you can use forecasting tools like Baremetrics, that simplify the process. These tools automatically track your MRR, helping you project future revenue, calculate cash flow, and assess customer changes.

Unlocking Growth and Scale with Stax Bill

For subscription businesses, in any given month, new customers will always be signing up and existing customers will upgrade, downgrade, or potentially even take their business elsewhere. As a result, your MRR will be under constant upward and downward pressure, so it’s important to track this metric to recognize the source of these changes.

Gaining a thorough understanding of MRR can help you strategize and put in place effective plans to not only increase monthly revenue but also drive growth for your SaaS business. If you are able to track the various fluctuations, trends, and patterns of MRR, you can pinpoint the sources of change and optimize your strategies. 

A complete recurring billing and subscription management platform like Stax Bill offers detailed MRR reports, including data on new, expansion, contraction, and churned MRR. With the MRR momentum report, you can gain insights into customer behavior, monitor trends, and make data-driven decisions. This visibility helps SaaS businesses adapt, reduce churn, and implement effective changes to boost long-term success.

To learn more, contact the Stax Bill team today.

Have you ever had to jump through hoops just to cancel a subscription? Maybe it’s a gym requiring you to send a cancellation notice in writing (LA Fitness, we’re looking at you), or a streaming service like SiriusXM making you navigate endless phone menus to speak with a representative before canceling your plan.

Consumers have long been frustrated with lengthy and complex cancellation policies, and the Federal Trade Commission (FTC) is finally putting its foot down.

The FTC announced a final “click-to-cancel” rule, which requires sellers “to make it as easy for consumers to cancel their enrollment as it was to sign up.”

So, what does the FTC’s rule mean for merchants (specifically subscription businesses)? This article covers the fundamentals of the FTC click-to-cancel rule and the steps you should take to ensure compliance.

TL;DR

• The FTC click-to-cancel rule requires subscription businesses to make cancellations as simple as signing up.
• Companies must provide a transparent, user-friendly cancellation process, often with one-click options.
• You may need to upgrade your technology to meet the new requirements. Updating customer-facing materials and training your team could also ensure everything runs smoothly.

What Is the FTC Click to Cancel Rule?

The FTC click-to-cancel rule requires businesses offering subscriptions or recurring payments to provide a cancellation process as simple as the signup process—typically a single click or straightforward action.

The FTC rule helps ensure that consumers can easily opt out without unnecessary hurdles or hidden requirements.

What Is the Negative Option Rule?

The Negative Option Rule governs subscription practices where a consumer’s silence or inaction is treated as consent to ongoing charges. It ensures businesses disclose terms clearly and obtain informed consent before billing customers. 

This ties directly to the FTC click-to-cancel rule, which addresses a crucial part of the subscription process—making cancellation as easy as signing up. It helps protect consumers from exploitative practices often associated with negative option plans.

How to Comply with the FTC Click-to-Cancel Rule

Here are the steps subscription businesses must take to comply with the FTC click-to-cancel rule. 

Step 1: Get up to speed with the FTC click-to-cancel rule and how it applies to your business

Familiarize yourself with the FTC’s final rule and its requirements. Go through the Federal Trade Commission’s official resources, including this fact sheet, which discusses the click-to-cancel rule in easy-to-understand terms. 

From there, determine which parts of your cancellation process might need adjustments. It also helps to identify areas where customer complaints have arisen in the past and address them accordingly.

Step 2: Configure your cancellation processes 

Already up to speed with the FTC click-to-cancel rule? Take a closer look at your current cancellation workflows and ensure they are as simple as your signup process. 

This might involve:

• Removing unnecessary steps
• Eliminating excessive customer retention tactics like requiring multiple phone calls or forcing customers to speak to a “retention specialist” before completing the cancellation
• Making cancellation options highly visible on your website or app.

Step 3: Implement click-to-cancel technology

Invest in tools or software that provide seamless cancellation capabilities, such as one-click cancel buttons or self-service portals. These systems should integrate smoothly with your existing subscription management platforms and deliver a frictionless experience for customers opting out.

Stax Bill makes it easy for subscription businesses to comply with the click-to-cancel rule. You can easily configure our platform by enabling a cancellation button so customers can terminate their subscriptions with a single click. You can also customize a confirmation message for a transparent and user-friendly experience.

Step 4: Ensure transparent consumer disclosures

If needed, revise your terms and conditions, signup forms, and marketing materials. These customer-facing materials must communicate your cancellation policies upfront. Ensure all fees, renewal terms, and cancellation steps are prominently displayed to avoid confusion or claims of misleading practices.

Step 5: Train your team

Educate your customer service and technical teams about the new requirements and how to handle cancellation requests. It’s not uncommon for consumers to call your support reps for information on how to cancel, so your team must be well-versed in the click-to-cancel rule and how it works in your business.

What Does It Mean for Subscription Businesses?

If you’re a subscription business, the FTC click-to-cancel rule directly applies to you because it requires you to simplify your cancellation workflows, ensuring they are as straightforward as your signup process.

Here are the ways it could impact your business.

It may require you to modify your cancellation procedures

For subscription businesses, the FTC click-to-cancel rule means providing customers a simple, user-friendly method.

As FTC Commission Chair Lina M. Khan says, “Too often, businesses make people jump through endless hoops just to cancel a subscription. The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

You may need to adopt better subscription technology

Depending on your current systems, you may need to implement or upgrade subscription management tools that support seamless cancellation workflows, automate compliance checks, and improve transparency in customer interactions.

Failure to comply may result in fines and penalties

Non-compliance with the FTC’s rule could lead to significant financial penalties, legal actions, and reputational damage. As such, you must prioritize compliance to avoid costly fines and maintain customer trust.

Stax Bill Makes It Easy to Comply with the FTC Click-to-Cancel Rule

Stax Bill simplifies compliance with the FTC click-to-cancel rule by providing seamless subscription management tools, including a customizable one-click cancellation process. Keep your business compliant and your customers happy with transparent and user-friendly solutions. Learn more about Stax Bill today.

According to World Commerce & Contracting, contracting businesses lose up to 9.2% of annual revenue due to hidden clauses, missed deadlines, and unfulfilled obligations.

Manual invoicing systems are a leading cause of revenue loss for businesses. They’re responsible for increased manual errors, workflow inefficiencies, revenue leaks, and increased overheads.

That’s why you need to implement contractor invoicing software. But not just any software—the right system.

In this article, we’re going to look at vital features and considerations to look at when choosing the right invoicing system for your contractor business.

Key Features to Look for in Contractor Invoicing Software

While automating your invoicing process as a contractor is a priority, choosing a system that suits your needs is more important. Not all contractor billing systems are equal.

Here are some features to prioritize:

Ease of use and customizable invoice templates

An invoicing software that is easy to use streamlines your entire payment process and makes it stress-free. Ensure the software’s interface is easy to use and you can access everything with just a few clicks. 

This is especially a vital feature for general contractors who multi-task and juggle multiple responsibilities.

So, what exactly should you be looking for? Here’s a list of some elements of an easy-to-use system:

• User-friendly and visually appealing interface
• Intuitive and straightforward navigation
• Extensive support options
• Simple installation 
• Efficient operation

At the same time, also look for contract invoicing software with customizable contractor invoice templates. You should be able to tweak these templates to match your brand and include all necessary details for your projects.

Job costing and expense tracking

You’re in business to make money. And since you probably adopt various pricing models, you want to accurately bill your customers without missing out on any potential income.

Project tracking and job costing features ensure accurate invoicing based on incurred costs. This helps you monitor the time and materials spent on each project.

Tracking expenses helps you manage your business costs to maintain profitability. You should be able to track expenses associated with labor, materials, other overheads, and reimbursable expenses.

