Billing for Subscriptions: Improve Your Recurring Billing Model

The world of pricing and invoicing models has been evolving. We were used to one-time transaction models, but now you can find subscriptions or recurring payments almost wherever. Nowadays, paying a recurrent price for things like movies, music, free shipping, etc. You'll probably find at least a couple if you look at your credit card statement.

The choice between buy and construct has become simpler in the SaaS sector thanks to subscription businesses. You may justify a subscription for the same product rather than diverting resources and attention away from your company's core strength to construct and manage an in-house product. This increases a company's efficiency and frees it up to concentrate on its own goods. This is especially useful for businesses on a tight budget who need to use other products to quickly achieve product/market fit.

B2C businesses were also impacted by the transition. Cell phones, subscription boxes, and even software like Microsoft Office can all be purchased through subscriptions, which makes budgeting for purchases simpler than ever.

Simple recurrent billing is insufficient for businesses that use some form of recurring model. Technology has advanced to make it simpler for businesses to manage their clients as pricing structures have changed to recurring models.

How does recurring billing work?

Recurring billing is much easier to administer than subscription billing. In its most basic form, your clients' credit cards are automatically charged at the same time on a regular basis, such as once a month, every third Tuesday, once a week, etc. Think about subscription management as your CRM, and recurring billing like your email account. Technically, you can send emails and manage your contacts if you have an email account.

However, you need a true CRM to acquire further capabilities like managing client records, establishing triggers, autoresponders, automated emails, etc. Although you can build this yourself, it requires a lot of time, money, and constant maintenance. This also applies to recurring billing. You'll have to start building your own functionality if you want more.

What is the drawback of recurring billing?

Lack of flexibility is one of the key issues with simple recurring billing. A straightforward $10/mo package can be all you need when you initially start paying consumers. What happens though if your business decides to charge per seat? What if you wish to give your consumers free trial periods? Your system for recurring billing doesn't comprehend that. It only comprehends "charge customer X $10". A seemingly little adjustment to your pricing strategy suddenly causes developers to make a lot of effort.

If you don't have subscription billing software that is intended to handle these challenges, a lot more problems may arise. A subscription billing system is made to assist you handle all the challenges that come with recurring billing, such as prorating and denied credit cards.

Billing for subscriptions

The handling of subscription billing is more sophisticated. Similar to how a CRM has more features than an email account, subscription billing has more features than simple recurring billing. A subscription billing system still relies on recurring billing as its primary feature, but it involves much more. Here are some components of a subscription billing system and why your business needs them:

Recurring charges

Recurring billing is undoubtedly the essential component of subscription billing. You can use this to keep a card on file and have transactions happen automatically once a billing cycle.

You are throwing away a lot of money if your setup for recurring billing is simply basic. Additionally, everything would be dispersed. To keep track of, bill, email, and otherwise communicate with your consumers, you would need to use a variety of software programs.

Dunning

Dunning enables you to recover potential revenue lost because of declined payments. If you charge a consumer on Thursday even though they are paid on Friday and they don't have enough money in their account, the transaction will be unsuccessful. You may lessen client churn by making it simple to configure your system to try again.

Messages from clients

When used in conjunction with dunning, communication emails are a fantastic way to let your customers know when they've made a payment or if the transaction has failed.

For instance, when you fail to pay for Spotify, you receive an email stating that your payment was refused and that they will try again (see image below). They even include a button to update your billing information if you've changed cards.

Systems for recurring payments are easier to use than those for subscription payments and cannot handle dunning. Using recurring billing to accomplish that? Not as simple.

Promotions

Promotions are a terrific approach to increase the consumer appeal of your product. You may easily give and manage promotions with a subscription billing system.

Pricing Schemes

With a subscription billing system, it is much simpler to create pricing plans for various billing models. You can manage all of your pricing plans from an intuitive dashboard rather than having to code them.

