You’ll often hear subscription billing management software and billing software used interchangeably. But if you want to get really nuanced, they’re actually two different—though closely related—things.
To add to your confusion, we’ll also throw around terms like subscription management platform, subscription management system, subscription lifecycle management, and subscription billing software.
So, what are the key differences? Subscription management refers to a suite of advanced technology that handles all aspects of customers’ subscriptions like renewals, billing being one of them. It’s more robust, touches more areas of the business, and can help with bigger-picture business goals. That’s Stax Bill.
Recurring billing software simply handles billing automation from multiple payment methods and invoicing. Which still offers a ton of value, including built-in metrics data. It’s just more limited. Think of it like this: recurring billing is an element of subscription management. It’s a feature contained within the wider subscription management toolkit.
A full-scale subscription management solution is better in the long run for businesses that prioritize scaling as it offers more.
Features of Recurring Billing Software and Subscription Billing Management
To boil it down, a recurring billing platform handles billing and invoicing. You might also hear it referred to as subscription billing software. Let’s begin by breaking down what you can expect from it.
Automated Invoicing
At its most basic level, recurring billing software should automatically send out invoices and accept recurring payments. This feature allows you to accept a variety of payment options, often including debit, ACH payments or even PayPal. Generally it includes invoicing templates, though you can still send out customized invoices.
The two primary benefits of this are:
- You reduce the time spent on billing
- The risk of human error is eliminated
The time-saving aspect alone is enough to get excited about. You could cut the hours you spend on billing by up to 90%.
That’s exactly what happened to JustLogin when it introduced a recurring billing and subscription management solution. Not only that, but business actually tripled. JustLogin was still able to maintain these incredible time savings despite there being more people to bill than ever before! In fact, the finance team could finally handle the billing process without putting in any overtime whatsoever.
Switching from manual to automated invoicing also means you don’t have to worry about human error, which could be your biggest revenue leak. One study showed that finance staff make mistakes between 12% and 15% of the time when billing manually.
It’s easy to see why. Using spreadsheets for recurring billing is tedious work, especially in a subscription business with hundreds or thousands of clients. We’re only human, after all.
The problem is that those mistakes hurt your recurring revenue streams in more ways than one. Revenue leakage can occur from invoices that are sent to the wrong address or contact—or not sent at all. A workflow that involves multiple systems can result in delays, causing gaps in cash flow. There are countless opportunities for errors in data, like the invoice amount, typos in calculations or formulas, duplications, and so on.
Any imperfections in accounting processes will likely mean dissatisfied customers, which can damage your brand and increase churn. Recurring billing software streamlines your accounting processes to make sure that doesn’t happen.
Dunning Features
Not all recurring billing solutions will have dunning management, but many include simple features to help with collections assurance.
However, functionality is often limited to simple reminder emails and SMS messages for failed payments. Higher-ticket features like credit card retry schedules are usually reserved for more comprehensive subscription management software (more on that later).
Financial Administration Features
Typically, recurring billing software solutions will provide some general administration features as well. For instance:
- Time tracking for billable hours of your practice or freelancers
- Expense tracking
- Integrations with your accounting software like Quickbooks Online, Freshbooks, or Xero
Such features make the invoicing process easier for a provider.
Single Source of Truth (SSOT)
Using an automated recurring billing solution means you can have an SSOT for accounts receivable (AR) data. That allows teams to have the confidence that customer data is reliable, which saves time cross-checking between systems and departments.
If you’re working off a spreadsheet or using another manual-heavy process, it can be easy for things to get convoluted. One person saves a copy of the master sheet to their desktop and begins working from there. Everyone else in your finance team still references the version saved on your shared drive. Weeks go by before anyone realizes there’s a discrepancy.
An automated system allows you to mark invoices as paid, overdue, or assign other statuses in real-time, and provide a reliable location for anyone looking for up-to-date AR info.
Aside from relieving pain points for your AR specialists, empowering your support department, and improving overall operational efficiency—a single source of truth also helps with accurate automated revenue forecasting and provides data integrity. For subscription-based businesses, it’s a strategic game-changer.
