Companies across sectors have increased their adoption of digitalization and are revamping their products and services to accommodate subscription-based business models.
Subscription billing has long been on the wishlist for Microsoft Dynamics 365 Business Central users. Previously, businesses had to rely on custom solutions or partner-driven apps to handle recurring billing. But there’s exciting news on the horizon! Microsoft is planning to roll out full subscription billing capabilities, along with enhanced revenue and expense recognition features, in the Release Wave 2 of 2024. Public previews are set for September and October 2024.
Subscription billing isn’t just a trend; it’s becoming essential across many industries. As cash flow becomes increasingly important and younger generations like Gen Z prefer staggered payments over lump sums, businesses across various sectors are adopting subscription models. Here are some industries where subscription billing is making a significant impact:
Software as a Service (SaaS): Think Salesforce or Microsoft 365, where software is accessed via regular subscription fees.
Media and Entertainment: Platforms like Netflix and Spotify offer ongoing content access.
Subscription Boxes: Companies such as Birchbox and Blue Apron deliver curated products on a recurring basis.
Membership Organizations: Gyms and professional associations use subscriptions for continuous access and services.
E-Learning and Online Education: Services like Coursera and Khan Academy provide ongoing educational content.
Health and Wellness: Telemedicine services and fitness apps offer regular health-related services.
Publishing: Newspapers and digital magazines use subscriptions for continuous content delivery.
Cloud Services: Providers like AWS and Google Cloud offer cloud resources on a subscription basis.
Food Services: Meal delivery services provide regular deliveries through subscriptions.
Professional Services: Consulting and advisory services often use retainer models.
Telecommunications: Mobile and internet service plans are commonly offered as subscriptions.
Gaming: Platforms like Xbox Game Pass provide access to a library of games via subscription.
Consumer Goods: Regular deliveries of products such as pet food or household items.
Finance and Investment: Ongoing access to financial planning tools and investment research.
Travel and Hospitality: Memberships for travel perks and hotel discounts.
Technology and Electronics: Subscription models for device protection and software updates.
While subscription billing offers numerous benefits, it’s not without its challenges. Here’s a look at some common issues businesses might face:
1. Complex Billing Cycles
Managing different billing cycles and subscription terms can be tricky. This complexity can lead to billing errors, difficult record-keeping, and potential customer dissatisfaction.
2. Customer Retention and Churn
Keeping customers engaged and reducing churn is a challenge. High cancellation rates can impact revenue stability, making effective retention strategies crucial.
3. Billing Errors and Discrepancies
Automated systems might experience issues such as incorrect charges or duplicate invoices. These errors can result in customer disputes and require administrative effort to resolve.
4. Payment Failures and Collections
Handling failed payments from expired cards or insufficient funds, and managing overdue payments, can be challenging. Effective collection processes are essential to avoid service interruptions and revenue loss.
5. Revenue Recognition and Compliance
Accurately recognizing revenue according to standards like ASC 606 or IFRS 15 can be complex for subscription models, potentially leading to compliance issues.
6. Managing Contract Changes
Adjusting subscription terms or pricing mid-cycle requires careful handling to avoid billing mistakes and ensure customer satisfaction.
7. Integration with Other Systems
Integrating subscription billing with CRM, ERP, and other systems can be complex. Poor integration can result in data inconsistencies and operational inefficiencies.
8. Customer Communication
Keeping customers informed about billing changes, renewals, and payment issues can be challenging, especially without automated or personalized communication.
9. Scalability Issues
As your business grows, scaling your subscription billing system to handle more volume or new features can be tough. Performance issues and ongoing adjustments might be required.
10. Fraud and Security Risks
Protecting customer payment information from fraud and breaches is a significant concern. Security issues can lead to financial loss, legal problems, and damage to trust.
11. Customization and Flexibility
Offering customized plans or flexible billing options often requires advanced setup, increasing the complexity of managing subscriptions.
12. Reporting and Analytics
Generating accurate reports on subscription metrics and financial performance can be challenging, impacting your ability to make data-driven decisions.
13. Handling Free Trials and Discounts
Managing free trials, introductory offers, and discounts can complicate billing processes and revenue forecasting, potentially leading to revenue leakage.
The introduction of robust subscription billing features in Business Central will offer greater flexibility and value to businesses. As these features become available, they will help streamline billing processes, enhance customer satisfaction, and support diverse business models.
Stay tuned for more updates and be ready to explore how these new capabilities can transform your subscription-based business!
You can now support many different types of subscription scenarios in Business Central. There’s a simple set of processes that let you manage portfolios of the items and services that you bill on a recurring schedule. For example, hardware maintenance, IT support, cleaning services, and so on. You combine the sale of services and items in mixed subscription contracts that hold information about the items, services, and billing schedule.
Templates simplify the process of creating subscription contracts by standardizing the parameters and schedules for recurring billing. You can manage current pricing and plan for future price updates. On the accounting side, posting accruals to balance sheet accounts is automated, and revenue or expense are assigned to the correct periods in the income statement.
The new module comes with:
- Contracts for which you do recurring billing for items and services.
- Billing schedules with flexible parameters that cater to typical use cases for recurring billing.
- Usage-based billing.
- Automated billing.
- Deferral integration.
- Revenue recognition based on billing schedules.
- Contract updates (parameters and prices).
- Standard reports for contracts, customers, billing schedules, recognized revenue, future billing dates and amounts, and so on. Most reports are available as Power BI reports.
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