Subscription Billing

Subscription Billing Management Software vs. Billing Software: Is There a Difference?

Serge Frigon

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. Can you guess what’s what?

But trust me–our intention is never to bamboozle! So today I’m setting the record straight with this handy article.

So, what’s the key difference? Subscription management refers to a suite of advanced technology that handles all aspects of customers’ subscriptions, 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 and invoicing. Which is still cool and offers a ton of value. 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. I’ll explain why now.

Features of Recurring Billing Software

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:

  1. You reduce the time spent on billing
  2. 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. Three cheers for leaving the office on time!

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 test offer usage-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.” That’s according to Peter Sondergaard of Gartner Inc. And I think we’d all be inclined to agree.

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 (just ask the weatherman😉), 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 simply your 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.

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.

FAQs about Subscription Management Software vs Billing Software

Q: What is the main difference between subscription management software and billing software?

Subscription management software refers to advanced technology that oversees all aspects of customer subscriptions, including billing. It’s more robust, interacts with more business areas, and aids bigger-picture business objectives. On the other hand, recurring billing software focuses solely on billing and invoicing.

Q: Can you give examples of tasks that subscription management software handles?

Subscription management software automates invoicing, accepts recurring payments, provides access to subscription management tools to manage every stage of the customer’s journey, notifies customers about various subscription touchpoints, offers catalog flexibility, manages multiple simultaneous pricing strategies, and integrates seamlessly with other systems like CRM, Inventory management software, etc.

Q: Do all businesses need a subscription management system?

The need for a subscription management system or recurring billing software depends on the business needs. A company that requires only an invoicing solution would be a better fit for recurring billing software. But, a business that wants a complete solution for their recurring revenue business, from payment processing to customer communication, may find a subscription management system more beneficial.

Q: Why is the use of subscription management software considered a growth catalyst for businesses?

Subscription management software allows businesses to plug revenue leaks, optimize monetization, adhere to regulations, and manage customer subscriptions with an excellent user experience from start to finish. Also, real-time data and analytics that the software provides can help leadership make better, data-driven decisions promoting business growth.

Q: What should business owners consider when selecting between subscription management software and recurring billing software?

When selecting either software, business owners should consider pricing plans, user reviews, user-friendliness of the software, whether it’s cloud-based, integrations with other applications, customization options, and specific needs of their business.

Q: Can businesses that primarily use recurring billing also benefit from features of a subscription management platform?

There’s no straightforward answer as the choice depends on the specific needs of the business. However, a subscription management platform, which includes recurring billing, could offer more comprehensive features that can benefit a growing business with subscription-based services. It can manage a customer’s lifecycle, track customer data for marketing, send out customer notifications and so on, which extend beyond just billing and invoicing.

Q: What are some examples of businesses who would benefit from either recurring billing software or subscription management software?

A doctor’s office might find more use for recurring billing software, using it to automate invoicing and manage billables and bookkeeping. In contrast, a business that allows customers to put a product on automatic reorder would benefit more from a full subscription management platform. This platform could handle everything from financial reporting, late payment reminders to customer notifications on shipments, integrating with inventory and customer service systems.

Q: What specific features should business owners look for in a recurring billing software?

In a recurring billing software, business owners should be on the lookout for features like unlimited and customizable invoices, and integrations with the accounting software they use. Higher-tier features like credit card retry schedules are typically found in more advanced subscription management software.

Q: What additional features should business owners consider when choosing a subscription management software?

When opting for subscription management software, business owners should ensure that the software integrates with their inventory management software and potentially any message marketing systems they use, like email marketing. The software should also have features to enhance customer experience and satisfaction, such as a self-service portal, customizable notifications, and flexible billing options.

Written by:

Serge Frigon
Serge Frigon
Director of Product, Stax Bill

Serge Frigon is Stax Bill’s Director of Product. He is passionate about improving billing processes for SaaS companies. With 20+ years in SaaS and billing software systems, Serge has a first-hand view of how important financial insights can be to the health of a company.