Some contractor billing systems may allow you to attach receipts directly to these expenses, ensuring proper documentation. By linking expenses to their specific projects, you can accurately evaluate the profitability of each project.

You can then make smart business decisions and adjust your pricing accordingly.

Time tracking and payroll integration

Many general contractors bill their clients based on time spent on the project. Your invoicing software should have time-tracking capabilities for labor cost management.

You should be able to log billable hours worked directly into the system and link the data to invoices.

In addition, seamless integration with payroll systems can help you streamline the payroll process by avoiding double data entry and errors. This helps you pay your employees and subcontractors fast.

Automated billing and recurring invoices

Timely invoicing helps your business maintain cash flow. Automation helps you streamline the billing process, eliminate human errors, and save time.

Invoicing software automates the invoice creation, invoice sending, and payment tracking processes. And since you probably offer recurring services, what would be more special than the ability to automate recurring invoices?

You can adjust the system to do this on pre-determined schedules or milestones. This is a game-changer for contractor services billed weekly, monthly, or any other regular period.

Some clients forget to make online payments on time. However a good contractor invoicing system sends automated payment reminders to ensure your business maintains a healthy cash flow.

Automated recurring invoices also provide your business with a predictable income stream. Knowing that the system will automatically send invoices and that you’ll regularly receive payments helps you plan your finances better.

Project and client management

Contractor projects often involve multiple tasks, timelines, teams, and dependencies. Missing deadlines or bad resource management can lead to delays and losses. Your contractor billing software should have project and client management capabilities.

Project management features help you to:

• Plan every project’s phase in detail
• Assign tasks to your team members and subcontractors
• Real time tracking of task progress

For example, a typical home renovation project involves electrical work, framing, remodeling, plumbing, and repainting, all to be completed at different times. With project management features, you can plan each of these tasks in order and track them to ensure they’re completed in sequence with minimal delays.

On top of that, you should have a solid client database to help you organize and maintain your client data. You can manage client data like contacts and project history in a centralized and easy-to-find spot.

The client management features should help you track your clients’ payment status and their billing stages.

Mobile access and cloud-based capabilities

General contractors are always on the move, sometimes working remotely. Having mobile access to your contractor invoicing software is essential.

Choose a contractor invoicing system with mobile access via mobile apps or a responsive web interface and cloud-based capabilities. This allows you to track time, monitor business expenses, and manage invoices, from anywhere, whether you’re on-site or in the office.

Cloud storage also helps you access and update project and client details even when you’re away from your workstation.

Integrations with accounting software

You probably use other tools, such as accounting tools, to streamline your workflow. Seamless integration helps the tools in your tech stack work together cohesively and keep your business data connected.

Integration with accounting tools like Quickbooks and Xero helps you to automatically sync your financial data. This means you don’t have to switch through apps to manually update your data.

The system should also help you with financial reporting to understand your business’s financial health. Detailed reporting helps you see where your money is coming from and exactly where it’s going.

With a complete overview of your income, you can spot your most profitable clients that bring the most revenue and services that are in high demand. You can then focus on providing high-quality services to this market segment to maximize revenue

Integration with accounting software also helps you with tax preparation. It simplifies tax calculations to ensure accuracy and compliance with tax laws.

Security and compliance

Data protection is a crucial aspect of invoicing software. You don’t want to put your financial and client details at risk of security breaches and unauthorized access.

Look for a contractor billing system with data security features, such as data encryption, user access controls, authentication, and regular backups to keep your data safe. These measures ensure that the data is only accessible to authorized users and that you can access and restore your sensitive data if you lose it.

It’s also important for the system to comply with industry standards and regulations. Check whether the system provider conducts regular security audits to protect your data.

Compliance with standards like the GDPR and ISO/IEC 27001 is a good indicator of a system that prioritizes protecting your business from potential cyber threats.

Considerations for Choosing the Right Software for Construction Business

Everything we’ve looked at so far concerns contractor invoicing software. However, you also need to prioritize your business’s needs and requirements.

Here are some considerations to make:

Company size and project volume

The size of your company greatly affects your invoicing needs.

If you’re a small business with a limited number of clients, you might need affordable and straightforward solutions with basic invoicing features.

On the other hand, larger construction firms require robust and complex systems with advanced features, like recurring billing, time-tracking for multiple teams, and third-party software integration.

Also, consider the frequency and complexity of your invoices. The solution should be able to accommodate your invoicing needs based on project volume.

Budget and cost structure

You want to find contractor invoicing software with flexible pricing. The system shouldn’t be so expensive that it eats into your profits.

Invoicing software providers often have different pricing models, including:

• One-time – You pay upfront one-time fees for complete access to the system
• Subscription-based – You pay a set monthly, quarterly, or annual fee for the software
• Freemium – You get some basic features for free but pay for advanced features
• Usage-based – You’re charged based on the number of invoices created or the volume of transactions processed

Evaluate the financial implications of each pricing model on your business and assess the value you get for your money. 

Check whether the provider or vendor is transparent when it comes to the pricing. Any hidden fees could potentially burden your business. Besides, hidden costs are a red flag since the provider isn’t 100% transparent.

Also, look for a software provider that offers free trials and demo options to allow you to test the system’s features before financially committing. 

Customer support and training resources

It’s common to encounter issues and downtimes when implementing software. You may also need assistance with the initial setup. Dependable customer support is vital in keeping things running smoothly.

Choose a provider that offers 24/7 support via multiple channels such as email, phone support, and live chat to ensure that any issues you encounter are solved quickly. Look for a company that also provides comprehensive training materials and onboarding support for a seamless transition.

Training resources can include tutorials, documentation, live webinars, and user guides. The provider can also offer deployment support via one-on-one sessions with experts to guide you through implementation and customization.

Reliable 24/7 customer support plus adequate training resources ensure that you’re never in the dark in case anything happens.

Scalability and future needs

While you want software that will serve your current needs, it’s also wise to consider the future. As your business grows, so do your invoicing needs.

Choose software that can grow with your business and accommodate your growing needs. Look for flexible features like the ability to add and remove users, custom templates, and capabilities for high invoice volumes.

Look for invoice software with modular features that you can add to your subscription as your business grows, instead of paying upfront for features you don’t need.

Top Recommendations for Contractor Invoicing Software

The best software for contractors is Stax Bill. Known for its extensive features and capabilities, this tool is geared towards meeting the needs of fast-growing businesses.

Here are some important Stax Bill features:

• Invoice customization – Stax Bill has customizable invoice templates to help you generate professional invoices with key details like account IDs, purchase order numbers, and other vital details. 
• Flexible product catalog – You can easily run a wide range of products, services, and subscriptions. This allows you to create unique discounts and special deals, and adjust your contractor prices.
• Advanced dunning management – Dunning management helps you reduce revenue loss by following up on failed payments. The Stax Bill dunning management feature helps you reduce failed payments by up to 700% due to payment retry scheduling.
• Comprehensive reporting – Stax Bill gives access to over 40 comprehensive reports that update automatically. These reports give you insights into cash flow, retention, churn, MRR growth, and much more.
• Compliant revenue recognition – Stax Bill supports various revenue recognition options for construction companies. Most importantly, there’s an advanced milestone revenue recognition module for ASC 606 compliance.  
• Tax calculation – Stax Bill provides tax calculation and charging features at state and country levels, with options for advanced tax computation.

Stax Bill pros and cons

One of the most prominent advantages of Stax Bill is payment gateway functionality where you can manage your entire business from one integrated platform. You don’t need any third-party online payment solutions to accept payments, accept credit cards, or get paid faster.

Also, all Stax Bill pricing plans have a monthly flat fee, unlimited invoices, and a wide range of advanced payment tools for your construction business. Plus we have a free demo account that you don’t pay a cent for.

