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Published on Thursday, 13 June 2013 16:52

Subscription based sales, selling software-as-a-service (SaaS), Cloud Services, etc. must be in the top ten of the business threats. 

It can be a customer relationship disaster, a back office nightmare, rubbish for cash flow and could get you in trouble with your Tax Office.

Repeated over-billing
Once the customers discover overcharging, your relationship and reputation is at best tarnished. You will then probably end up losing the customer but they will still want their money back promptly and this could result in a nasty and clearly un-forecasted dip in your cash flow.

Repeated under-billing
You may be confident that our systems will catch errors in the creation of the initial bill template, but errors made when amending a bill template, for example changing the bill frequency, adding additional services, etc. may result in undiscovered and consistent losses month after month.

Administration overload
Rather than one or two bills being raised for each sale, your administration is lumbered with billing-forever, for each and every new sale. Billing normally leads to payments and this requires administration time too.

Cash flow and forecasting
Subscription sales can put considerable pressure on your cash flow as at best, you will normally only “realise” your profits over time. Each subscription sale has the potential to have an initial negative effect on cash flow as set-up costs, purchases and labour may have to borne and then recovered over time.

Cash flow forecasting can also be more complicated and time consuming as you have to cater for the different frequencies, contract end dates etc.

Accountancy / Tax Office troubles
Correctly defining sales income for services, that have yet to be provided, where appropriate costs may not have be incurred, can get a business in trouble as they may misreport business profits. This includes collating the data for accountancy and tax requirements defined by the accounting requirements in Urgent Issues Task Force Abstract 40 (UITF 40) about recognition of turnover from contracts for professional and other services.

It can get worse; metered services, over usage, multiple platforms, for the first 20 units we charge….but if ….
So you provide your services based on one or more element of metered supply. Clearly you may have some levels of automation, downloads, spread sheets etc. but basically when bill time arrives, you find what they have used, check what might be included, get the unit price for the first usage level and then price the remainder, now onto the next invoice line. You then may compare it to the last bill to check for glaring errors.
 
You may have considered using a providers billing system if they have one. This clearly looked ok in the first instance, for single provider supply, but it comes with many more business threats.

If you have to make subscription based sales then automate
We, Encode It Ltd, do provide our software, as a service, so we use our own, market leading software for our Repeat Billing. For small businesses and business start-ups, we offer this software totally free* of all charges. * Like always, this is subject to terms and conditions.