Steps for a successful transition from invoicing to subscription billing
Invoicing has traditionally been the most popular and widespread method for small to medium-sized businesses to bill their clients or customers for goods and services.
The payment method aspect of invoicing is a disadvantage; even with tight payment terms, most businesses will experience late invoice payments. This can cause a severe problem because it directly affects cash flow.
A solution has been found!
If you regularly sell goods or services to the same customers, it may be worth switching away from invoicing to a subscription model with recurring payments. Here’s what our Liverpool Website Design team at Blue Whale Media have suggested about subscription billing on your ecommerce website:
A Subscription Model
A subscription model allows your customers to sign up to receive regular goods or services, weekly or monthly. Recurring billing means that they agree to pay you for those goods or services on the same regular basis, sometimes in advance. Payment is usually automatic and fast, with money taken directly from the customer’s bank within a few days. Here are the benefits:
- More predictable cash flow
- Bill people upfront
- Price products based on the value
- Reduce the risk of late payments
- You keep existing customers
Choosing the right billing system
You may already be using cloud accounting software such as Xero, to send your invoices. This software type has considerable advantages over conventional software because you can access your accounts from any device with a web browser. Cloud accounting is essential when moving from invoicing to subscription billing. This is because the software is kept up-to-date; it is easier to manage subscriptions and reduce human error risk.
Optimise the cash collection process
Subscription billing allows you to get paid faster, in turn improving cash flow. It’s best for subscription billing to use the ‘pull’ payment method, which allows you to take the money from your customer’s bank each month when it’s due. All this requires is your customers to complete a simple mandate that authorises all the following payments. This way, you can allow them to choose a billing date for their convenience.
Build your customer relationships
Subscription billing doesn’t remove the need to build strong relationships with your customers, but it makes it more critical. The ongoing nature of the subscription model means that building and retaining those relationships is crucial. You also may want to get feedback from your customers as you move from invoicing to subscription billing because your customer needs may have changed and now is the perfect time to learn how and why.
The best way to set up subscription billing with direct debit is to get the customer to complete a mandate within a secure webpage. The leap to a subscription billing system may seem like a daunting undertaking; it is actually a pretty seamless process if you select the right software for your business needs.
The subscription-based landscape is becoming increasingly more popular and presents the advantages to both your business and clients, making it a win-win situation.