The subscription business model has grown in popularity with providers of services or products because it establishes a regular, predictable income stream. This is particularly true for technology companies. However, the subscription model poses challenges, primarily in handling the accounting and billing for subscriptions. Our benchmark research on recurring revenue finds that only 29 percent of participants who have finance and accounting roles, and fewer than half overall, are satisfied with their subscription invoicing process. As for complaints about the process, most (79%) said it requires too much effort.
Simple subscriptions (such as for a magazine) are handled easily by any financial system. Today’s subscription business models, however, are complicated by billing methods such as usage-based charges, discounts, seasonal plans and adding or subtracting users during the period. Our research finds that a majority of companies use four or more billing methods. Accounting for these variations can be further complicated because the data specifying the details of the subscription may be kept in multiple systems.