Revenue and Subscription Management doesn’t need to be hard

If you are a software company, ARR, or Annual Recurring Revenue is by far the most important metric to your business.  It’s the principal metric used to put a valuation on your business. Ironically, even the biggest software companies have a completely disjointed subscription management system, with this key data sitting between CRM, spreadsheets, and accounting.

However, managing this revenue is very different from other types of revenue, like license, or services, it is vital to get it right, as it is very valuable.

As a SaaS company, you work hard to get every dollar of recurring revenue in the door.  Even if you are the best in your cohort, it probably cost you a dollar in sales and marketing costs just to get a dollar in ARR bookings.

What are the key elements to get Subscription Management right?

This seemingly straightforward process is hard to manage because of the number of variables that must be taken into account:

• Do you offer customers monthly, quarterly annual, or multi-year terms?
• Are your price points different based on term? E.g. do Monthly plans cost more than Annual ones?
• Does subscription start on order date, go-live, or another specified date?
• Do you invoice on order, or specified date?
• Do you invoice based on the subscription term or offer flexible payment terms? E.g. 1 Year term, monthly pricing, etc.

Hand-off to accounting

All this price flexibility can make it challenging for accounting to manage. For many software companies, the handoff from sales to accounting is a mess. The sales team could be inventing products, new contracting terms, pricing models. The creation of the invoice for accounting is entirely manual. What is even more difficult is that recurring revenue is deferred revenue – unless the billing is monthly, the invoice amount can’t be recognized as revenue.  Tracking this information becomes difficult and this is the point where accounting usually sets up a spreadsheet to track the deferrals.

The above scenario is not so bad when you have a handful of customers. But when that number is in the thousands, and the subscription renewal dates are spread out all over the calendar, it’s a lot more problematic.

And that’s not all you have to manage, as you also need to consider when existing customers add to their current plans, be it the same or different services altogether. Accordingly, licenses may have to co-termed so that all of the individual subscriptions in a customer’s account are set to the same term dates, and prorated as necessary. Or maybe they shouldn’t be co-termed.  The option needs to be made available for the buyer to decide.

Subscription Management: Upsells & Cross-sells

Imagine you are a new customer success manager inheriting 100s of accounts. How do you figure out what the customer owns, when they purchased and for how much?  The answer is simple, you ask accounting or legal to piece it all together.  That takes a lot of time when the process to quote an upsell should be fast and simple.

What about Renewals?

When it comes time for the renewal, if you are managing subscriptions manually, there is a good chance you are managing the renewal manually as well.  This includes creating an opportunity manually, identifying the renewal amount based on last year’s renewals against any downsells or upsells over the past year. The administration on this process is significant, and prone to error.

Why are you managing your most important revenue in a spreadsheet?

In short: perhaps it’s time to move on from that spreadsheet to a better subscription management system. And, we can help you manage that ARR like a boss.

Enter TekStack

We have built Subscription Management right within TekStack, incorporating it into the sales process. SaaS companies can manage all recurring revenue from one tool, as a by-product of the built-in Opportunity CPQ process, also managing renewals and co-terming subscriptions as well. TekStack helps you:

• Track Subscription Revenue: Manage ARR by customer and by revenue type automatically as part of your deal close process. You can also track the subscription history, so you know the previous buying price.
• Manage Renewals: Automate the renewal process or require a signature to renew contracts – and start that process in advance. Automatically generate renewal opportunities and run renewal playbooks
• Automate Invoicing: As discussed earlier, generating Renewal Invoices isn’t always straightforward. Handle co-terming invoices, prorated costs, and contracted price increases automatically, whether monthly/annual/multi-year terms (or a combination of them all).
• Management reporting: Get key metrics including ARR run rate, annual/monthly growth, track ARR on new logos, opportunities for upselling or renewals, customer attrition/retention and net churn.
• Get an idea of how much of ARR is live (not at risk), and align ARR to customer health – so you get ample notice of when their renewals are coming and to act accordingly.
• Give your Customer Success team the information they need, including: What does the customer own, what quantity, and what price? What is the transaction history over time?

Provide your Customer Success team the information they need for your company’s success.

Interested in a fully featured and integrated subscription management app without the need for third party tools? Then contact us for a demo.