updated on March 4, 2025 by tech-n-design

Managing subscription billing for recurring payments is a business imperative across all industries.

This will cover the key parts of billing management. Each one is important to get your billing right for your business to grow and be healthy.

Read our previous article for more on related software. Now let’s get into the nitty gritty of billing.

Understanding How to Choose a Subscription Plan

Selecting the optimal subscription plan for your business can often resemble traversing a complex maze. With numerous elements to consider, such as recurring payments, SaaS billing, invoicing automation, and subscription metrics, it’s understandable to feel daunted. However, this guide will illuminate your path and assist you in this intricate process.

Recurring Payments

The lifeblood of any subscription business is recurring payments. This means you need a system that can do multiple things. The system’s capabilities impact your revenue stream, from managing multiple payment gateways to processing credit cards to multi-currency.

Handling different billing cycles (monthly or annual) and subscription renewals is also key. These are not just operational tasks but strategic ones that bring in the cash.

In 2025, these requirements will become more complicated and harder. Businesses aren’t just looking for operational efficiency but strategic advantage.

The right system for recurring payments can give you that advantage and contribute to the financial health and growth of your business.

SaaS billing

Now let’s talk about the SaaS billing side of your subscription management system. The solution you choose should have customizable billing options, including usage-based billing. This is not just a feature but a tool to help your business adapt to your customer’s needs and your business growth.

Customer needs are all over the place, and one size fits all is no longer a viable option. A system with usage based billing can cater to a wider range of customers from basic plan to those who need more features and services. This flexibility will increase customer satisfaction and open up new revenue streams for your business and help your business grow and succeed.

Invoicing automation

Invoicing automation is another key part of subscription billing. Manual invoicing is time consuming and error prone. An automated system is a game changer.

Automating the process saves time, reduces the risk of errors, and streamlines. This benefits internal efficiency and the customer experience. Error free invoices means a smoother customer journey and more trust and satisfaction with your customers. That’s a big advantage that drives customer retention and growth.

Subscription Data

Subscription metrics are the lifeblood of your business. They give you a clear, quantifiable view of how you’re performing. A subscription plan that gives you real time analytics on metrics like churn and revenue recognition is not a tool, it’s an asset.

Churn Management Metrics

This is about customer retention, the key to any subscription business. When you track churn rates, you can see trends, understand why customers are leaving and implement retention strategies. Similarly, revenue recognition metrics allow you to track your financials accurately and comply with financial reporting and see your business in black and white.

These real time analytics will inform your pricing and planning decisions. They will help you adapt to market changes, customer changes and business needs.

Churn management is an area that requires your full focus. Your subscription plan should have features to help you manage and reduce customer churn. This is about retaining customers, increasing lifetime value and growing business sustainably.

One of those features could be automated emails for account updates. These can be timely reminders for customers to update their account details so they don’t get interrupted and churn.

A good dunning process is key to recovering failed payments. Payment failures can lead to involuntary churn which can be mitigated with a good dunning process. This is about communicating with customers about failed or overdue payments and allowing them to fix the issue.

Revenue Recognition

Understanding your revenue and reporting it accurately is critical to the success of your business. You need a plan to tackle this important job. It’s not just about keeping books; it’s also about keeping records that comply with financial reporting standards.

If your business is based on periodic payments, such as monthly retainer fees or ongoing commissions, you likely recognize revenue over time. This type of revenue is often tied to a long-term contract and is recognized on an accrual basis. This means you need a system that can handle this timing difference. That’s where your plan comes in.

A revenue recognition plan will help you calculate your income during the payment period, recognize it at the correct time and report it correctly on your financial statements. It will also keep you in compliance with GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards).

Accurate revenue recognition is also important for internal purposes. With a plan in place, you’ll have the confidence to make decisions about your business based on real financial information. You’ll also stay compliant with financial reporting regulations.

