B2B Payments

B2B Subscriptions Change The Corporate Accounting Game

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From beauty care boxes to online entertainment streaming services, the world of subscriptions is expansive — and getting bigger. Consumers aren’t the only ones getting on board, though, as businesses jump on the subscription bandwagon in troves.

If you need proof, look no further than the Software-as-a-Service world. Corporations are predicted to bump their spending on SaaS apps to $50.8 billion by 2018, a 13 percent jump from 2013 levels, while 27.8 percent of enterprise apps will be SaaS-based, IDC estimates said earlier this month.

And that’s just a slice of the B2B subscriptions sphere, said Tyler Eyamie, CEO of subscription billing solutions provider Fusebill, in a recent chat with PYMNTS. With companies turning to subscriptions for anything from software to meal services, from Internet of Things-connected devices to online marketing, the way companies sell to and buy from each other is changing.

According to Eyamie, the attraction towards subscriptions is also shifting the way companies bill and get invoiced for their services, creating a new world of logistical challenges for cash flow management.

 

Shifting To A Subscription Model

For sellers of subscription-based services, Eyamie said adopting to this business model is enticing.

“Wall Street is valuing companies with recurring revenue models a lot better than those with one-time transactions,” the CEO explained. “And it creates this beautiful snowball of recurring revenue you can count on every month. It allows companies to more accurately track revenue and control cash flow, that sort of thing.”

Fusebill’s recent $6 million funding round can be taken as proof that the subscription model is expanding, Eyamie said.

That expansion also means challenges for the businesses in how they manage their accounts and finances, as well as their relationship with business or consumer subscribers.

“We see a real gap on the QuickBooks side of things,” said Eyamie. “A lot of our companies come to us, and they’re billing manually. They have humans literally charging customers’ credit cards or sending out invoices and running around to collect, and then keeping a separate spreadsheet.”

When billing on a recurring basis instead of a single time, manual accounting tactics can make cash management monumentally more difficult. And existing cloud accounting tools, Eyamie said, “they just do not elegantly handle that recurring relationship.”

 

The Subscriber’s Side Of Things

When a business is subscribing to a service of any kind, the maze of accounting challenges that accompany recurring charges also leads to a paradigm shift in a subscriber’s entire cash-and-spend management strategy.

One major way this becomes clear, Eyamie explained, is through the payment models businesses deploy that differ from consumers.

When a consumer subscribes to a service, payment options are fairly straightforward: Service providers can bill a customer’s card, or customers can opt in to have funds taken out of their bank account at roughly the same time every month, for example. But businesses operate on more complex payment timelines, which is why Eyamie said Fusebill had to support the ability for businesses to pay on various payment terms (net-30, net-60 or net-90 days, and so on).

Companies that subscribe to a service naturally have a more reliable way to predict their spend, Eyamie said. But B2B subscription services must support corporate customers’ demands in how they want to pay, the executive added. Offering what Eyamie described as an “agile billing platform,” allowing customers to customize their payment experience, is part of Fusebill’s effort to have companies identify billing as a strategic part of their offering.

“We’re trying to take billing from a dusty, back-office, nobody-ever-talks-about-it type of thing to a decision that executives are making in the boardroom,” he said. “To choose an agile billing platform and make that a competitive differentiator.”

On the B2B side of subscriptions, a flexible payment experience can be make-or-break for suppliers of recurring services. Doing it right, as Eyamie pointed out, means a positive recurring relationship between buyer and seller — and a greater grasp on cash flow for forecasting and accounting purposes.

But with SaaS, IoT and other subscription tools ballooning in availability, time is running out for B2B subscription billing and payments competitors to come out on top.

The CEO described the area as a “greenfield opportunity” for billing services, like Fusebill. With the latest funding, the startup will essentially work to get its name known and let businesses that offer subscription services know there’s a solution like it out there.

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