And we don’t penalize your business for doing well. There are no overage fees. If you exceed your plan’s revenue band, we simply upgrade you to the next plan at the end of the subscription. 

However, on the downside, to determine your monthly fee, we have to look at your annual net invoiced numbers. A business whose monthly net invoiced revenue is less than $5,000 could end up paying more than the value they receive.

This means Stax Bill might not be the best invoicing software for businesses still trying to find their footing.

How to Implement and Get the Most Out of Your Invoicing Software

Choosing a good invoicing software for your contracting business is one thing. Implementing the system to get the most out of it is another. You need to carefully plan and strategize to get the most out of it.

Successful software implementation starts with a good plan. Plan the onboarding process by mapping out the steps you need to set up the system, including customizing templates, importing client data, and integrating with other tools in your tech stack.

It’s important to also set aside time for system testing to spot and solve any errors before going live.

Adequately train your whole team to ensure they understand the system and its capabilities. Since they’re hands-on with your business processes, their input can give you great insights into what features can best serve your needs.

Leverage the customization options to tailor the software for your processes. Tailor invoice templates for your brand, configure tax and discounts based on your location and industry, and set up payment reminders for late payments and dunning management for failed payments.

Regularly review the system’s performance to evaluate how effectively it meets your needs. Update your customizable templates, workflows, and integrations to maintain efficiency as your business grows and regulations change.

Also, keep your system up to date with the latest features and security patches.

Conclusion

Choosing the right software for contractors is a critical decision to improve your business’s efficiency. The right software has the potential to positively impact your cash flow, client relationships, and operational efficiency.

When evaluating a billing system, consider features like ease of use, expense and time tracking, payroll integration, automated invoicing and recurring billing, project management, mobile access, and integration with other business tools.

Remember to prioritize your specific business goals, needs, budget, and future needs.

From manual processes and longer sales cycles in the pre-digital era, enterprise resource planning (ERP) systems in the 1990s to 2000s, automation and integrated payment solutions in the 2010s, to data and API-driven transactions in the 2020s, the world of B2B transactions continues to evolve.

Today, the gap between B2B and B2C transactions could never be narrower. Both B2B and B2C buyers and sellers continue to gravitate towards contactless and online convenience.

In the B2B world, in particular, online payments have become the most preferred way of transactions. 

If you’re a business that regularly transacts with other businesses, implementing B2B billing and payment solutions is no longer an option—it’s a priority.

But it’s not just about searching online and signing up for the first B2B payment solution you see.

This is why we’ve created this comprehensive guide to walk you through everything you need to know about B2B billing and payments.

What is B2B Billing?

Business-to-business (B2B) refers to transactions conducted between businesses. B2B payments are fund transfers from one business to another business in exchange for goods and services. As such, B2B billing is when one business charges another for its products or services.

B2B payments often involve manufacturers, wholesalers, retailers, service providers, enterprises, and small businesses. They also involve various processes, such as subscription and cash flow management, accounting, and tax payments.

These transactions can be one-time or recurring, based on the terms the buyer and seller agreed upon.

For example, let’s say you run a cloud computing business that allows other businesses to access business software on a subscription basis. In this case, you’re the B2B merchant and your customers make regular monthly or annual payments to your business.

To receive payments from your customers, you bill them every payment schedule and send invoices based on usage or predetermined fees.

B2B vs B2C Billing

Unlike B2B transactions, business-to-consumer (B2C) transactions involve businesses and consumers (individuals). While they both involve the exchange of money from one entity to another, they differ in various principles including transaction values, complexity, and preferred payment methods.

Here’s a comparison table to understand the differences between the two:

	B2B Billing	B2C Billing
Parties	The participating parties on both ends of the transaction are corporate entities	Characterized by a single buyer, who’s the customer
Complexity	B2B transactions are often more complex and involve larger payment amounts. They might include recurring payments, bulk orders, multiple pricing models, and intricate invoicing	Consumer transactions involve directly purchasing products or services, so they are more straightforward. They also have lower transaction amounts and simpler payment processes.
Payment Methods	B2B transactions involve various payment methods, such as electronic fund transfers (EFTs), checks, wire transfers, Automated Clearing House (ACH) transfers, credit cards, and many others	B2C payments often involve cash,  mobile e-wallets, credit and debit cards, and online payment platforms, like Paypal and Stripe
Processing Time and Fees	B2B payments generally take longer to process since they’re larger in volume and more complex. They often have higher processing fees, especially for payments that require specialized payment solutions or cross-border payments	B2C payments can be processed faster with few special considerations since they’re simpler and involve readily available products. These transactions often have lower standardized transaction fees
Regulatory Requirements	B2B transactions are subject to stringent regulatory and tax requirements, such as compliance with contract laws, the need for detailed invoicing, and adherence to international trade laws. Both parties must adhere to tax implications both at the state and regional levels	Laws and regulations governing B2C transactions are generally less complex than B2B regulatory requirements. B2C transactions must comply with standard consumer protection regulations and sales taxes
Relationship  Dynamics	Business relationships are often at the core of B2B transactions. Relationship dynamics influencing the payment process include negotiated agreements, custom pricing, and personalized contract terms. Usually, business owners work with the leadership team before committing to a contract or purchasing a product or service. Deliberations also take longer.	B2C payments are transactional in nature and don’t involve negotiations or long-term contracts. These transactions are often characterized by speed, convenience, and security. For example, buying a cup of coffee isn’t a decision you deliberate on for weeks involving multiple business leaders. You simply walk into a coffee shop for faster turnaround time

Types of B2B Billing Models

B2B payments comprise various billing models, including:

• Recurring billing – Also known as subscription billing, recurring billing is when businesses charge their customers on a regular and scheduled basis (monthly, quarterly, or annually) for continuous products or services. This is the most widely adopted billing model for SaaS companies, maintenance services, and other subscription-based businesses. Many businesses that choose this model benefit from improved customer retention and predictable revenue. However, it requires a robust subscription billing system that can handle subscription renewals, manage potential payment failures, and provide flexible billing cycles based on customer needs.
• One-time billing – One-time billing involves a single payment for a specific product or service, without any recurring payments. This model is mostly used for individual purchases, such as project-based work, equipment sales, and consultation services. This is the easiest model for customers to understand since it’s straightforward and with immediate revenue recognition. On the other hand, it offers businesses limited revenue predictability. Businesses must stay on their toes to constantly generate new sales and maintain cash flow.
• Usage-based billing – Commonly known as pay-as-you-go, usage-based billing charges customers based on consumption or usage of the product or service. This model is common among businesses whose products are used constantly and require ongoing support, such as utilities, telecommunication companies, and cloud service providers. It’s highly flexible for customers since they only pay for what they use. However, the business must adopt accurate usage tracking systems to avoid overcharging or undercharging.
• Hybrid billing models – Hybrid billing models combine the above models to create a customized pricing strategy. For example, a SaaS company might charge a subscription fee (recurring billing) plus an extra fee for additional cloud storage (usage-based billing). Hybrid is a great option for SaaS businesses and service providers that want to cater to diverse customer needs. While it helps you optimize revenue potential, it can be quite complex to implement and often requires advanced billing software.

B2B Payment Methods

B2B transaction terms can vary based on the merchant and customer’s negotiations. Some of the ways these payments differ are based on the payment methods used by the customers to settle the invoices.

Let’s take a closer look at some common B2B payment methods:

ACH payments

An ACH transaction is an electronic mode of transfer where funds are transacted between banks and credit unions through a network known as an Automated Clearing House. An ACH network is a secure intermediary that facilitates the transfer between banks.

ACH payments are popular with B2B payments since they’re contractual. In short, they require both parties involved in the transaction to complete the paperwork, which makes them secure.

On top of that, they’re more cost-effective with lower processing fees compared to other options like credit cards and wire transfers. They typically cost around 1% of the transaction amount with a $10 limit. 

