5 Best Practices when Using NetSuite for Your Subscription Billing Business

Businesses of all types are finding that a subscription business model can be incredibly profitable. These longstanding business relationships with customers ensures companies earn consistent ongoing revenue. However, many companies find it tough to efficiently manage recurring contracts without the assistance of an ERP financial system like NetSuite, particularly as the company grows. Whether a model is based on subscription tiers that impact month-to-month pricing or must align subscription data with specific hardware, many companies recognize early on that these details are best managed by an automated system. 

Before you take the next step on your subscription billing business, we’d encourage you to consider the following five best practices to guide your NetSuite strategy.

1.  Plan before you scale

Companies often turn to NetSuite to help them manage their growth. After all, the leading ERP solution provides companies with tremendous efficiency, allowing them to focus more resources on growing the business. However, subscription-based businesses have added layers of complexity for which to account. Subscription costs may fluctuate within the billing cycle as customers adjust service levels. When paired with Internet of Things (IoT) devices, companies suddenly must also account for changes across hardware and software. Selling at the enterprise level, companies may find themselves managing large contracts that carry multiple subscriptions, bundled with hardware that may be deployed across a range of locations.

That’s a lot of detail to manage. While switching financial systems late in the game can interrupt operations for any company, this can be particularly detrimental for subscription based companies. The earlier a company invests in a system that can automate processes from order to cash, the more effectively the company can scale without sacrificing profitability.

2.  Don’t waste resources building solutions that already exist

It’s easy for innovators to fall into the trap of thinking that their unique product and/or service offering requires a similarly unique way of billing. For companies that already have a skilled software team, such as is the case for many IoT device manufacturers, it may seem a simple enough expectation to have an internal team build into the product software a solution that manages the complexity of subscription billing. In the early stages of product development, this may also seem to be the most cost-effective solution.

The challenge here is that as a company grows and scales, the product development team will be required to split its focus (or add more team members) to manage regular billing software enhancements. This is time that your valuable personnel resources could more effectively spend on developing improvements to their sellable intellectual property. 

Systems like NetSuite release product updates based on industry best practices at least twice a year. Are you prepared to commit resources to ongoing billing improvements, rather than product improvements to your IP? By moving all subscription billing processes into NetSuite, companies can more efficiently allocate their resources. 

3.  Eliminate data silos where possible 

The need to manually align accounting data at the end of the month for reporting opens companies up to all manner of risks due to human error or data omission. Those risks only grow with the amount of data that must be resolved, and subscription-based business models are imbued with layers of data. Containing all of that information within a single system like NetSuite greatly reduces the potential for accounting errors, verus splitting it across multiple systems (e.g. – separate CRM, external billing, and ERP/Financials).

This becomes even more impactful for organizations that are able to bring into the system processes beyond basic financials, such as inventory management and warehousing. With inventory management built into their ERP, companies can simplify forward and reverse logistics. The GL impact is posted instantly once an order has shipped or a return is received. And subscription companies can effectively align data between billing, renewals, related devices, professional services, customer installation sites, etc – all in one system.

4.  Plan for the entire subscription lifecycle

Many companies find data silos drag down efficiency. But subscription-based companies whose subscriptions are powered by devices or services have the added challenge of managing separate device and service silos over the lifecycle of a subscription. 

The challenge is that the sales and fulfillment of devices & services may occur at completely different volumes and timeframes than the activation of subscriptions that the devices & services may enable. In addition, IoT or device-oriented companies may need to replace failed or damaged hardware at some point, while pausing the subscription until the device being utilized has been restored. Refurbished devices may move to new customers on completely different subscriptions. Whatever the case may be, an integrated subscription billing solution in your ERP/Financials system should makes it possible to decouple the devices & services from a subscription and then relate them back when needed. This is especially true for companies that are managing subscriptions across thousands of devices, all upon a single enterprise contract. 

Managing these layers of detail across a series of systems can get overwhelming, fast. By using NetSuite and 360 Subscription Billing, companies can more easily manage the entire device, service and subscription life cycles. 

5.  Consider the compliance impacts of your subscription data 

All of the complexity carried by subscription business models can amplify when it comes to ensuring compliance with generally accepted accounting principles and international regulations. As a case in point, revenue recognition for subscription billing businesses requires organizations to have a clear handle on a number of variables: hardware, software, and service bundles stretching across a range of implementation dates; price fluctuations due to discounts or giveaways; delayed payment options based upon product or service delivery or implementation; and more. All of these variables, and the many changes that can occur along the journey from realizable revenue to earned revenue, can complicate the process of revenue recognition.  It all depends on how you are selling your contracts. 

The beauty of a solution like NetSuite is that it brings a wide range of data together into a single system. This consolidated data makes it possible to ensure compliance all within the same solution. That’s why NetSuite developed its Advanced Revenue Management (ARM) module. The module helps companies of all sizes efficiently operate in accordance with the criteria for revenue recognition laid out by international standards.  The ARM module in your Financials system can’t do its thing if your subscription sales & billing transactions are in another system.

Get more best practices with a partner you can trust

Managing a subscription-based business can be challenging. Fortunately, managing subscription billing with NetSuite doesn’t have to be. 360 Subscription Billing is available to guide you through the right modules and integrations for your unique business model. If you’re ready to get the best solution for your financial management, contact us today.