Covid-19 has seen many businesses turn to alternative finance streams. Could Subscription Billing be the answer you have been looking for?
Subscription Billing is the latest in a long and substantial line of innovative methods of raising finance for your business. Britain is a nation of ‘super subscribers’, as the average household pays on average 7 subscriptions a month. So, what exactly is it, and how can your business benefit from it.
What is Subscription Billing?
Really, it is just a complex name for something you already know about. You will have come across it in the past, but most recently it is being used by broadsheet newspapers in order to pay staff for digital content.
Subscriptions are charged to the consumer based on their use of service throughout the month. You might operate payments in this manner if you run a gym, for example. Clients pay to attend on a monthly basis, allowing you steady income regardless of whether they attend or not. You could then charge an additional fee for optional extra services (like a specialised yoga class, for example).
Subscription billing is best described as when a merchant automatically charges a cardholder for specified goods or services on a prearranged schedule, popular and successful examples include the music streaming site Spotify, Amazon prime or Netflix. They have been around for a while now and offer several benefits to the merchant.
Benefits of Utilising Subscription Financing for your Small-Medium Business
There are several benefits to using subscription financing as your steady income, particularly in 2020. Some of the best of these include:
- Fixed Cash Flow Solution – you receive an exact amount every month, regardless of what else you make. What could be better for a merchant?
- Higher percentage of paid invoices – with automated payments you have no need of issuing payment reminders each month. You have the cardholder’s permission to charge them monthly, so payment is always prompt.
- Lower processing fees – online payments negate the need for postage, paper, and cheque processing costs.
- Increased flow of repeat customers – subscription billing means your business has repeat customers every month. This is a huge advantage when the cost of lead generation is considered.
Examples of Subscription Billing Success
A San Francisco based fin-tech firm called Chargebee, which helps businesses set up and manage their billing, subscription, revenue operations and compliance, has raised $55 million in a new financing round as it looks to accelerate its expansion in global markets.
Chargebee is a platform used by the popular coffee and sandwich branch Pret-a-Manger, who recently launched their £20 a month subscription scheme. The monthly payment would offer the customer unlimited free coffees, whilst providing a huge financial benefit for the coffee shop.
By some estimates, as much as 40% of Ecommerce revenue comes from repeat purchases. Streaming music services alone generated around $19.1 billion in 2018. However, only 30% of online bills are made on a recurring basis, while the remaining 68% are one-off payments. We are increasingly living in a subscription economy.