This makes them affordable options for large transaction volumes and suitable for recurring payments.

On the flip side, they ordinarily take 1-3 business days to process, which might be significantly longer than other options. This means they might not be suitable for urgent payments.

International ACH payments may be more complicated due to the string of intermediary banks and compliance with international transfer regulations.

Wire transfers

Wire transfers involve electronically transferring money from one bank account to another without other financial institutions acting as middlemen. Services like the SWIFT (Society for Worldwide Interbank Financial Telecommunications) banking system facilitate real-time fund transfer.

Wire transfers are fast and convenient, making them suitable for both domestic and international transfers. They also offer a high level of security and are irreversible once sent.

One major concern with wire transfers is their high processing fees. The transaction fees are charged on both incoming and outgoing transactions. The average wire transfer fee for domestic transfers is $15 for the receiver and $25 for the sender. For international wires, the average is $15 for the receiver and up to $50 for the sender.

While the irreversible nature is beneficial for security, it can be a downside if you send money to the wrong account. You have to ensure that you’ve entered accurate recipient details.

Credit card payments

Credit card payments are the primary payment method for B2B transactions. Just about every B2B customer will offer to pay using their credit card. And it makes so much sense why.

They’re convenient, inexpensive, and provide strong fraud protection. On top of that, credit card issuers like Visa and Mastercard offer various reward schemes and lower interest rates tailored to attract businesses like yours.

Credit card payments give merchants instant access to funds. It can be highly beneficial if you treat it like a debit card and pay it off every month.

Note that credit and debit card processing fees can add up fast, especially for credit cards. For this reason, not many businesses will accept credit card payments for large amounts.

eChecks

An electronic check (eCheck) is simply an electronic form of the conventional paper check. Just like the paper check, the eCheck draws money from the issuer’s bank account.

However, paper checks are limited when it comes to out-of-state or international payments. Such transfers would require additional paperwork and are sometimes not possible. This is where eChecks come in.

Echecks allow businesses to transfer money domestically or internationally through local or global financial institution networks. They offer increased security with advanced safety features, such as encryption and authentication processes to reduce fraud and unauthorized access.

Since they leave a digital trail of traceable records, they bolster trust between the transacting parties.

If you want to adopt eChecks for your business, you must comply with the rules and regulations governing the electronic transfer of money. You must also implement data security measures to address cybersecurity concerns. 

Payment gateways and processors for B2B

Payment gateways and processors are more popular with eCommerce brands and online retailers. But B2B businesses can also benefit from popular payment platforms like PayPal, Skrill, Venmo, and Zelle.

For starters, B2B payment gateways are digital platforms that act as intermediaries in electronic funds transfers. They eliminate the need to rely on a third-party payment processor.

These platforms often have additional features such as invoicing, account management, and automated billing. These services not only allow businesses to accept multiple payment methods via a single platform, but also boost speed, convenience, and flexibility.

Just like credit and debit card payments, transaction fees for payment gateways and processors can add up quickly. Most of these platforms are only available in the countries they’re based in.

Relying on a third-party payment services provider also means evaluating the service’s reputation and data security measures.

B2B Payment Terms and Invoicing

B2B payment terms, also known as net terms, are the financial conditions that must be met to complete a B2B transaction. The merchant communicates these terms to the consumer stating how the consumer can complete a payment and how long they have to do so.

In most cases, the buyers expect the merchants to stretch their payment terms to net 30, 60, or even 90-day payment windows. These terms allow consumers to pay for the goods or services after the stipulated period instead of paying upfront.

From a business perspective, this can be beneficial to the buyer’s working capital as they can resell the products or use them as raw materials and make a profit before the invoice is due.

Other payment terms to consider include:

• Payment methods – State your preferred payment methods. Do you want your customers to pay via ACH transfer or do you prefer credit cards?
• Default interest and penalties – If you apply an interest amount and other penalties for late payments, include them in your invoices
• Retention of title – This clause states that you retain ownership of the products until the consumer has fully paid for them. This protects you against payment defaults
• Discounts and bonuses – These are incentives to consumers who meet special conditions, such as bulk orders, early payment, or simply complying with payment terms.

These details can easily slip through the cracks. This is why you need to apply best practices for B2B invoicing.

One strategy to leverage is automation. Automating the invoicing process can save your business a lot of time and money. Invoicing tools handle the entire billing process including collecting customer details, creating and dispatching invoices, and revenue recognition.

On top of that, billing automation increases accuracy and eliminates the risk of errors present in manual invoicing processes. For example, your billing tool automatically syncs and applies your payment terms on all your invoices without the need for manual intervention. 

But there’s a catch—to enjoy these benefits, you must invest in the right B2B billing software, like Stax Bill.

How to Choose a B2B Billing System 

When selecting a B2B billing system for your business, you need to first evaluate your business. You just don’t want to invest in the most expensive or most popular billing system in the market. You want to invest in one that suits your specific business needs.

Some billing systems on the market are created for large enterprises with intricate needs, while others are more suitable for small businesses with a handful of users. 

Consider your business’s number of customers, pricing model, discounting, and needs to grow with time. Ask yourself whether there are any gaps in your business processes you’d like the billing system to bridge.

Once you’ve determined your business needs, you can look for the following B2B billing system features:

• Customizable invoices – The B2B billing system should have invoice templates that you can customize to match your brand image or pricing models. For example, you should be able to add your brand colors and logo or add and delete line items.
• Integration capabilities – The billing system should integrate with other tools in your tech stack, such as CRM, payment gateway, and accounting tools. Seamless integration ensures information flows smoothly within various departments in your business. This also gives you a detailed picture of your finances and business performance.
• User-friendliness – Making your payment process simple ensures you get paid on time. This is why the billing system should provide a payment portal for both your accounts receivable team and your clients. The portal should have an intuitive and easy-to-use navigation system, giving your clients an easy way to pay.
• Multiple payment options – Which payment methods do your clients prefer? Does the B2B billing system support these methods? Remember, accommodating your customer’s most preferred methods gets you paid on time. Also, check whether the system allows flexible payment terms, such as installments or Buy-Now-Pay-Later (BNPL) options.
• Pricing – While it’s important to have a B2B billing system, you don’t want to break the bank and eat too much into your profits. Check whether the investment matches your budget. Also, evaluate the software provider’s transparency when it comes to pricing. Hidden fees and costs are a red flag.
• Recurring billing – If you run a subscription-based business, it’s important to get a billing system with automated recurring billing features. These features allow you to set up monthly, quarterly, or annual subscription plans and automatically bill clients based on these schedules.

Don’t forget to think about your future. Consider scalability. You want a B2B billing software that can accommodate your business as it scales. Since your business is likely to expand to international markets, look for a billing system that will accommodate your international customers’ preferences. 

For example, evaluate whether it supports multiple currencies, multiple languages, and international trade and tax regulations.

Similarly, invest in a system that prioritizes security and compliance with industry standards like the Payment Card Industry Data Security Standard (PCI DSS). Checks for data security measures such as encryption, tokenization, and access controls.

Challenges in B2B Payments and How to Overcome Them

Like many business processes, B2B payments have various challenges. Here’s a breakdown of some challenges and how to overcome them:

Payment delays

Payment delays aren’t a new concept to many B2B businesses. According to a 2022 study by Chaser, 87% of B2B businesses typically receive payments after the due date. In addition, over half of these businesses spend more than 4 hours daily following up on late payments.

These delays lead to cash flow and operational challenges while straining the relationship between you and your clients.

One of the key factors behind payment delays is manual processing of invoices and paper-based approvals. This means that circumventing this challenge starts with automating your billing processes.

Another contributor to payment delays is poor communication and vague payment terms in your contracts. To go around this, establish transparent and clear communication to eliminate confusion and ensure your clients understand your expectations.