Features of Subscription Management Software
A subscription management system automates invoicing and allows you to accept recurring payments, but it’s so much more than that.
It gives you access to a host of subscription management tools that let you control every stage of the customer’s journey.
Empower Your Customers
Features like a self-service portal take a lot of tedious work off your support team’s plate. Giving customers the power to adjust their subscription information in a few clicks saves them hassle and improves the end-to-end experience.
As awesome as your support team is, not everyone wants to speak to them to change something simple like updating an expired card. And your team members probably have bigger issues they’d prefer to spend their time working on.
With less strain on your support team to handle menial tasks, it frees up extra time for them to deepen customer relationships and provide more focused customer communications. And when people have more positive (and less frequent!) interactions with your support team, they’re more likely to stick around: increasing customer lifetime value (LTV) and improving customer retention.
This goes for new customer signups, too. If your product is relatively simple and doesn’t always require a sales rep to close a new deal, modern subscription management solutions offer a simple way to create new business.
Removing obstacles for prospective customers to sign up is a win-win—and a hosted registration page is a great way to do that. Giving customers the option of multiple payment gateways and the ability to choose add-ons to their subscriptions also increases revenue potential.
A Robust Suite of Collections Assurance Features
The best subscription management software will include credit card auto-updating, retry schedules, and AR aging reports. These features can help subscription-based businesses recover huge amounts of lost revenue.
Take bitHeads, for example. The business had a complex, usage-based pricing model which came with a truckload of security concerns surrounding storing customer data, then a boatload of issues with actually collecting payment.
Issues like failed payments saw them losing revenue every month. They desperately needed to automate recurring payments, then secure customer payments with an effective dunning management system. Subscription management software gave them that ability.
Since introducing a solution to handle its subscription lifecycle management, it now recovers around 5-10% of its monthly revenue which may otherwise have been written off. Nice, right?
Customer Notifications
Subscription management software should allow you to set notifications for your customers around a variety of touchpoints related to their subscription. This generally includes:
- Reminders that their subscription is about to be paid
- Notification that payment failed
- Item shipping notifications
- Notifications related to shipping delays or back orders
For the most basic subscription management systems, these notifications may not be customizable. On the most sophisticated level, however, you should be able to edit them in HTML or even integrate the system with your email marketing system and send your notifications out of the same location you send all other customer-facing messages.
A Flexible Catalog
Catalog flexibility is critical if you’re serious about customer satisfaction and want a competitive edge in the SaaS market. It enables you to easily add new products and subscription plans, create custom pricing and plan configuration for unique customers, and roll out easy, automated pricing uplifts.
The very nature of a subscription-based business model means dealing with variations in the billing cycle between customers. And in the fast-evolving world of SaaS, customers expect flexible billing options. And then some.
Subscription management software lets you manage multiple pricing strategies simultaneously. You can testusage-based services, per-user plans, a tiered model, or any other pricing strategy among market segments to find the best fit. Then, capitalize on your findings. Subscription management software also includes automated, ASC 606-compliant revenue recognition which would be nigh on impossible to manage manually—especially for a growing business with an expanding customer base.
Using subscription management software means you can offer free and paid trials, with targeted marketing campaigns to convert those users. Plus, being able to accept global payments in multiple currencies unlocks the potential for international growth.
Detailed Analytics
“Information is the oil of the 21st century, and analytics is the combustion engine,” according to Peter Sondergaard of Gartner Inc.
Real-time reports help leadership make better, data-driven decisions that encourage business growth. For example, monthly recurring revenue (MRR) reports help you keep track of contraction MRR and churn, so you can identify problem areas and respond faster. The right subscription management software in your tech stack won’t just influence important decisions, it will give you the actual means to scale, too.
Accurate forecasting is an infamously tricky task, but subscription management software leverages your subscription business’s predictable recurring revenue to provide insightful and practically useful reports.
Use them for sales forecasting, product development, and strategic planning to develop recurring revenues.
Seamless integrations
Subscription management touches so much more than accounting. It involves aspects of inventory management, marketing, and customer support at the very least. Because of that, it is crucial that your subscription management system offer seamless integrations with any systems that these other teams use, like your inventory management software, CRM, eCommerce platform and more.
