What is subscription billing software?
Subscription billing software is a tool used by businesses that sell products and services through a subscription model to manage recurring billing. Subscription billing software enables businesses to create and manage subscriptions, billing cycles, and subscription packages, including discounts, upgrades and downgrades more efficiently.
Who uses subscription billing software?
Subscription billing software can be used by any business selling its products or services via a subscription model. Where this was once a small market made up of convenience services like milk or newspaper deliveries, it now encompasses an ever-growing market spanning everything from streaming services to fitness apps to recipe boxes.
The size of the market ( an estimated US$ 47.82 billion by 2025 ) sees subscription billing software utilized by businesses at all stages of growth, targeting both businesses and consumers, both domestically and internationally.
As such, different subscription billing software providers target different segments of the market. Paddle and Chargify, for example, are built specifically for SaaS businesses where ReCharge and Bold Commerce cater to businesses selling physical goods.
Within a business, subscription software is used by finance and accounting teams to track revenue and performance metrics. It can also be used by sales and marketing teams to develop insights into customer behavior like the most popular products and plans.
Why use subscription billing software?
From trading goods to cash payments to online checkouts and licensing, the way we sell goods and services changes over time. As technology advances and customer expectations change, businesses need to adapt their billing models in order to capitalize on new opportunities and optimize processes to meet the new standards.
Subscription billing is the most recent shift in how businesses sell. But while the model opens up a scalable and predictable source of revenue, it also contains a number of complexities that saw traditional payment providers and accounting setups fall short.
Subscription billing software is designed to simplify how you manage the complexities associated with subscriptions and recurring billing . This includes:
The ability to accommodate flexible subscription models, including pauses, cancellations and proration to ensure customers only pay for what they use
Dunning and payment retry processes that help businesses to recover more revenue
And a clear and accurate view over revenue and customer data.
For end customers, it creates a more satisfactory experience and a level of control over how and when they are billed.
Without software to do it for you, businesses are forced to build their own subscription logic to sit on top of a payment gateway which puts a heavy burden on engineering teams and can leave you with silos in your revenue data.
With subscription billing software the process is easier but there is still work to do to connect it with other components in your wider revenue delivery infrastructure, including payments, tax compliance, accounting, and fraud prevention.
Important features to consider when choosing subscription billing software
Subscription billing software shares a number of features but different providers choose which to specialize in depending on the types of business they serve.
Which features matter the most to you will depend on your business. For example, a global SaaS business is more likely to be concerned about multi-currency support and sales tax compliance than a business that only serves customers in one country.
Below is a list of popular subscription billing software features to consider, as identified by G2 :
Custom recurring billing : The ability to choose how often you bill customers (for example on a daily, weekly, monthly, or annual basis) and to offer trial periods, add-on payments, price modifications and proration.
Subscription data management : One source of truth for all of your customer data.
Subscription lifecycle management: Visibility over the customer lifecycle and the ability to automate aspects of it, for example, collecting payment information, and subscription renewals.
Compliance : Offering a level of financial compliance, and support for managing sales tax (depending on the provider, this varies from notifications and alerts to tell you where you’re liable through to full sales tax liability, managed on your behalf).
Analytics: The ability to measure success and optimize processes based on accurate data across core subscription metrics.
Dunning : The ability to strategically communicate with customers to collect or recover payments.
Multi-currency support : The ability to charge customers and collect payments in a number of different currencies.
A/B testing: The ability to test features, like pricing models, to determine where there are opportunities to collect more revenue.
Integrations: The ability to connect your subscription management software to the other tools in your revenue delivery infrastructure.