Also, invest in B2B payments software with automated payment reminders and dunning management.

Managing different payment terms across clients

You probably have different payment terms for different clients. Some could be on net-30, others net-60, and even milestone-based payments. Managing everything while ensuring accurate invoicing and no payments are missed could be a headache. It could strain your accounting resources and complicate your reconciliation process.

The way around this is to invest in a flexible billing system that allows you to customize invoices and payment terms. During initial contract negotiations with your clients, ensure you agree on terms that balance flexibility with your business’s cash flow needs.

For clients with differing payment terms, you can set up alerts for approaching due dates to help you efficiently manage your accounts receivables. 

Navigating international payments

Managing international payments is like juggling multiple bowling pins. Think of foreign exchange rates, varying regulations, and varying banking systems. If not managed well, they could lead to delays and increased costs.

You can leverage B2B billing solutions that accommodate cross-border payments to streamline international payments. Such platforms offer competitive exchange rates, faster payment processing times, and improved payment process visibility.

Multi-currency accounts can also help you streamline international payments by allowing you to hold funds in different currencies and convert them when rates are more favorable.

Also, stay on top of regulatory compliance measures to avoid any legal issues in target markets.

The Role of Automation in B2B Billing and Payments

Manual billing systems are like an old jalopy—functional, but expensive. As a SaaS business owner, you likely understand how primitive and slow traditional billing systems are, but have you thought about their true cost?

Manual billing systems cost more than just time and money. They cost you opportunities as well. Instead of having up-to-date financial records that you can leverage to make smart business decisions, you’re stuck playing the waiting game.

Human errors elevate these issues further. In finances, a small inaccuracy can morph into grave business issues. With manual systems, you’re likely to see interchanged numbers, displaced decimal points, and generally chaotic financial books.

All of these aren’t mere inconveniences. They spark payment delays, damage client relationships, and affect your business’s bottom line.

Automation in B2B billing and payments speeds up the entire process by eliminating repetitive tasks like invoice creation, data entry, and payment follow-ups. Streamlining these tasks helps free up your staff to focus on other productive activities like sales.

Since there’s little to no need for human intervention, you save administrative costs. You also won’t have to spend on paper, printing, and postage.

Automated billing systems also streamline the experience for your clients by enabling timely, accurate invoices and payment reminders. Customers appreciate timely notifications which foster robust relationships.

To top it all off, automated systems give you access to reports and analytics with valuable data-driven insights you can leverage to make smart business decisions.

How to Manage Recurring Payments in B2B

Managing recurring B2B payments requires more than just a quick setup and leaving the system to do all the work. Instead, you need to develop and adopt strategies that leverage the system’s capabilities.

For long-term contracts, you need to automate regular invoicing. This helps simplify recurring billing by creating a regular invoicing schedule that your clients can rely on. Stax Bill allows you to set up automated cycles.

Long-term contracts often evolve. Your clients might upgrade or downgrade their subscription plans or modify their service levels. You should ensure that your billing system is flexible enough to adjust accordingly with minimal bumps.

For mid-cycle changes, your system should have proration features that ensure your clients are only charged for the services they receive and your business still captures that revenue.

In case you change your pricing or contract terms, make sure to communicate clearly, ideally using automated updates. Transparency avoids any payment disputes in the future and keeps your relationship smooth, even as service levels change.

Sometimes, clients forget to make payments or update their payment details. Automate payment reminders to avoid interrupting your cash flow. Also, dunning management comes in handy for clients who might have expired cards or insufficient funds. These strategies help you avoid involuntary churn.

Recurring payment systems are likely to provide insights into payment failure rates. You can monitor and optimize these analytics to spot common causes of payment failures. With these insights, you can reduce payment failures and create a more reliable revenue stream.

Best Practices for B2B Payment Reconciliation 

Payment reconciliation involves processes of matching and comparing transaction records to ensure that received payments match your business’s financial statements. This accounting process ensures your records are accurate and up-to-date.

To make B2B payment reconciliation as efficient as possible, you need to adopt these best practices:

• Leverage automation – B2B payment tools like Stax Bill can help you automatically match incoming payments with outstanding invoices. This simplifies the reconciliation process by reducing the time spent manually tracking payments and looking for discrepancies.
• Reconcile frequently – You should regularly reconcile your payments, ideally every month. This not only keeps your records current but also helps you spot discrepancies early and address them.
• Address discrepancies fast – If you identify any discrepancies, such as unrecognized payments, mismatched amounts, or duplicate entries, investigate them immediately. Acting fast is vital for avoiding escalations, correcting errors, recovering funds, and avoiding similar issues in the future. 
• Standardize the process – Have a set of standardized procedures you use for reconciliation to maintain accuracy and consistency. Document these procedures and ensure your team understands and follows them closely.
• Maintain clear records and audit trails – Document every process of each transaction, including invoice details, payment dates, and client communication. Also, ensure that all transactions are tracked using clear audit trails for compliance purposes.

The Future of B2B Billing and Payments

The B2B payments industry continues to grow at staggering rates. According to Fortune Business Insights, the market is expected to grow at an impressive CAGR of 11.9% and hit $174.38 trillion by 2030.

This amount of growth comes with various trends you should watch closely, including:

• Blockchain – Businesses continue to explore the adoption of block and cryptocurrency into B2B payments. Blockchain technology is a decentralized and immutable database that bolsters security, transparency, and trust. Cryptocurrency is a great payment alternative, especially for cross-border transactions.
• Real-time payments – Businesses want their money fast. This has led to an increased demand for quick processing. Modern B2B payment systems offer real-time payment processing which improves convenience for vendors. 
• AI in B2B payments – Artificial Intelligence (AI) technologies such as Machine Learning (ML), Generative AI, predictive analytics, and Natural Language Processing (NLP) have the potential to streamline B2B payments further. Businesses are likely to adopt AI technologies in various processes like invoice management, customer service, fraud prevention, security compliance, and forecasting.

Conclusion

The B2B world is extremely competitive. Businesses that fail to adapt and level up to changing times end up going underwater. One of the solutions technology has made possible is B2B billing and payment systems.

Automating your billing processes allows you to boost accuracy, maximize efficiency, improve your business cash flow, and stay in the good books of the IRS.

But you need to go for the right billing solution. Features to look for include customizable invoices, integration capabilities, user-friendliness, multiple payment options, recurring billing, and transparent pricing.

Stax Bill offers you these features and many more. Schedule a demo today and improve your B2B billing efficiency.

You’ve started a subscription business because you want to satisfy a need in the marketplace—and of course, you want to make money doing it. To be successful, you’re sure of two things: You need to provide high-quality products and services, and you need to be priced right.

Finding your optimal pricing strategy requires some assessment of both the industry and your market.

When determining your subscription price, you need to find a balance between covering the costs of running your business and maximizing what customers will pay for your offerings. If your pricing is too low, you may not be able to cover your costs. If you charge too much, customers will compare price to value and decide to cancel their subscription—that is, if you were able to sign them up to begin with.

And of course, determining the ideal pricing strategy for your subscription offerings is something you’ll need to revisit continually throughout the lifetime of your business.

Consider the following in your analysis.

TL;DR 

• Subscription pricing is a business model where customers pay a recurring fee (weekly, monthly, yearly, etc.) to access a product or service.
• In general subscription companies will offer tier-based pricing of some form. There are 3 popular ways to divide tiers for types of subscription pricing models.
• Determining the right pricing requires a combination of market analysis, understanding customer value, and testing.

What is Subscription Pricing?

Subscription pricing is a business model where customers pay a recurring fee (weekly, monthly, yearly, etc.) to access a product or service. This pricing structure is popular with software companies (SaaS companies) as software-as-a-service has boomed, streaming services, and e-commerce. Instead of a one-time fixed price, subscribers continuously pay to retain access to the service, which provides a lot of predictability in forecasting and a stable, predictable revenue stream for the business.

