In many diverse industries, an intriguing trend is the subscription business model. Like Netflix and Amazon, many companies now look to subscription buying to attract customers, personalize product delivery, and ensure recurring revenue. However, as the subscription business model becomes more widespread, companies realize the increased complexity of their accounting and financial reporting. Work 365 can help your subscription business handle the challenges.
Accounting and Financial Reporting Challenges
The subscription business model offers distinct advantages. However, as companies adopt the new strategy, they must realize the challenges of managing subscriptions and growing subscription-based revenue. Logistics and accounting must deal with non-standard billing and contract terms, inconsistent renewal dates, pricing tiers, payment methods, etc.
Deferred Revenue
Traditionally, when companies bill customers each month, they also receive monthly payments. However, receiving advance payment for products or services that have not yet been delivered can be challenging. Deferred revenue or income that has not yet been earned is a liability.
Rather than reporting it on the income statement, deferred revenue is treated as a liability on the balance sheet. Accurately calculating deferred revenue liability can be challenging.
Revenue Leakage
Subscription customers expect high levels of flexibility in payment and subscription terms. However, flexibility introduces complexity in your accounting process. Without a real-time view of customers and their various billing agreements, companies risk billing incorrectly.
Strategic subscription management requires companies to plug many loopholes and stay on top of changing billing options.
Non-integrated Billing and Accounting Solutions
Another challenge for subscription-based businesses is integrating their billing processes with their accounting solutions. To build reliable, recurring revenue, you must be able to invoice your customers accurately, taking into account their flexible payment schedules. That will require a constant data flow between your billing and accounting systems.
Unless you can manage customer subscriptions and invoices with flexible billing components, you won’t be able to grow your business to adopt new billing models, capture more revenue, or process global payments.
Handling New Subscriptions, Add-Ons, and Renewals
Accurate tracking and invoicing will be challenging, with new customers, add-on items, and subscription renewals continually occurring. For companies embracing the subscription model, tracking, reconciling, and reporting such changes while also managing taxes requires them to monitor changes in subscription data constantly and then adjust individual customer invoices quickly and accurately.
Accommodating Different Billing and Accounting Requirements
Subscription businesses need robust billing and accounting systems to record transactions and issue timely invoices. While billing and accounting systems have sometimes overlapped, they serve two purposes. Subscription businesses need both systems to track and invoice usage-based billing accurately:
Accounting systems document and classify financial transactions, including total revenue, profits, budgets, expenses, and accounts payable and receivable.
Billing systems automate complex manual tasks associated with creating accurate invoices and efficiently track actual product/service usage, client provisioning, discounts, plans, tiers, taxes, etc.
Accurately Track and Invoice Usage-Based Billing with Work 365
Work 365 is a modern billing and invoicing automation platform that will afford your subscription businesses complete control over your accounting and financial reporting. It will enable you to streamline operations, track, reconcile, and report on usage-based consumption, and ensure recurring revenue.
Powered by the Dynamics 365 Platform, Work 365 provides advanced automation capabilities with Power Automate, Power Apps, and Dataverse.
With Work 365’s automated billing platform, subscription businesses can automate processes across various accounting and financial reporting tasks, including provisioning, change tracking, invoicing subscription management, and product bundling.
Work 365 enables seamless integration with leading accounting and payment systems to automate complex invoicing tasks and drive faster collections. You can devote more energy to serving your customers, crafting customized experiences, and proactively plugging revenue leakage by saving time on internal support and complex administrative tasks.
Implement Work 365 today to efficiently manage and automate recurring billing, track flexible billing terms, and ensure accurate invoices.
To learn more about Work 365 and how it can help your subscription business handle financial reporting challenges, contact our experts.
By Work365, www.work365apps.com
