In an attempt to survive (and thrive) in a rapidly evolving and ultra-competitive business landscape, many companies have adopted a recurring revenue model to establish stable and predictable income streams. This approach goes beyond the traditional transactional model, fostering long-term customer relationships and profitability. As businesses increasingly shift toward recurring revenue streams like subscription-based models, efficient revenue management becomes essential.
This is where recurring revenue management software comes in, like subscription management, order management tools, billing, and revenue recognition software—revolutionizing how companies manage all the details and processes surrounding subscription-based revenue accounting. The purpose of this article is to help finance and accounting teams choose the best recurring revenue management software for their needs. In doing so, they (and perhaps you) can get back to focusing on the strategic initiatives that move the needle instead of wasting time in the recurring revenue weeds.
What Is a Recurring Revenue Model?
Chances are, you’re already acquainted with the concept of recurring revenue models. However, for a quick recap, let’s dive deeper into what exactly constitutes a recurring revenue model and touch briefly on its benefits. In essence, it is a strategic approach by many businesses to generate consistent income streams over time. At its core is recurring billing, a method of charging customers at regular intervals (like a monthly subscription) and often facilitated by specialized recurring billing software or subscription management software.
This steady inflow of revenue, known as recurring revenue, allows companies to stabilize their financial outlooks and plan for future growth and investments. However, effective revenue recognition within these models typically requires careful consideration of the subscription lifecycle and management of recurring payments.
In addition, subscription management (keeping your customers happy by easily managing their subscription needs) is a key component of this business model. It includes activities like customer onboarding, billing cycle management, and customer retention strategies.
By optimizing all these elements, businesses can create sustainable, predictable revenue streams while providing ongoing value to their customers.
Key Features and Functionalities of a Recurring Revenue Management Solution
There are several features you should look for in a subscription management software tool. Remember, the primary goal is to find a solution that will make your team more efficient when it comes to revenue tracking, billing, and customer management.
Subscription Lifecycle Management
Naturally, subscription lengths, terms, and prices can vary widely between different companies. It’s crucial to find a recurring revenue management solution to configure subscription plans, including pricing, billing frequency, and trial periods, to match exactly what you need.
Even better if the subscription management platform you select allows your customers to manage their subscriptions themselves (upgrading/downgrading plans, updating payment information, viewing billing history, etc.).
Billing and Invoicing
Another thing to look for is software that generates and sends recurring invoices to clients on a predetermined schedule (making your life easier) and lets you customize invoice templates and branding as you see fit.
This is a biggie. Make sure to pick a revenue recognition software that will automate the allocation of your revenue across different periods so your company stays in compliance with subscription revenue recognition standards like ASC 606 and so you can generate accurate financial reports.
Furthermore, it should manage deferred revenue and be flexible enough to recognize revenue under your specific revenue policies.
Advanced Analytics and Reporting
A high-quality subscription management program will also track key metrics like Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), Churn Rate, and Customer Lifetime Value (CLV), in addition to producing detailed reports and dashboards that provide timely insights into your company’s subscription performance, growth trends, and customer behavior.
Churn Management and Retention
Subscription-based companies simply must stay on top of churn. As in how quickly it is losing customers due to subscription cancellations and non-renewals.
Ideally, your recurring revenue management solution should predict potential churn by identifying at-risk customers. It should also provide tools like targeted communications, offers, and personalized experiences to help improve retention.
Another question to ask as you’re making a decision is—does the software allow you to experiment with different pricing strategies like usage-based or consumption? And does it support upselling and cross-selling opportunities based on customer behavior and preferences?
Integration and Scalability
When selecting a recurring revenue software, it’s important to ensure it seamlessly integrates with your other business systems, such as your CRM, ERP, and accounting programs. This enables a smooth flow of data and allows the software to scale alongside your business as it grows. The software should also be able to handle an increased transaction volume with ease.