Subscription Pricing Examples

There are many, many subscription companies on the market these days to provide examples for subscription-based pricing models. They demonstrate a variety of products and how nearly any type of product can be turned into a subscription.

• Netflix (a video streaming service) charges a monthly fee for access to its library of movies and TV shows. Different pricing tiers offer different levels of video quality.

• Adobe Creative Cloud (a software service) switched from selling one-time licenses for software like Photoshop to a subscription-based model where users pay a monthly or yearly fee for access to their suite of tools.

• Amazon Prime (an eCommerce and video/music streaming service) offers a subscription that includes free shipping on orders, access to Amazon Prime Video, and other perks for an annual or monthly fee.

• Dollar Shave Club (a physical goods subscription) sends customers a monthly shipment of razors and grooming products, with different subscription tiers based on the frequency of delivery and product type.

In general subscription companies will offer tier-based pricing of some form. There are 3 popular ways to divide tiers for types of subscription pricing models:

• Tiered Pricing Model: Develop multiple pricing plans (e.g., basic, premium, enterprise) to offer flexibility. Basic plans can offer the core features at a lower price, while premium plans can provide additional features or higher usage limits at a higher price. Enterprise or custom plans can be tailored for larger customers or companies with more specialized needs.
• Feature-Based Tiers (AKA Value-Based Pricing): Differentiate pricing tiers based on feature access. For example, Adobe Creative Cloud offers tiers where higher-paying customers get access to more software tools or advanced functionality.
• Usage-Based Pricing Model (AKA Per-User Pricing): Charge based on usage levels, such as the number of users, amount of data stored, or hours of service used. This allows small customers to pay less while offering scalable pricing for larger customers.

How Do You Determine What Your Subscription Pricing Should Be?

1. Your business model

If your product is an essential service with a monthly subscription price, you can expect to have hundreds or even thousands of customers at any one time. A large market involves more players which means your pricing will need to stay in line with the competition.

If you’re serving a niche market, you’ll have fewer customers and can command a higher subscription price. This type of customer-base will likely require greater attention and more of your operations will be dedicated to managing customer relationships.

2. Your business costs

A standard method of pricing is to determine the cost of delivering the service to your market. What you need to keep in mind is this must include both fixed costs and variable costs. The fixed costs should be spread out over the number of customers you’re looking to attract and manage in your subscription business. All your business’s bottom-line operating costs and overhead should be included in this calculation.

You should also consider your customer acquisition cost (CAC)—the amount it costs to turn a potential customer into a paying customer. This important metric can change over time and should be monitored and factored into your pricing.

3. Your competition

As a business in the race to win over customers, it’s wise to educate yourself on your competition. Find out the strengths and weaknesses in their products. What do your competitors look like from a consumer perspective? And how do you and your product compare?
All of this information will help you position yourself within the industry—and help you to define your pricing sweet spot.

Customer perception

Assess what your competitor’s customers are saying about them by scanning online review sites like G2 Crowd and Capterra.

• What do customers say is positive about your competitors?
• What do customers dislike about your competitors?
• How often are reviews being left? For every single customer review, there are at least 26 customers who haven’t left one.

What are your competitors’ reputations in the industry? In terms of pricing, are they considered expensive or affordable?

Marketing and branding

What are your competitors’ marketing positions? Look at who they’re marketing their products to. Large businesses? High-income professionals? Small firms? Budget conscious individuals? Also, look at how they market their services. Are they a luxury brand or an essential tool for the user? How does this compare to your target market?

Use this information to develop and redevelop your own product positioning.

Product features

A good pricing table is a perfect way for a subscription business to enable potential customers to easily compare the plans it offers. How do you create a good pricing table?

Limit the information: If potential customers can’t scan the information easily, they aren’t going to be able to compare subscription options.

Demonstrate differences: Communicate how each plan is different from the others. If there are similar elements to your various plans and pricing points, include those at the bottom of the pricing table while leaving distinctly different elements toward the top.

Ensure your pricing stands out: You should place the price at the top of the table so the customer knows what it is prior to reading the plan features.

Limit visual aids and color: The most common mistake is placing red crosses and green ticks upon the page. Although this design makes the product elements stick out, they also make the pricing table too crowded and distract from the main message.

Use illustrations to demonstrate differences: Some of the best subscription pricing tables have images to demonstrate the differences between plans. For instance, different size boxes to represent the various levels of service offered.

Consistent design: Your entire website should have a consistent overall design. The same should apply for your pricing tables.

Highlighting: You want to highlight your best subscription plan for your customers. The highlighted plan could be in a different color, bolded or ‘pop out’ when the cursor hovers over the plan.

You should also analyze your competitors’ offerings. How do their products differ from yours? How have they differentiated themselves in the industry? What features do you have that they don’t? What are those features worth to your customers? If you estimate how much it would cost you to provide the same service as your competitors do, how far off is your pricing?

Terms of service

What are your competitors’ terms of service? How do your terms differ? If your terms are flexible, they’ll be more appealing to customers and they may be willing to pay more.

However, you shouldn’t base your prices solely on your competitors’ price points. Your product may have greater value and you could have different costs.

4. Your value to the customer

Your customers aren’t going to pay for a service they don’t think is worth their money. Therefore, you should ask your customers what they believe is the value for your subscription service. It’s likely they’ll slightly underestimate what you could charge, but it can be a good starting point.

• Determine how essential your product is to customers’ needs. 
• You can survey customers to understand their willingness to pay for various features or service levels. 
• Analyze customer behavior to understand which features are most used and most valuable. 
• Identify the key value metric for your service (e.g., number of users, storage space, bandwidth) and price according to the value customers derive from this metric. For example, Dropbox charges based on storage capacity, as that is its core value offering.

5. Experiment and Iterate

Setting the perfect subscription price often requires experimentation and fine-tuning:

• A/B test different pricing plans to different segments of your audience and measure the response. 
• Offering a free tier with limited features (the “freemium” model) can help attract customers, and later encourage them to upgrade to a paid plan for more advanced features.
• Regularly assess subscription data (churn rates, customer acquisition, conversion rates) to evaluate how your pricing strategy impacts customer behavior. Adjust pricing based on these learnings.

Experimenting and iterating allows you to find a balance between attracting new customers and maximizing revenue from existing subscribers.

6. Pricing Psychology

How a price is presented can have a big impact on how customers perceive it. When determining a pricing strategy, be sure to keep key psychological tricks in mind:

Highlight how much a customer can save by subscribing annually instead of monthly, which frames the yearly plan as a better deal and encourages longer-term commitment.

Prices ending in “.99” (e.g., $9.99 instead of $10.00) are psychologically perceived as significantly cheaper, even though the difference is minimal. 

Show a more expensive pricing option first (the “anchor”) to make subsequent options seem like better deals. For example, displaying the most expensive plan first will make mid-tier options appear more affordable.

The optimal subscription pricing strategy

The optimal pricing strategy for your subscription offerings is critical to the success of your business. When establishing and re-establishing the best price points for your business, take into consideration factors such as your:

• business model
• costs
• competition, and
• value to the customer.

For more on this topic read the Tips and Tricks for Solving the Subscription Pricing Puzzle, or download 7 Killer B2B Pricing Strategies for Your Business. The guide walks through the many different pricing strategies available to subscription businesses. It also includes real-world examples of these strategies in action, tips and guidance for selecting and implementing the right strategy for your business, and signs its time to switch up your strategy.

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Quick FAQs about Subscription Pricing

Q: What factors should be considered when determining subscription pricing?