Dunning Process

The dunning process is another critical factor in subscription billing management. This process involves reaching out to customers to recover payments that have failed or are overdue. It’s essential to maintaining a healthy cash flow and minimizing involuntary churn.

A well-structured dunning process involves timely and effective communication with customers about their payment status. It’s about informing customers of failed or missed payments, providing easy ways to resolve the issue, and preventing service interruptions that could lead to customer dissatisfaction and churn.

A robust subscription plan should automate this process. Automation can ensure timely and consistent communication with customers, reducing the time and effort required to manage this process manually. It can also improve recovery rates by promptly addressing payment issues and providing customers with easy and convenient ways to make payments.

Pricing Strategies

Pricing plans are how you make money in your business, especially if you offer a service or product on a subscription basis. It’s a key factor in attracting and retaining customers, which is essential to your business success. Choose a flexible pricing plan so you can try different pricing strategies.

If you offer a service or product on a subscription basis, there’s no one-size-fits-all pricing strategy. Your customers are unique and so is their value proposition. Your pricing should reflect that. A flat pricing plan won’t allow you to offer the variety your customers need. A tiered pricing plan based on features, usage or a freemium model with upgrade options is a better choice.

A pricing plan that offers a variety of pricing models is also important. Pricing isn’t set it and forget it. As your business grows and the market changes, your pricing should too. You’ll want to adjust your pricing based on feedback from your customers. A flexible pricing plan will allow you to test different pricing strategies so you can determine what works best for your business and attract the most revenue.

In the end, the right pricing plan will give you the flexibility and tools to offer effective pricing strategies that meet your customers’ needs and grow your business.

The Customer Lifecycle

When selecting a billing management solution, it’s important to consider the customer lifecycle. Imagine the journey a customer takes from sign up to renewal. Your billing plan should support that journey every step of the way.

You want to start off on the right foot, so sign up should be seamless. If it’s smooth at the beginning, customers are more likely to stick around. As customers use your service, their needs will change. That’s where your billing solution comes in. It should allow for easy plan changes, handle cancellations, and make renewals a breeze.

Cancellations will happen, and how you handle them can have a big impact on your business. A great billing plan makes cancellations easy, and allows customers to resume service at a later time.

Finally, your billing solution should make renewals a breeze. You want to ensure revenue continues to flow in and customers keep using your service. Automating renewals is a great option, as it saves customers the hassle of remembering to renew.

Payment Gateways

A payment gateway helps your business and your customers connect so you can get paid for your products and services. They allow you to receive payments safely and securely. When selecting a subscription plan, make sure to choose one that supports multiple payment gateways.

Your customers come from all over and they all have different payment preferences. Some like to use credit cards, while others prefer digital wallets or online bank transfers. A flexible subscription plan is perfect for accommodating different types of customers. By supporting multiple payment gateways, you can accept payments from a variety of sources, making it easy and convenient for your customers to pay you.

The more payment options you provide, the easier it will be for your customers to pay you. Offering multiple payment options can also reduce payment failures and increase customer retention. A great subscription plan should simplify your business life while also enhancing your customers’ experience. This leads to happy, returning customers and healthy business growth.

Creating and Cancelling Subscriptions

Making it easy to sign up and cancel is important.

When I sign up to a service I want to know exactly what I’m getting and the value it delivers. I want to be able to cancel at any time and switch if something better comes along. I start by defining my pricing and tiers to make sure it aligns with the value I’m providing. Then I decide how often I want to bill: monthly, quarterly or annually. This billing frequency impacts how customers budget for my product or service. I often use subscription management software to automate billing and invoicing as well as payments. I can set and forget and my customers love the convenience. It’s a great way to set my business up for success from the start.

Canceling a subscription is where things get tricky. I believe it should be just as easy to cancel as it is to sign up. If I can cancel a subscription with ease I might not be so hesitant to try a service in the first place. I make sure my cancellation policy is clear and upfront with no fine print or surprises. I also consider adding features that allow customers to suspend or downgrade their subscription instead of canceling altogether. And I always keep a close eye on cancellation data. It’s full of insights on why customers are leaving and how I can reduce churn.