Assessing Your Business Needs
Your business is likely very different from the next—even one utilizing a recurring revenue model. That means the software that works for them might not work well for you. So as you move forward in selecting a recurring revenue management solution for your company, take the time to identify and assess your accounting team’s individual needs, challenges, and objectives.
Evaluate Your Current Challenges and Pain Points
A good place to start is by pinpointing the issues and problems that frustrate your finance team on a daily basis. For example, are they wasting hours of valuable time a week (or day) on tedious and inefficient manual data entry? Are they lacking real-time performance insights? Are they struggling to predict market trends accurately?
Once you’ve identified their existing pain points, you can seek out modernized revenue management software that tackles these specific challenges. The right program can literally transform your team’s entire approach to revenue management and, bonus(!), eliminate human error via automation. Addressing your company’s particular challenges will enhance operational efficiency and unlock untapped revenue potential.
Define Your Essential Requirements and Objectives for the Software
Beyond your team’s pain points, think through what requirements and objectives you and your team have in mind for this software. Are you looking to automate billing? Is there a desire for it to forecast revenue or manage your subscriptions?
Some common features that might resonate with your team include:
- Subscription plan creation
- Flexible pricing options
- Automated invoicing
- Customizable billing cycles
- Payment gateway and CRM integration
- Robust reporting and analytics
- Automation of customer communication
- User-friendly dashboards
- Revenue recognition compliance
Like any other major decision, listing these objectives and all your other desired features and functionalities can be helpful. Putting them in a checklist format will make it easier to compare different recurring revenue management options.
For each, go through the list and check off all the objectives and requirements it fulfills. Ultimately, the ones with the most checks should be your top contenders.
Outlining your desired features and aligning them with specific business objectives will help ensure that the recurring revenue management software you select both streamlines operations and maximizes revenue growth and customer satisfaction.
Forgotten Factors to Consider When Making Your Decision
Some considerations are often overlooked when companies go down the rabbit hole of trying to find the best recurring revenue management solution for their specific situation. So you don’t also accidentally forget them, let’s discuss them in further detail below.
Scalability and Flexibility
It’s essential to choose software that isn’t so rigid it can’t adapt to all the currently unforeseen changes that will occur in your business in the future. Look for a solution that can handle growth without running into performance issues and is flexible enough to adjust to future pricing changes and fluctuating market demands.
To assess the scalability and flexibility of a potential solution, first identify your company’s current and future requirements (e.g., the volume of transactions, user load, integrations with other systems, and potential changes in your business model). Then run some tests on the software—namely, load testing (simulate heavy levels of user activity to see how it performs), horizontal vs. vertical scaling (ask if it can be scaled by adding more servers or by upgrading hardware/resources), and auto-scaling (check to see if the software supports automatic scaling based on predefined triggers like increased traffic).
To evaluate its flexibility, find out if your team can tailor workflows, data fields, and reports to its requirements. Additionally, check into the availability and capabilities of APIs for extending its functionality or connecting with other tools.
And don’t forget to inquire about the software vendor’s roadmap. Are they planning to introduce new features or technologies that will align with your future needs?
Considering how well the software will communicate with other essential business applications is imperative to ensure seamless data flow, efficient operations, and accurate reporting.
Here’s how to evaluate a tool’s capabilities in this area: Begin by identifying your company’s integration requirements (i.e., what key programs need to connect to the software?), then check the software’s supported integrations, API capabilities, and integration methods (by the way, APIs tend to be the most flexible and customizable).
Next, scrutinize the tool’s API documentation for data transfer details, error handling, and security measures. Also, consider the software’s real-time syncing versus batch processing capabilities and its performance and scalability under varying data loads. Finally, test integrations before implementation and factor in costs and ROI.
Security and Compliance
Nowadays, organizations simply can’t ignore data security and regulatory compliance. Neglecting these is an extremely risky move that can potentially lead to severe financial repercussions, damage to a company’s reputation, legal liabilities, and loss of customer trust.
