“We have become slaves to subscriptions. “
This is a quote from my millennial son. But it applies to all of us. We rent everything. Think about Adobe. Netflix. AWS. Getty Images. Getty Images had an aggressive acquisition strategy that bought out many private agencies that had built a stock photography business. And companies and their investors love that for good reason. Subscription revenue creates stable and predictable revenue streams with no sales costs, thereby increasing their ratings.
Subscription spending is increasing as a percentage of total B2B spending (we know that business travel and expenses have dropped significantly, with an unknown amount over the next several years), even though there is no specific industry data. I’m sure there are spend analytics companies out there that can break down the sourcing data to prove it.
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And because of the technology, it’s no longer coffee services or maintenance contracts or cloud storage or servers that have a subscription. Companies have built technology into their products that enables them to collect data and offer it as a subscription.
Michelin, the tire and rubber company, uses sensors on tires to offer MICHELIN Track Connect Technology to keep hauliers and others constantly informed of the pressure and temperature of each tire. United Technologies has announced plans monetize its data and analytics skills by leveraging IoT capabilities into value-adding, subscription-based services for its customer base.
How does a company deal with all of these subscriptions that are paid for as buyers and accepted as traders?
Subscription management on the buyer side
Many companies moved their services to the cloud during the Covid pandemic. You now have to pay IT for infrastructure and domain name renewals, marketing buys Facebook and Google ads, HR pays for their LinkedIn employee subscriptions, so many services have to be paid for on a regular basis.
When all of these services are tied to a company card that can be in the hands of multiple employees, problems arise. Cards expire, cards are lost or canceled, employees terminate. For a small to medium-sized business, all of this can lead to business continuity issues, from losing domain names to freezing infrastructure.
Solution providers are increasingly offering companies a way to manage these expenses in a controlled manner without the need for specific people to issue company cards. Such a company, Mesh payments, provides a single point of contact to orchestrate, manage, analyze and optimize and reconcile subscription payments and prevent payment defaults.
Sales-side subscription management
Merchants have to bill customers for B2B subscriptions, which are usually automated on a fixed schedule. Invoices have to be created for different subscriptions (fixed, usage), billing frequencies and to manage discounts. The software must also handle cancellations, provide email notifications, update customer payment details, and handle payment collection, including integration with various payment gateways depending on where B2B customers are from. And companies can pay for their B2B subscriptions through a number of different payment methods – a combination of checks, ACH, and card, which is a huge headache for the Treasury Department.
There are many more sell-side solutions than buy-side solutions. Many of the PayFacs have added subscription management software to their suite. We profiled Bluesnap recently and his Subscription billing module.
As subscriptions become a bigger part of the B2B supplier world, businesses of all sizes need solutions on both the buy and the seller side.
David Gustin leads Global Business Intelligence, a research and advisory practice focused on the interfaces of payments, trade finance, trade credit, and working capital. He can be reached at dgustin (at) globalbanking.com.
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