Tax Compliance

Tax compliance, not the most exciting part of running a subscription business but necessary. Your subscription plan should auto calculate tax so your business is always up to date with tax laws.

Tax compliance is a complex beast in subscription businesses. Different regions have different tax laws and these laws change often. Manually tracking these changes and calculating tax accordingly is a headache and error prone. That’s where automation comes in.

A subscription plan with auto tax can take this off your hands. It can calculate tax based on the latest laws so you get accuracy and compliance. Saves you time and effort and reduces the risk of non compliance and the penalties that come with it.

Also auto tax can improve the customer experience. By calculating and displaying tax at checkout customers know exactly what they are paying for and get transparency and trust.

Consider the Security of your Data

Your plan should put data security first, your business information and customer data.

Data breaches and cyber threats are real and constant. Your customers give you their personal and financial information; it’s your responsibility to keep that data safe. A breach could mean financial loss, damage to your reputation and loss of customer trust which can be long term for your business.

The right plan should have robust security in place. This means encryption to protect data in transit and at rest, secure access controls to prevent unauthorised access and regular security audits to identify and fix vulnerabilities.

And it should also comply with data protection regulations like GDPR and CCPA. That protects your customer’s data and your business from fines.

GoCardless: Best for Efficient Recurring Payment Processing

Conclusion

Subscription billing is a complex process important to businesses relying on recurring revenue.

You want to make sure you’re not only processing transactions but driving growth and delighting your customers.

To truly master subscription billing, you need to understand how billing cycles work, different subscription tiers, and payment plans. You want to make it easy on your customers, so learn about pricing strategies, reducing churn, proper revenue recognition, and legal requirements.

Following best practices means being proactive and prepared to evolve with the market.

Subscription Billing Management 101: FAQs 

1. What is Subscription Billing Management?

Subscription billing management is a business model where customers pay a recurring fee—typically monthly or annually—to access a product or service. This model requires a robust system to manage customer subscriptions, billing cycles, payment processing, and other related tasks. It’s a dynamic process that demands continuous monitoring and adjustments to ensure optimal performance and customer satisfaction.

2. Why is Subscription Billing Management Important?

Subscription billing management is crucial for several reasons. Firstly, it provides a predictable revenue stream, allowing businesses to forecast their financial future more accurately. Secondly, it fosters customer loyalty by offering consistent value over time. Lastly, it allows businesses to scale efficiently, as the infrastructure needed to manage many subscriptions can also handle a smaller number with the same effectiveness.

3. What are the Key Components of a Subscription Billing Management System?

A comprehensive subscription billing management system comprises several key components:

• Subscription Management: This involves managing the lifecycle of subscriptions, including sign-ups, renewals, upgrades, downgrades, and cancellations.
• Billing and Invoicing: This includes generating bills, sending invoices, and managing discounts or promotional offers.
• Payment Processing: This involves handling various payment methods, processing payments, and dealing with failed transactions.
• Revenue Recognition: This includes recognizing revenue in accordance with accounting standards and generating financial reports.
• Customer Communication: This involves notifying customers about billing issues, upcoming renewals, changes in pricing, and other relevant information.

4. What are the Challenges in Subscription Billing Management?

Subscription billing is not without its headaches. You may have to deal with multiple billing cycles, failed payments, and complicated tax laws — all while trying to keep your customers happy. As your business grows, these issues can multiply, which is why you need a flexible and robust billing management system. Don’t forget to hire a team to handle customer questions and concerns about billing.

5. How Can Businesses Overcome These Challenges?

I think that businesses should definitely look into billing management software to help them overcome the challenges of subscription billing. A good billing management software can automate and simplify your billing process, and allow you to set up multiple billing scenarios, accept a variety of payment options, and stay on top of tax laws and accounting standards. Having analytics to measure your billing performance is also a big plus.