To safeguard against these risks, businesses must prioritize robust security measures and ensure that the recurring revenue management software they use will protect sensitive financial and customer data. To check this, ask the software vendor if it offers data encryption through secure transport (TLS/SSL) and multi-factor authentication.
Additionally, look for the software to adhere to data privacy regulations like General Data Protection Regulation (GDPR) and to support defined user roles and permissions.
Finding a software vendor in compliance with AICPA SOC (the American Institute of CPA’s System and Organization Controls) is also a huge win, as adherence to these stringent security standards shows a serious commitment to enterprise-level customer data security. RightRev achieved SOC 1 Type II and SOC 2 Type II compliance in January 2023; elevating its security compliance to accomodate Enterprise-grade customers.
Lastly, to ensure comprehensive security, consider the following steps:
- Seek out strong data backup and disaster recovery mechanisms
- Verify the presence of a comprehensive incident response plan
- Ensure consistent software updates are in place
- Provide regular training for employees on security practices
- Take into account the security reputation of the vendor
Automation and Workflow Efficiency
Recurring revenue management software automates many previously manual (and labor-intensive) processes, improving overall workflow efficiency. Automating tasks such as invoicing, payment tracking, and revenue reporting helps businesses reduce human error and save substantial amounts of time.
For instance, automated invoicing systems can generate and distribute invoices promptly, ensuring faster payment cycles and reducing the risk of overlooked transactions. Similarly, automated reminders for overdue payments can benefit cash flow management. And automation can also improve strategic decision-making by providing various departments access to synchronized real-time data.
Automation expedites revenue-related tasks and minimizes operational bottlenecks so your team can focus on higher-value activities instead.
Analytics and Reporting
Analytics are increasingly prevalent in today’s AI- and data-driven business landscape. More and more companies are analyzing data to make sense of revenue trends and consumer behavior to make well-informed decisions that drive growth. As a result, it’s extremely helpful to use software that outputs revenue reports in real time so teams can spot notable patterns, correlations, and anomalies within their financial data—shedding light on factors that influence sales and profits.
In your quest to find software with robust reporting capabilities, prioritize features such as customizable dashboards, real-time data updates, and the ability to generate detailed visual representations. Furthermore, seek tools that can efficiently handle large datasets and provide predictive analytics to anticipate future trends. A user-friendly interface and compatibility with various data sources are also key considerations.
Is Recurring Revenue Management Software Worth It?
The answer to that question is a resounding yes. Deciding to use recurring revenue management software is absolutely 100% worth it.
Not only will putting a financial operations platform of this kind in place significantly improve the lives of your finance and accounting team (we’re talking about eliminating a ton of tedious tasks here), it will instantly boost efficiency, increase customer satisfaction, reduce manual errors, and help guarantee predictable cash flow. In the long run, implementing revenue management accounting software to streamline your billing process, manage subscriptions, track KPIs, forecast revenue, automate revenue recognition, and more will no doubt drive revenue growth.
To ensure a positive experience, remember the factors mentioned above as you and your team decide which recurring revenue platform to use. Ultimately, investing in the right revenue management tools in today’s competitive landscape will ensure a brighter and more prosperous future for any organization.
How RightRev Can Help
Highly scalable and flexible, RightRev is built to take the many complexities of modern recurring revenue management off your hands. We know just how cumbersome and labor-intensive contract changes can be when finance teams manually manage all those little details day-in-and-day-out. Our configurable subscription-focused rules engine understands those modifications and accounts for them so your team can shake free of spreadsheets and tackle high-level initiatives instead. RightRev’s API-based revenue recognition engine can integrate with any upstream order or subscription management tool and billing application. It also integrates with your ERP for a clean, consolidated feed into your General Ledger.
The grind is real—we get it—and we genuinely want to liberate you and your finance folks from it. Contact us today to learn exactly how RightRev’s state-of-the-art revenue recognition software can benefit your company.