Organizations that use recurring business models add value to their company, keep their customers loyal and happy and attain consistent cash flow.
Nowadays, more and more companies seem to embrace recurring revenue business models, such as software as a service or subscriptions, due to the many advantages such models offer over other common transactional sales models. Organizations that use recurring business models add value to their company, keep their customers loyal and happy and, simultaneously, attain consistent cash flow. However, albeit the many benefits, this model can be complicated, and even inefficient, as it entails a number of challenges that need to be addressed.
Importantly, you have to be aware of the problems you may encounter with recurring revenue business models as different marketing strategies are required as well as adjusted sales plans, and even a new set of KPIs. Recurring revenue, for example, affects customer billing, which can instigate some problems for accounts receivable staff. To elaborate, a single sale in recurring revenue business actually represents multiple transactions which are billed at predefined intervals, for example weekly, monthly, or annually. To this end, customers are usually billed more often when compared to the traditional model in which a sale forms a single transaction that is billed only once. As a result, total billing volume is increased, hence accounts receivable are burdened with additional workload. What can be also complicated is the pricing strategy, that is, the billing process and revenue recognition. This is because when the customer requires variable rate structures, such as volume-based, tiered and/or customer specific pricing, the correct rate needs to be ensured. Considering that quantity and rates charged are not always the same, this is a prone to errors task. Furthermore, when promotional discounts and trial offers are involved, billing needs to include start and end dates. What is really burdensome as far as the management of recurring billing is concerned is the ineffective manual processes that may be required. Specifically, when you have to review numerous customer accounts on a monthly basis, for which you have to calculate the respective charges, you need too much time and, effectively, more staff to handle this large volume. Obviously, hiring needs increase operating costs, which should be prevented if you want to succeed in today’s competitive business environment. Finally, you often rely on spreadsheets for your data for keeping track of promotional periods, applying the respective rating models and, overall, for completing all tasks of recurring billing. This can be problematic as business leaders are obstructed from having an accurate, real-time view of financial performance.
Fortunately, all these challenges that may result in impeding business success can be easily solved by automating recurring billing. To explain, automation makes the billing process much simpler, time-effective and, most importantly, does not leave room for errors as manual tracking and rate calculations are not needed. Additionally, you won’t have to deal with the aforementioned challenges if you choose NetSuite ERP, a solution that enables you to keep customer data, pricing, and any other important information in only one place. Importantly, this is the ideal solution in order to run your billing operations smoothly as it provides data quality and real time financial visibility into billing and financial activity across areas like monthly recurring revenue, total contract value, and customer churn. At the same time, NetSuite’s Suite Billing improves cash flow and enhances customer relationships through offering support and fostering transparency with regard to billing activities, including consolidated invoicing, automated rating processes, as well as support to multiple pricing models. You can also turn your billing subscriptions to one-time charges or recurring fees, either in advance or in arrears. What is particularly useful is the provision of multiple rating models, through which companies can easily and straightforwardly create subscriptions that capture setup fees, license counts, and variable consumption in order to attain maximum efficiency with the billing process. Undoubtedly, by automating standard accounting tasks, employees become much more productive and have more time to deal with other important tasks. Especially if the finance team is using spreadsheets or other applications for managing recurring billing, SuiteBilling automates additional processes and improves visibility since significant financial data is stored and managed in a single centralized location.
NetU partners with Oracle NetSuite and can provide clients with this solution. If you require further information or consultation, do not hesitate to contact NetU, here.