Dashboard

A reporting dashboard can help you get a quick overview of your company. Making ensuring your business is in good shape requires keeping track of crucial SaaS indicators like monthly recurring income, churn rate, and customer lifetime value.

Prorating

It doesn't make sense for customers who upgrade plans to pay for a full month of a more expensive plan if they were only on it for two weeks. Similar to this, you want to make sure that your consumers were actually charged for being on the plan if they were on a more expensive plan. You can decide how much to charge clients who upgrade or downgrade in the middle of a billing cycle by using prorating.

You can modify your system to function exactly how you want it to with subscription billing. You store everything in one location as well. Instead of having to make different systems work together through hacking, one piece of software takes care of all of your billing requirements for you.

Who needs billing for subscriptions?

Anyone who requires recurring billing can benefit from subscription billing. Utilizing a full system makes the most sense financially. Starting with a subscription billing platform helps you save time and will make a lot more sense in the long run, unless your business has a small user base, and you have no plans to scale it at all.

Why organizations prefer subscription billing

Provides chances for new businesses

Subscription billing has created new markets and sectors for any goods. Without subscription billing, everything from subscription boxes to SaaS would be considerably more challenging. Companies are able to concentrate more on growth and less on renewals by being able to charge a card at the same time every month.

Predictable growth and revenue

Revenue and growth are relatively predictable on a scale. It is straightforward to determine how quickly your business may and will grow by taking into account client acquisition cost, lifetime value, and churn rate.

Large margins

The margins are substantially larger than in most other businesses if your offer is SaaS. The primary expense SaaS companies face, aside from constant development expenses, is the price of marketing and selling their goods or services.

Why clients prefer subscription billing

Effective in terms of cost

Any SaaS solution that is built in-house comes at a significant cost. Costs can potentially spiral out of control depending on the intricacy of the product and how much your developers are getting paid. Even worse, it may take months to construct and connect with an internal system.

Additionally, purchasing software can have a high initial cost. For instance, depending on the Microsoft Office programs you require, the price of a "perpetual license" varies from $150 to $500. But for the same thing, a monthly membership only costs $7 to $10.

Most SaaS providers don't provide the same "perpetual license" buying option that Microsoft offers. But the consumer still benefits in the same way. Consumers incur far lower upfront expenditures by subscribing to a piece of software.

Foreseeable costs

Subscription costs are also far more foreseeable than non-subscription costs. Budgeting for subscriptions is simple, whether you're purchasing a computer, software, or a subscription box. Making little monthly payments that pile up over time is preferable to saving up for a single large purchase.

Enhanced products

Due to how simple it is to move from one subscription to a rival, businesses are constantly working to develop new features and improve customer service. Customers will profit greatly from this as products will get better over time. Customers can switch at a far lower cost than if they were to buy an altogether new product if they are dissatisfied with product upgrades or their experience.

Why is Cheddar so outstanding?

All-in-one place

With Cheddar, you simply need a single software subscription to handle all of your billing requirements. If you are in the USA, Cheddar offers a complete subscription billing solution that includes payment processing, a payment gateway, and subscription management.

Easy to set up

You only need to create a customer and add them to a plan in its most basic form. This implies that you can begin billing your clients as soon as tomorrow!

Flexible schedules

In Cheddar, setting up flat subscription bills is simple. It will be very simple to adjust your pricing or possibly test out a different pricing plan as your business expands within Cheddar.

Unaffected by payment processor

You can switch between processors at any moment because Cheddar includes a built-in payment processor and supports a wide range of third-party payment processors.

Tracking and charging for usage

Cheddar enables you to monitor consumer activity in real-time without having to charge for it. You may monitor how your consumers interact with your system using our straightforward counters, which we refer to as Tracked Items. All you need to do is choose a monitored item and apply billing logic to it if you finally want to utilize a usage-based pricing model.

Consumer assistance

Our support staff is fantastic. You can contact us in a variety of ways to get the answers to your questions.

Work 365 is an automated billing services and SaaS billing solutions for Microsoft partners to streamline recurring billing and invoicing process.