When determining subscription pricing, consider factors such as your business model, costs (both fixed and variable), customer acquisition cost (CAC), competition, and the value provided to customers. Balancing these elements helps ensure pricing that covers costs and meets customer expectations.

Q: How do industry standards influence subscription pricing?

Industry standards influence subscription pricing by setting benchmarks that customers are familiar with and expect. Analyzing competitors’ pricing helps position your subscription offerings competitively while identifying areas for differentiation.

Q: Why is it important to revisit your subscription pricing strategy?

It’s essential to revisit your subscription pricing strategy regularly to adapt to market changes, evolving customer expectations, and cost variations. Continuous assessment ensures that pricing remains optimal for profitability and customer retention.

Q: How can customer feedback impact subscription pricing decisions?

Customer feedback provides insights into perceived value and acceptable price points. Engaging with customers helps refine pricing strategies to meet their expectations, potentially through surveys or direct interactions.

Q: What is the role of a pricing table in subscription businesses?

A pricing table helps potential customers easily compare subscription plans. Effective pricing tables limit information overload, highlight key differences, and ensure prices are prominently displayed to facilitate decision-making.

Q: How can competitor analysis aid in setting subscription prices?

Competitor analysis helps identify strengths and weaknesses in their offerings, assess their market positioning, and understand their pricing strategies. This information guides your pricing decisions to ensure competitive and attractive subscription options.

Q: What are the benefits of A/B testing different subscription price points?

A/B testing different subscription price points allows you to evaluate which price yields higher conversion rates and customer lifetime value (LTV). This data-driven approach helps identify the optimal price for maximizing revenue and customer satisfaction.

Q: How can serving a niche market affect subscription pricing?

Serving a niche market often allows for higher subscription prices due to fewer customers requiring more personalized attention and resources. This specialized approach justifies premium pricing for tailored offerings.

Q: Why should both fixed and variable costs be included in subscription pricing?

Including both fixed and variable costs in subscription pricing ensures comprehensive coverage of all expenses involved in delivering the service. This approach helps maintain profitability while offering competitive prices.

Q: What are common subscription pricing models, and how do they differ?

Common subscription pricing models include flat rate, tiered, per-user, and usage-based pricing. Each model has distinct characteristics, such as fixed fees, varying levels of service, or charges based on usage, catering to different business needs and customer preferences.

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Do you need subscription billing and management software? Contact one of our experts at info@staxbill.com, call or check out the Stax Bill free trial.

The subscription business model continues to thrive, with growth most recently fueled by advances in artificial intelligence (AI), machine learning, and the Internet of Things (IoT). It’s all about creating more flexibility, more scalability, and enhanced usability for both businesses and their customers.

As the industry evolves, traditional billing solutions and legacy systems are coming up short. Fortunately, robust subscription billing platforms have risen to the challenge. They offer advanced tools and features which continue to progress with the market, and they integrate with and enhance a business’s entire revenue operations infrastructure.

What makes subscription billing platforms so special?

Ultimately, it boils down to capability. Recurring billing software is designed with subscription businesses and their various pricing models in mind. That design requires innovative features in the following areas.

1. Product catalog

Between one-time, recurring, and usage or consumption models—not to mention hybrid pricing, combining any or all three models—managing a subscription business’s product catalog and plan offerings is a complex task. Add in discounts, promotional rules, and product updates and it’s easy to understand why these business teams demand both comprehensive and flexible solutions.

What’s more, because subscription businesses rely on recurring revenue projections to manage their finances, they require the ability to safely and independently test new product roll-outs and changes to pricing models. All of this must happen without having to alter the active billing and accounting systems still managing the existing models. Agile subscription billing software makes this possible.

Ultimately, subscription businesses simply need billing solutions that can test complex catalogs, and manage them once made available to customers. Some things a comprehensive recurring billing platform should be able to do in this regard are:

• Change pricing plans easily when needed, both broadly and at the customer level
• Handle discounts, promotions, and coupons with automation, and
• Offer the flexibility to add, remove, and change products in plans and in customer subscriptions.
• Support multiple pricing models, including one-time, recurring, usage-based, and hybrid.
• Enable easy creation and management of bundled offers and tiered pricing structures.
• Provide A/B testing capabilities for pricing and plan variations.
• Automate proration calculations for mid-cycle plan changes.
• Allow for regional pricing adjustments based on market demands.
• Integrate seamlessly with existing product catalogs and inventory systems.
• Facilitate comprehensive reporting and analytics on catalog performance and customer preferences.

2. Customer communications and notifications

Subscriptions have changed the business-consumer relationship. Traditional business models center around one-time purchases; the business-consumer relationship ends once a transaction is complete. Subscription businesses, by contrast, must cultivate a long-term relationship with customers to minimize churn and ensure the recurring revenue upon which they rely.

In some ways, this is actually better for business. It’s easier to get customer feedback from subscribers, who hope to benefit from sharing their thoughts by getting an improved product down the line. This benefit and others, however, come at the cost of increased need for efficient customer communication.

The dunning process provides an excellent example of customer relationship management. With the ubiquitous use of stored credit cards for recurring payments, tactfully notifying customers of failed payments is a delicate balancing act of phrasing, timing, and frequency.

Comprehensive subscription billing management platforms help businesses handle this with ease and automation.

Some other notifications subscription billing platforms should handle well include:

• subscription activations/welcome notices
• billing/statement notifications
• subscription expiration warnings
• upcoming credit card expirations notifications, and
• collection reattempts for failed payment.

When one platform enables you to automate all billing-related customer notifications in a unified manner, the business-to-customer relationship is poised for success.

In general, a subscription billing system plays a pivotal role in managing and helping to streamline the entire customer lifecycle by offering comprehensive tools that optimize each stage of the customer journey. 

• The platform should offer customizable sign-up pages to help with customer acquisition, simplifying the onboarding process.
• Retention is a critical phase where these platforms’ capabilities shine. It should have built-in advanced analytics to predict churn, as well as identify customers who might be interested in upgrading or add-ons. These analytics can help you boost customer lifetime value.
• The platform should automates subscription renewals, ensuring seamless continuity of service. It should also provide easy options for customers to upgrade or downgrade their plans based on their evolving needs.

Additionally, your platform should give you a 360-degree view of each customer’s journey, integrating purchase history, interactions, and support tickets into a comprehensive profile.

3. Automated invoicing

On the topic of customer communications, invoices are the other side of the product catalog management coin. Just as a comprehensive subscription management platform should be able to handle the various complexities a business’s catalog presents, so too should it be able to translate delivered products clearly and concisely to customers through invoicing.

This is especially important in usage- or consumption-based pricing models. Invoicing becomes considerably more complex, for example, in telematics businesses which may use distance traveled and drive time on top of fixed recurring fees and one-time charges for specific products and services.

Calculating these charges using an internal algorithm is one thing; presenting it clearly to a customer on an invoice can be quite another.

Fortunately, robust subscription management platforms have sophisticated invoice design tools at their disposal. A strong platform should provide a business with various means of usage data presentation, allow for invoice customizations and adjustments, including corporate branding on invoices.

4. Usage/metering

Usage-based billing means, of course, that a billing solution must be able to handle the raw usage data generated by customers and translate that usage effectively into the billing process. This is metering and rating—essential capabilities that ensure each customer is billed appropriately based on their usage and pricing plan.

• Metering: the tracking of usage data by user, account, transaction, or another designated measure—i.e., tracking individual users on a shared mobile phone account, versus a payment portal charging a percentage per transaction.
• Rating: the measurement by which the payment will be determined—i.e., some mobile service providers charge per minute, while many other services are known to charge per hour.

Subscription business is still an evolving model, so change is inevitable. What happens when metering or rating charges must be updated across the board for all existing subscribers? Comprehensive subscription billing platforms support these kinds of bulk operations, absorbing large tasks such as adding or removing products or updating pricing rates and billing models.

