Business models with recurring invoices (recurring billing) have existed for a very long time. While subscription-based print products such as daily newspapers, magazines, and books used to be the norm, e-commerce and SaaS business models with recurring invoices have now also become common. Subscription billing and recurring billing sound synonymous to most people. But does the corresponding software also offer a comparable range of functions? Are there differences and, if so, what are they? This article deals with subscription management and recurring billing.
With recurring billing, also known as a recurring invoice, a retailer or service provider charges a customer regularly for goods or services on a recurring basis. As a rule, the customer grants the provider prior authorization to collect the invoice amount. The invoicing process is automated.
Recurring invoices are used, for example, for subscriptions or club memberships. These regular payments also occur in the rental of real estate and other goods, in the supply of electricity, gas, and water, as well as for SaaS services and internet service providers. Recurring billing maps the processes surrounding invoicing and payment collection. These processes also include the representation of the respective pricing models and billing cycles.
The advantages of recurring invoices and the associated recurring payments clearly lie in predictable cash flow as well as the automation of invoice creation and collection. As a rule, recurring automatic invoicing is also more cost-effective for the provider than creating individual invoices for each transaction.
Recurring billing software supports the invoicing process and makes it possible to collect customer payments through various payment methods such as credit and debit cards, Stripe, or SEPA direct debit.
For this purpose, customers provide all necessary data during the first payment and give their consent for regular debits from their account. Recurring payments can be divided into fixed and variable payments. With fixed recurring payments, the customer is always charged the same amount for the same billing cycle. Variable payments are generally used for consumption-based services, since the invoice amount may vary at the end of each billing cycle.
A subscription refers to the recurring use or receipt of a service. Subscriptions exist both in the form of newspaper or magazine subscriptions and in the form of flexible internet subscription offers. A distinction can be made between product subscriptions and service subscriptions. Subscription business models range from daily newspaper subscriptions and gym memberships to music and video streaming services and food subscriptions (meal boxes, etc.).
Subscription management is about the successful management of customers and the successful administration and marketing of recurring deliveries of services or products, while ensuring customer satisfaction. Profitable revenue should be generated through subscription terms that last as long as possible. Naturally, subscription management is also linked to the recurring billing of the subscription.
Subscription management software generally includes all functions required to map the management and marketing of subscription products as well as their billing. These important components and functions include:
Before a subscription is concluded, you can use the software for:
During the subscription and after it has ended, you can use the software for:
Subscription management software is suitable for all companies with subscription products or subscription services, regardless of company size or industry. In contrast to recurring billing software, subscription management software offers additional functions that go beyond merely creating and monitoring recurring invoices and incoming payments. Subscription management software considers and maps the complete life cycle of a subscription product or subscription service.
For a successful subscription business, regular payment for the subscription is not the only important factor. Customers want to be well looked after and not just receive the product or service on time and regularly. In subscription management as well, the service concept and customer service experience have long since taken center stage. Building a positive and long-term relationship with the customer is important for every company with subscriptions in its portfolio. For this purpose, subscription management software is better suited than standalone recurring billing software, especially since the functions for recurring invoicing are already a fundamental component of subscription management software.