The Key Difference Between Subscription Management Software and Billing Software
The difference really boils down to the fact that billing software is just one piece of subscription management software.
Subscription management software is able to manage a customer’s full lifecycle, from the day they sign up through their lifetime of subscription purchases, to the day they cancel. And while that functionality certainly requires the ability to bill the customer and track revenue, it also involves a lot of customer relationship management features.
Your subscription management software will track customer data to be used by your marketing team, for instance. It will send your customers notifications to keep them engaged and informed about their products.
Is Subscription Management Software or Billing Software Cheaper?
The short answer is that billing software is cheaper. But that doesn’t mean it’s more cost efficient. Let’s take a look at the nuanced answer.
Part 1. Costs
Typically, billing software has both lower upfront and ongoing costs.
- They’re often available as a one-time purchase or with a relatively affordable monthly subscription. This makes it an attractive option for small businesses or startups with limited budgets. The initial setup is usually straightforward, and the software can be implemented quickly, minimizing disruption.
- The ongoing costs generally focus on periodic updates, maintenance, and potentially some minimal support fees.
In contrast, subscription management software often requires a more significant upfront investment and ongoing costs.
- The upfront investment includes the cost of the software itself, potential customization to fit the specific needs of your business, and integration with existing systems (such as CRM, inventory management, and accounting software). Additionally, the implementation process may be more complex and time-consuming, requiring more resources upfront.
- Ongoing expenses include subscription fees for cloud-based platforms, regular updates, customer support, and maintenance. Moreover, because this software often integrates with multiple business functions, there may be additional costs related to maintaining those integrations and ensuring seamless operation across all systems. However, these expenses are typically offset by the increased efficiency and reduced manual workload the software provides.
Part 2. ROI
While billing software can offer significant savings in the short term and even deliver quick ROI, it may present limitations as your business grows. In the short term, the automation of invoicing and payment processing leads to immediate time savings, reduced manual errors, and faster payment cycles. These efficiencies translate directly into improved cash flow and lower operational costs.
However, over time, the ROI of billing software may plateau, particularly for businesses that grow beyond the software’s capabilities. As the business expands, the need for more advanced features (like customer relationship management, advanced analytics, and automated dunning) might necessitate the purchase of additional software, diminishing the overall ROI.
Although the initial and ongoing costs are higher, the long-term value of subscription management software is considerable, especially for businesses planning to scale. Subscription management software can quickly start delivering ROI by optimizing the entire subscription lifecycle. The automation of complex processes, integration with other business systems, and advanced analytics capabilities result in immediate operational efficiencies and better decision-making. The software also helps reduce revenue leakage and improve customer retention, directly impacting the bottom line.
The long-term ROI is where subscription management software truly shines, especially for businesses focused on growth. The ability to scale efficiently, manage complex pricing models, and provide a seamless customer experience leads to sustained revenue growth and improved customer lifetime value (LTV). Moreover, the insights gained from detailed analytics and reporting can inform strategic decisions that drive further growth and profitability.
The comprehensive nature of this software allows it to grow with your business, handling increasing complexity without the need for multiple additional tools. The ability to automate various aspects of the customer lifecycle, from billing to customer engagement, leads to improved efficiency, reduced churn, and higher customer satisfaction—factors that contribute to long-term profitability.
So What’s Better: Recurring Billing or Subscription Management Software?
There’s no simple answer as to what is necessarily ‘better’, but rather what solution meets your business’s needs.
A subscription management platform will include recurring billing, whereas the only requirement of recurring billing software is to automate invoicing and accept recurring payments.
A doctor’s office is a good example of a business who would be a good fit for recurring billing software. Here, the small business owner uses a medical practice management system to run the majority of the business functions. They only need an invoicing solution to run recurring invoices, offer online payments, take credit card payments, and potentially manage their billables and bookkeeping.
However, if you’re looking for a more holistic solution for your recurring revenue business, a subscription management system may be more fitting.
It encompasses every stage of the subscription lifecycle, from payment processing and storing customer information, to customer communication, reporting, price strategy testing, dunning management, and more.