5. Finance management

We touched upon recurring revenue projections earlier, but the importance of robust recurring billing software’s role in finance management cannot be understated.

The right platform should be able to measure and report on metrics uniquely significant to subscription businesses, helping in revenue management and providing insights on pricing strategies or suggesting opportunities for monetization.

These metrics are different than the ones used by traditional billing solutions, which focus on one-time measurements such as selling price, gross revenue, and close rates.

Knowing anticipated revenue and costs is crucial to running a recurring revenue business. While accounting solutions are usually designed with double-entry general ledger bases, their other features fall short of subscription business’s billing needs.

Fortunately, adaptive subscription billing platforms like Stax Bill are also built on ledger-based double-entry accounting foundations, while also tracking and reporting the right metrics for subscription business success.

6. Subscription billing software intelligence and analytics

Agile subscription management platforms should be able to provide insights on:

• annual recurring revenue (ARR)
• monthly recurring revenue (MRR)
• subscriber churn
• subscriber acquisition,
• customer lifetime value (CLV)
• average revenue per user (ARPU)
• customer retention rate
• subscription renewal rates
• revenue growth rate
• customer satisfaction and net promoter score (NPS)
• trial conversion rates
• usage patterns and trends
• payment failures and recovery rates
• marketing campaign effectiveness

All of these metrics combined are important, not only to revenue and cost prediction, but also to the testing and actual roll-out of new products. Businesses need to fully understand their cash flow situations before they can confidently invest in new developments.

What’s more, subscription management analytics can provide insights to customer segments, real-time revenue snapshots, and product popularity. This data helps managers keep a finger on the pulse of a subscription business, ensuring long-term health.

7. Recurring billing automation

Of course, a subscription billing platform had better get the main thing right: billing.

While traditional billing solutions may have the ability to store customer contact information, and perhaps even credit card information, they typically still require manual input of goods or services rendered during the billing cycle. This can make common tasks such as reactivation, difficult to keep up with at scale.

Comprehensive subscription billing platforms, of course, automate the billing process. They also offer additional automated services related to billing that are hard to compete with, such as:

• upcoming credit card expiration reminders
• card number updating for expired or replaced cards
• card payment retries for declined transactions
• customer self-service portal functionality, and
• advanced tracking of aging accounts receivables.

Automated billing reduces revenue leakage by ensuring recurring charges are never missed and sent invoices get paid or can easily be followed up on, thanks to advanced dunning management.

The process is “always on,” in real-time, so that all hours are business hours for customers.

8. Account management

Comprehensive subscription billing platforms are also subscription management platforms.

The distinction is important: the software doesn’t just automate the billing and crunch the financial data—it integrates other essential account management functions such as sign-up, activation, upgrades, downgrades, cancellations, and even re-activation.

The agility doesn’t end there. In the case of business-to-business subscription providers, the ability to separate the end-user from accounts receivable when sending invoices is paramount. If the wrong person receives an invoice, there’s a chance it’ll never get paid.

In the same token, multiple users on one account still need their usage reported on one invoice to reduce confusion and bottlenecks when requesting payment. Some users may also have access to products which other users do not, despite being on the same subscription. They may still need their varying usage consolidated during invoicing.

All of this is handled smoothly with a robust subscription billing solution, which, based on payment (or lack thereof) can automatically handle provisioning, cancellation, downgrading, or pausing as dictated by the terms of the subscription.

9. Integrations

A crucial aspect of selecting the right subscription billing software is ensuring that it seamlessly integrates with your existing technology stack. This includes customer relationship management software (CRM), enterprise resource planning (ERP) software, payment gateways, accounting software, eCommence platforms and other essential business applications. 

These integrations may come built-in to the platform. For instance, many solutions will offer pre-built integrations with the most commonly used SAAS solutions, like Salesforce. However, the platform should also offer an API that your engineering team can use to build custom integrations.

The ability to integrate means that data can flow smoothly between systems, reducing manual data entry, minimizing errors, and ensuring a cohesive operational workflow. When subscription billing software can communicate and synchronize with other tools in your ecosystem, it enhances overall efficiency and supports a more unified approach to managing the subscription lifecycle.

10. Taking payments

Perhaps the most obvious feature a subscription billing platform should possess is the ability to take a wide variety of payment methods and even accept multiple currencies when payment processing. This versatility ensures that businesses can accommodate the diverse preferences and financial systems of their customers, enhancing convenience and accessibility. 

By supporting multiple payment methods at checkout, such as credit cards, the software can reduce barriers to entry and improve customer satisfaction. 

Additionally, the capability to handle different currencies is crucial for businesses operating internationally, as it allows customers to pay in their local currency, avoiding conversion fees and complexities. This feature not only simplifies the payment process but also fosters trust and loyalty by providing a seamless and familiar transaction experience.

As subscription business models continue to evolve, so will the billing solutions which support them. No matter the direction, however, one thing is certain: businesses and solutions will need to continue to focus on their relationships with customers.

Acquiring customers with attractive products and retaining them with considerate and efficient communication and self-service abilities are practices which light the path to subscription business success. All of this can be enhanced and automated with a digital transformation to an adaptive subscription billing platform.

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Quick FAQs about Subscription Billing Software

Q: What is subscription billing software?

Subscription billing software is a specialized tool designed to manage recurring billing processes for businesses that operate on a subscription model. It automates tasks such as invoicing, payment collection, plan management, and customer communication, ensuring seamless operations and improving customer retention.

Q: Why do businesses need subscription billing software?

Businesses need subscription billing software to efficiently manage recurring revenue streams, handle complex pricing models, automate billing processes, and maintain customer relationships. This software helps reduce revenue leakage, streamline operations, and provide valuable insights into financial metrics.

Q: What are the key features to look for in subscription billing software?

Key features to look for include flexible pricing and product catalog management, automated billing and invoicing, comprehensive dunning management, robust metering and rating capabilities, detailed financial reporting and analytics, and customer communication tools.

Q: How does subscription billing software handle different pricing models?

Subscription billing software can handle various pricing models including one-time, recurring, and usage-based billing. It allows businesses to easily change pricing plans, manage discounts and promotions, and create hybrid pricing models that combine multiple billing strategies.

Q: What is dunning management and why is it important?

Dunning management refers to the process of communicating with customers about failed payments and retrying collections. Effective dunning management is crucial for minimizing churn and ensuring continuous revenue flow by automating reminders and retries for overdue payments.

Q: How can subscription billing software improve customer communication?

Subscription billing software improves customer communication by automating notifications for key events such as subscription activations, billing statements, expiration warnings, and failed payment retries. This ensures timely and consistent communication, enhancing customer satisfaction and retention.

Q: What are metering and rating in the context of subscription billing?

Metering involves tracking the usage of services or products by customers, while rating determines the charges based on this usage. These capabilities ensure accurate billing for usage-based pricing models, allowing businesses to bill customers appropriately according to their consumption.

Q: How does subscription billing software support financial management?

Subscription billing software supports financial management by providing insights into essential metrics such as annual recurring revenue (ARR), monthly recurring revenue (MRR), subscriber churn, and acquisition rates. These insights help businesses make informed decisions about cash flow and investments.

Q: Can subscription billing software handle bulk operations?

Yes, comprehensive subscription billing software can handle bulk operations, such as updating pricing rates or adding/removing products across all existing subscribers. This capability ensures that businesses can efficiently manage large-scale changes without disrupting ongoing billing processes.

Q: What are the benefits of using an adaptive subscription billing platform?

An adaptive subscription billing platform offers numerous benefits, including automation of billing processes, improved accuracy in invoicing, enhanced customer communication, and valuable financial analytics. These features collectively help businesses maximize their ROI by streamlining operations and reducing manual workload.

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