No Surprises! Benefits of a Subscription Billing Model
For decades, the accounting industry has universally billed its clients based on set rates, typically hours-based, for specific time spent or discrete tasks performed. In recent years, however, we’ve started to see a significant shift in these billing structures.
A recurring payment, also referred to as a subscription, recurring billing or automatic payment, is an electronically processed payment that repeats according to a preset schedule.
Today, accounting firms are increasingly offering subscription billing to their clients to charge for the value of various levels of services more accurately. This move in the accounting industry is part of a larger trend – the prevalence of customers paying for subscription services via automated payments is on the rise. As of the end of 2021, over 80% of consumers reported having at least one subscription for services. Clients will understand and welcome the opportunity to pay accounting costs on the same basis.
Why a Subscription Model?
Technology has been a major factor driving the move toward subscription billing. The ability to easily charge and process automated, recurring payments via tools like APX within your OfficeTools practice management software from CARET has made subscription billing for accounting services not just viable, but beneficial for both clients and accountants.
The inherent nature of accounting work leads to fluctuations in billing over the course of the year. Bills are high around tax time and significantly lower at other times of the year. The fluctuations lead to unpredictability in revenue management for the firm and budget management for your clients. Subscription-based billing, wherein clients are charged a set rate for services each month, smooths out the lumpiness and offers substantial benefits for all parties.
Accounting firm CEO Katey Maddux highlights the benefits in this post: 5 Ways Accepting Recurring Payments will Change Your Business for the Better.
For accountants, subscription billing allows the firm to predict its income and better manage cash flows throughout the year. CPA firm Slater & Rutherford is a perfect example. As Gidget Slater explains, “We do about 200 recurring payments every month for subscription monthly maintenance. This has helped the business tremendously and has improved cash flow. It saves about a day or two of time a month.”
Subscription billing gives accountants the ability to more accurately price specific services based on the value they offer the customer. Certain services or tasks are more complex than others, so it makes sense that they should be billed at a different rate. Subscription billing lets you build those different rates into your overall invoicing, making your services more attractive to clients, who want to pay for value.
Clients who perceive value in their services and aren’t surprised by monthly bills are more likely to pay their bills promptly, reducing your collection efforts. When you add automated, recurring billing to the mix, collections are eliminated entirely. You always get paid, and your clients always know what and when they will pay. Subscription billing allows both parties to save substantial amounts of time every month on billing and payments.
Clients in turn benefit from knowing they’re paying a fair price for the services they’re receiving. Predictability in billing brings better expense and cash flow management. Finally, recurring payments tools like APX always keep payment information secure, so your clients don’t have to worry about potential security risks.
Once you’ve decided to offer subscription billing, there are three steps to getting started: creating service packages, determining your monthly subscription fee and implementing the right tools to support your recurring billing.
Creating service packages involves determining the various levels of services your firm will offer – differentiating those more complex, higher-value tasks from the more routine tasks. The idea is to sort your services by the value they provide your clients. Once you’ve done that, it’s time to assign prices to each level of service you’ve defined. It’s important to establish the full range of services and their prices upfront, so you can then tailor your total package prices for each client based on the services they want – some clients may only use your firm for certain things, while others might outsource their entire accounting operation to you. Having set prices and packages makes it easy to quote subscription prices to each client at the outset.
Finally, once you have your clients on board with subscription pricing, make sure you have the technology to support automated recurring monthly billing for your subscription offerings. CARET offers the combination of OfficeTools and APX to do just that. These tools work together to form a complete service delivery and billing solution for monthly recurring payments.
Ready to learn more about OfficeTools and APX automated payments? View the video:
You’ll learn how to simplify your billing process and manage payments and other helpful APX tips and tricks.
Questions? Talk to an expert in practice management and payments.
Call: 858-882-4879 to learn more about how CARET can help you implement subscription billing with OfficeTools and APX.