Improve Subscription Billing with Effective NetSuite Strategies
A subscription business model can be highly profitable, promoting enduring relationships with customers, and generating a steady stream of recurring revenue. However, many organizations encounter significant challenges in efficiently managing recurring contracts, particularly as they scale their operations.
This is where an enterprise resource planning (ERP) financial system like NetSuite becomes invaluable.
Businesses quickly encounter complexities such as tiered pricing or alignment of subscription data with specific hardware components that are best managed through an automated system. Discover how leveraging NetSuite effectively can improve subscription billing processes and contribute to efficiency, compliance, and sustained growth in the competitive subscription landscape with the following recommended practices.
Plan Before You Scale
As companies seek to expand their operations, many leverage NetSuite to help them manage growth. The leading ERP solution is recognized for its ability to enhance operational efficiency, allowing organizations to allocate more resources toward scaling their business.
It’s essential to recognize that subscription-based businesses come with additional layers of complexity that need to be accounted for. For instance, subscription costs may fluctuate throughout the billing cycle as customers adjust their service levels. In addition, when paired with Internet of Things (IoT) devices, companies must also consider the implications of changes across both hardware and software.
When selling at the enterprise level, organizations may find themselves managing extensive contracts that encompass multiple subscriptions, often bundled with hardware deployed across various locations. This intricate web of details can be overwhelming. Transitioning to a new financial system late in the game can disrupt operations, particularly for subscription-based businesses.
By investing early in a system that automates processes from order to cash, companies can scale effectively without compromising profitability.
Avoid Redundant Development
Innovators often fall into the trap of believing that their unique product or service offerings necessitate a bespoke approach to billing. For companies with skilled software development teams, it may seem reasonable to expect that an internal team can create a custom solution for managing subscription billing complexities. While this may appear cost-effective in the early stages, challenges arise as the company grows.
As the product development team diverts focus to manage ongoing enhancements to billing software, inefficiencies can emerge. Valuable personnel may be better utilized in developing improvements to the company’s core intellectual property.
Systems like NetSuite provide regular product updates based on industry best practices at least twice a year. By transitioning all subscription billing processes into NetSuite, companies can streamline operations and allocate resources more effectively.
Eliminate Data Silos Where Possible
The need to manually align accounting data at the end of each month for reporting purposes opens companies up to various risks associated with human error or data omission. These risks only increase as the volume of data that must be reconciled grows—and subscription-based business models inherently involve multiple layers of data.
By consolidating this information within a single system like NetSuite, organizations can significantly reduce the potential for accounting errors compared to managing data across multiple systems, such as separate customer relationship management (CRM), external billing, and ERP and financial systems.
This consolidation is even more impactful for organizations that can integrate processes beyond basic financials, such as inventory management and warehousing. With inventory management built directly into their ERP, companies can simplify both forward and reverse logistics. The general ledger impact is posted instantly once an order has shipped or a return has been processed.
Additionally, subscription companies can effectively align data across billing, renewals, related devices, professional services, customer installation sites, and more—all within one cohesive system.
Plan for the Entire Subscription Life Cycle
While many companies recognize that data silos can hinder efficiency, subscription-based organizations face the challenge of managing various aspects of their offerings throughout the life cycle of a subscription.
The complexity arises because the sales and fulfillment of services may occur at different volumes and timeframes compared to the activation of subscriptions. Additionally, companies may need to pause subscriptions during service interruptions or changes, which can complicate billing and customer management.
Given these intricacies, an integrated subscription billing solution within your ERP or financial system should facilitate the seamless management of subscriptions, allowing for easy adjustments and re-association of services as needed. This capability is essential for companies managing multiple subscription plans and customer relationships.
By implementing NetSuite and its 360 Subscription Billing capabilities, companies can effectively manage the entire life cycle of their subscriptions and associated services, facilitating a streamlined and efficient process.
Consider the Compliance Implications of Subscription Data
The complexities inherent in subscription business models can significantly amplify the challenges of maintaining compliance with generally accepted accounting principles (GAAP) and international regulations. For instance, revenue recognition for subscription billing requires organizations to maintain a clear understanding of various variables, including:
- Hardware, software, and service bundles that span multiple implementation dates
- Price fluctuations due to discounts or promotional offers
- Delayed payment options based on product or service delivery timelines.
These variables, along with the many changes that can occur along the journey from realizable revenue to earned revenue, complicate the revenue recognition process. The specifics depend heavily on how contracts are structured and sold.
The advantage of a solution like NetSuite lies in its ability to consolidate a wide range of data into a single system. This centralized data repository facilitates compliance management within the same solution.
This is why NetSuite developed its Advanced Revenue Management (ARM) module, enabling companies of all sizes to operate efficiently in accordance with international revenue recognition standards. However, the ARM module cannot function effectively if your subscription sales and billing transactions are managed in a separate system.
We’re Here to Help
To learn how effectively implementing NetSuite can benefit your subscription business, contact your Moss Adams professional.