While subscription billing features alone may be suitable for a smaller-scale SaaS business, automated subscription management is a growth catalyst for the ambitious who want to plug leaks, optimize monetization, be regulation compliant, and manage customer subscriptions with an excellent user experience from A-Z.
A good example of a business that would benefit from a full subscription management solution is one that allows customers to put a consumable (like soap) on automatic reorder.
In this case, the business needs more than simply online invoicing. Rather, they’ll need features like financial reporting on their subscription program and a self-service web-based client portal that can send notifications like late payment reminders and shipping notifications.
Ideally this portal is available to customers’ mobile devices, like on a mobile app for Android or iOS. They’ll need this system to integrate with their inventory management and customer support software systems. You can see how this business needs so much more functionality than simply an intuitive billing system or invoicing software.
Choosing the Right Solution for Your Business
Ultimately, how does a small business owner choose the best invoicing software for their business? First, you have to determine how much functionality you need to offer your customers. If you need them to be able to do more than just pay online – to do things like select their own products, you’re looking for subscription management software.
When selecting either type of software, you’re going to want to evaluate:
The pricing plan, and if they offer a trial period or free plan for you to test out the software
- User reviews
- How user-friendly the software is
- Whether it’s cloud-based
For recurring billing software specifically, you’ll want to ensure it offers:
- Unlimited invoices
- Customizable invoices
- Integrations with any accounting software you use
For subscription management software, you’ll want to go one step further and make sure it integrates with your inventory management software and potentially any message marketing systems you use, like email marketing.
Quick FAQs about Subscription Billing Management and Billing Software
Q: What is the main difference between subscription billing management software and billing software?
Subscription billing management software is a comprehensive solution designed to manage the entire lifecycle of a customer’s subscription. It includes features like renewals, customer communication, and advanced analytics. On the other hand, billing software primarily focuses on automating billing and invoicing processes, such as sending invoices and processing payments.
Q: Why should a business choose subscription management software over simple billing software?
Businesses aiming for growth and scalability should consider subscription management software because it offers more robust features. It helps in managing complex pricing models, enhancing customer relationships, and providing detailed reporting. This ultimately contributes to improved customer retention and increased revenue.
Q: Can small businesses benefit from using subscription management software?
Yes, small businesses can benefit significantly from subscription management software, particularly if they plan to scale. It offers automation of complex processes, improved customer engagement, and better revenue tracking, which are essential for maintaining a competitive edge in a subscription-based market.
Q: What are some key features of recurring billing software?
Key features of recurring billing software include automated invoicing, support for multiple payment methods, customizable invoice templates, and basic dunning management like sending reminders for failed payments. It often integrates with accounting software to streamline financial operations.
Q: How does subscription management software help reduce revenue leakage?
Subscription management software reduces revenue leakage by automating billing processes, managing failed payments through advanced dunning management, and ensuring accurate invoicing. It minimizes human error and provides a seamless experience for both businesses and customers.
Q: What are the cost implications of choosing subscription management software over billing software?
While subscription management software generally has higher upfront and ongoing costs compared to billing software, it delivers greater long-term value. The investment is justified by increased efficiency, reduced manual workload, and improved customer satisfaction, which ultimately lead to better ROI.
Q: How does automated billing improve operational efficiency?
Automated billing improves operational efficiency by reducing the time spent on manual invoicing and payment processing, eliminating human errors, and ensuring timely payments. It frees up resources, allowing teams to focus on strategic tasks and improving overall productivity.
Q: Can subscription management software integrate with other business systems?
Yes, subscription management software can integrate with various business systems like CRM, inventory management, and e-commerce platforms. This ensures seamless operation across different departments and enhances the overall efficiency of business processes.
Q: What industries typically benefit from using subscription management software?
Industries that rely on recurring revenue models, such as SaaS, media, and e-commerce, significantly benefit from subscription management software. It helps manage customer subscriptions, optimize pricing strategies, and improve customer engagement, which are crucial for these industries.
Q: Are there customizable options available in subscription management software?
Yes, subscription management software often includes customizable options such as editable notifications, flexible pricing models, and personalized customer portals. This allows businesses to tailor the system to their specific needs and enhance the customer experience.
