You can’t run a growing SaaS or subscription company using QuickBooks, Excel spreadsheets and manual processes. Here’s how NetSuite plus an industry-built application helps organizations easily manage complexities like recurring revenue, reporting and compliance.
With an eye on improving their organizations’ agility and scalability, more CIOs are deploying Software-as-a-Service (SaaS) solutions to run their operations. A software delivery model that’s hosted centrally and that’s delivered via subscription, SaaS allows customers to access cloud-based software in exchange for a monthly fee. A market that’s expected to grow to more than $272 billion in 2021—up from $226 billion in 2020—the global SaaS software sector is expanding at a compound annual growth rate (CAGR) of nearly 21%.
As a whole, subscription-based offerings are in the midst of a growth spurt right now. Companies offering everything from security systems and managed services to fleet management and remote diagnostics have grown five to eight times faster than traditional businesses over the last two years. In 2020, for example, revenues for subscription companies grew by nearly 12% while their product-based peers saw their revenues decline by 1.6%.
These upticks are expected to continue as businesses and consumers alike adopt more SaaS software and sign up for more subscription services. According to the Subscribed Institute, 78% of adults worldwide are using subscription services (versus 71% in 2018), and 75% believe that in the future people will subscribe to more services and own less physical “stuff.”
To manage growing demand for their services while maintaining profitability, both SaaS and subscription companies need a unified cloud-based Enterprise Resource Planning (ERP) solutions that meet their unique needs. These are needs that most companies’ existing point solutions, basic accounting packages and disparate solutions can’t adequately address.
In this business guide, we look at the complexities of running a growing SaaS or subscription company, and explain the value that NetSuite cloud ERP combined with a native SuiteApp brings to the table for companies that are operating in this growing sector.
Managing the Opportunity Whirlwind
Operating in an industry that’s on a wild growth ride can be both exhilarating and challenging at the same time. While the opportunities to run a successful SaaS or subscription company are plentiful right now, organizations operating in these sectors have unique financial and operational management needs that they try to manage using QuickBooks, FreshBooks, Sage, Odoo and/or Excel spreadsheets.
Because they work with customers that purchase on a consistent basis, for instance, companies need robust recurring revenue capabilities that automate subscriptions at scale, support the launch of new plans and services, and help them leverage crossselling and upselling opportunities.
“The sheer complexity of managing the financials of a recurring revenue business model is itself a barrier to growth,” said Rufus Lohmueller, CEO at 360 Cloud Apps, LLC, a certified NetSuite Solution Provider. “Billing terms can vary significantly from client-to-client for amount charged, frequency of invoicing and start or end dates. This pain point is especially acute for businesses that need to manage product purchasing, inventory and fulfillment to meet customer needs in addition to subscriptions.”
Whether they’re providing Internet of Things (IoT) services to B2B customers, offering home security solutions to consumers, managing commercial properties, or providing professional development courses to individual companies, subscription and SaaS companies also need efficient, automated tools for managing price adjustments, subscription changes, usage charges, revenue synchronization and/or the physical tracking of related devices.
The Right Stuff
Working with SaaS and subscription companies whose annual revenues range from $5 million (on the startup side) to $100 million (for more mature organizations), 360 Cloud Apps developed a proprietary native SuiteApp that enhances NetSuite’s capabilities specifically for this industry. 360 Subscription Billing automates recurring invoices, electronic payments, credit memos, renewals and other recurring transactions directly within NetSuite. It also provides SOX-compliant tools for price adjustments, subscription changes, usage charges, revenue synchronization, sites and device tracking, and more.
360 Subscription Billing (360SB) also has a turnkey connector with Salesforce CPQ, thus leveraging the top, best-of-breed cloud platforms using common subscription objects, fields and automated behavior.
“The Salesforce CPQ Connector product is optional, allowing clients to connect the systems using their own preferred method,” said Ryan Brown, Director of 360 Cloud Apps. Available on the SuiteCloud Developer Network, 360 Subscription Billing gives SaaS and subscription companies:
• High-volume processing. 360 Subscription Billing can process over 300,000 records in a single execution.
