This article was published in The Independent.
Driven by the rapid expansion in cloud computing, software as a Service (SaaS) products such as Office 365, Slack and Salesforce have seen rapid growth. But sustaining this progress will present a challenge if software companies fail to develop a deep understanding of the key metrics needed to maintain this momentum.
For SaaS organisations, finance departments are strategic assets. Their responsibilities include managing the complexities of recurring subscriptions and billing cycles – the very lifeblood of a business.
While consumer services such as Spotify, Netflix and Amazon Prime are generally fairly simple – one product, one price, one year – business to business (B2B) software tends to be much more complex.
Subscriptions must be kept up-to-date, with the right terms, price changes, upsells, indexes and legal entities. SaaS enterprises also need to create and maintain a single source of truth about transactions and revenue, thus enabling a 100 per cent accurate CMRR forecast.
Subscription management software may need to integrate with other systems such as finance or CRM. For some businesses, there may be international requirements with different VAT or sales tax rates. And B2B sales are often varied, with specially negotiated agreements and added value included. More fundamentally, businesses are constantly changing. They need to be agile and flex with circumstances. The services they provide must flex with them.
Subscription management for SaaS supports efficiency not only because it reduces the risk of human error but also because it provides the ability to track key SaaS metrics, automate invoices and communicate with new and existing customers. However, without subscription management, solution growth is at risk of being very rigid and unable to cope with changing business requirements.
“Subscription management and data insights can help us to better understand how our customers use our products and where there may be gaps in services we haven’t yet thought of,” says Niclas Lilja, founder of Younium, a leading European provider of B2B subscription management solutions. Younium’s subscription management system manages the full life cycle of B2B customer subscriptions and integrates all the processes from sales to finance, removing errors, making changes to subscriptions and controlling invoicing.
Younium supports B2B subscription software providers that need a more flexible solution. “Many B2B salespeople negotiate wildly and freely,” says Lilja. “There is a need for a system that can cope with this: a system that isn’t limited to a single price for a single offer.”
SaaS providers can also benefit in other ways, with control of their advanced subscription services. Younium’s experience across many different types of software businesses means that it can offer extensive best practice advice where finance departments can analyse and report KPIs without risk of errors. This also includes getting the basics right: remembering to invoice repeat subscriptions and chase late payments or changing pricing when initial special terms have expired.
Younium also provides systems that support sales, with real-time information about the value and profitability of individual clients and ways of streamlining the quote-to-order process. This helps its clients to improve the B2B customer experience, enabling them to move from billing based on complex spreadsheets to online systems where self-service renewals can be provided.
Linked to this is support for financial operations. Billing, collection and data management can be automated, saving software houses time and costs and supporting business decision-making. Automating billing based on usage can be enabled so that subscription invoices can be sent out on time – a powerful way of protecting cash flow. Auditing and reporting can be simplified, too.
Advanced subscription support can even increase the valuation of a business because a transparent billing system makes future subscription revenues visible. Surfacing these recurrent revenues is essential, especially for externally funded companies. Younium enables subscription businesses to describe their future revenue streams more fully and credibly, with monthly repeating revenues (MRR), retention rates, customer acquisition costs and lifetime value.
In the past, most major subscription management services have originated in the US, where there is a large and relatively homogenous single market. Europe is made up of several small markets, and subscription services need to be flexible to cope with the variety. With its European heritage, Younium is well placed to manage the complexity of B2B services in multi-faceted international markets.
It’s clear that this highly flexible subscription management solution will empower SaaS companies to understand and act on their essential metrics. It is this innovation that is driving the reinvention of the software subscription industry.