• Electronic payments. Automated electronic payments for subscription invoices to ensure the process is transparent, easy, secure and compliant—all within NetSuite.
• Automated communications. Designate which contacts should receive recurring invoices and notifications via email.
• Automated revenue recognition. The solution provides flexibility in a normally rigid area and a seamless integration with NetSuite Advanced Revenue Management, which translates into less time synchronizing accounting processes and data.
• Easy and compliant subscription changes. Rate increases, temporary promotions, and upsells to increase Monthly Recurring Revenue (MRR)/Annual Recurring Revenue (ARR) changes are handled automatically and quickly.
• Flexible billing terms. Flexible contract start dates, billing dates and end dates. For easier back-end management, 360 Subscription Billing also lets companies consolidate subscription invoicing and renewals.
• Device, site and asset tracking. Designed with smart device, SaaS and managed services companies in mind, the SuiteApp tracks customer-specific data throughout the subscription lifecycle and provides invoicing detail, provisioning or support linkage, and warranty/return claim references.
• Fulfillment-driven terms. 360 Subscription Billing automatically syncs NetSuite product or service fulfillments with subscription billing and revenue terms.
• Consolidate or split invoices. Consolidated on one invoice or split out to different entities—360 Subscription Billing lets SaaS and subscription companies configure this on a contract-by-contract basis.
• Usage charges and rating. Include subscription related usage charges with contracts and invoices. 360 Subscription Billing provides usage rating by contract to calculate the amount to invoice across quantity tiers.
360 Subscription Billing also automates the subscription renewal process. This helps companies increase retention, sustain their revenues, and reduce their reliance on manual administrative labor. Customers can approve a renewal transaction for an additional term, for instance, with new start and end dates, billing frequency and amount.
Finally, the solution is easily expandable and customizable to each company’s unique needs. “360 Subscription Billing is built to grow,”said Brown, “and is an easily expandable and customizable platform that fits a company’s specific business process requirements today and in the future.”
Dramatic Cash Flow Increases
Recently, NetSuite SuiteSuccess enabled for rapid implementation leveraging included assets and best practices by vertical. 360 Subscription Billing gives subscription and SaaS companies the simplicity to directly use native NetSuite items and transactions in any desired combination and without the need for intermediate subscription layers.
Acknowledging that the recurring revenue business model is more complex than most business owners realize until they reach scale, Lohmueller said administering the back-office aspects of regular invoicing, revenue recognition, changes to terms, renewals and account receivables can all stymie growth and add staff costs without an automated solution.
“The ‘ah-ha’ moment usually comes when our customers realize a dramatic increase in cash flow through much more efficient account receivables and overhead costs,” he added, “that don’t scale at the same pace as increasing revenues.”
You Can’t Manage Without the Right Software
By managing customer contracts and automating the related recurring revenue in NetSuite, 360 Subscription Billing facilitates the subscription management process while allowing companies to scale up and leverage new opportunities in a growing field. “This makes managing subscriptions easier than ever,” said Brown, “and supports many different contract scenarios, allowing firms to serve their customers without the limits of other solutions.”
The solution also addresses variations within the company’s own customer base. For example, 500 clients may be on a monthly billing cycle while another 1,000 may be billed annually. Revenue recognition is also difficult, and particularly when customers are on open-ended plans (a monthly commitment that can be terminated at any time) and as companies determine whether to quantify and project that revenue potential per month, for a 6-month period or for an entire year.
As SaaS and subscription companies expand, these complexities grow right along with them. To best manage these realities, companies need cloud ERP that’s been tailored specifically to their industry’s needs.
“Due to the nature of the business, SaaS and subscription companies work in an extremely nuanced compliance and reporting environment, and particularly when it comes to following standards. It’s virtually impossible to manage without the right software package.” – Rufus Lohmueller, CEO, 360 Cloud Apps, LLC
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