What is ERP for Subscription Business?
ERP for Subscription Business is a single, cohesive system tailored to address the complexities of subscription-based enterprises operating with recurring revenue models. It assists with core business activities such as subscription management, resource allocation, supply chain management, and financial management, among many others.
With subscription business operations becoming increasingly complex, ERP software provides a number of benefits, such as making them efficient in revenue recognition, accommodating complex revenue models, and handling a high volume of transactions.
Overview of the Subscription Industry
The Indian subscription industry has gained significant traction in recent years. In 2022, India witnessed a growth of over 49% in the digital subscriptions. The growth story is expected to continue, and the industry is projected to reach $102 billion by the financial year 2024.
There are several factors contributing to the growth of the subscription industry, such as increasing disposable income among Indians, Internet penetration, and changes in lifestyle and user trends.
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Challenges Faced by the Subscription Industry
- Growing Billing and Collections Data
The backend departments of many subscription businesses still rely on spreadsheets to manage the large volume of billing and collections and track, renew, and discontinue services for their clients. Not only does this system of data management increase work overload but also the likelihood of human errors. As the business grows in size, the task becomes cumbersome as hundreds of thousands of subscribers are added to the list.
- Customer Acquisition Cost
Businesses have to invest a significant amount of capital in sales, marketing, and advertisements to acquire new customers. Moreover, they have to conduct market research, customer surveys, and different pricing experiences. The acquisition cost may outweigh the revenues if the subscription price is unreasonably low.
- Adding Value for Each Renewal Cycle
Adding value for each renewal cycle is crucial in the subscription revenue model to retain existing customers and ensure smooth revenue flow. If the company fails to do so, it risks losing existing customers in the next renewal cycle. Customers are more likely to pay for services that add value.
- Perceived Value
One of the common examples of the subscription industry is the software industry. Since software applications are not tangible and cannot be touched, they are commonly perceived to have a lower value.
- Integration Between CMS and Subscription Model
Without ERP, subscription businesses lack platform integration between the Content Management System (CMS) and the subscription model. Many CMSs lack the system to build highly customizable checkout pages for boosting sales through cross-selling and up-selling opportunities.
Future Trends in Subscription Businesses
- Freemium
Freemium is a business model that allows customers to get started for free and pay only when they wish to upgrade. Upgrading provides access to extended features and new functionalities that are otherwise not part of the free version. The freemium model is especially popular in the software industry.
- Usage-based Pricing
The usage-based pricing model does not involve initial commitments or fixed billing amounts. Instead, it offers customers the flexibility to pay based on their usage. For example, some telecom operators charge customers based on their outgoing call duration and the number of SMSes sent during the plan’s validity.
- Artificial Intelligence (AI)
AI has been increasingly used in subscription businesses to provide personalized and customized experiences for customers. For example, some online music streaming services use AI to identify user liking patterns and intent and accordingly suggest new music. Similarly, some movie streaming services provide personalized suggestions to their viewers.
Features of ERP for Subscription Businesses
- Automation
ERP streamlines various repetitive tasks, eliminates manual work, and ensures employees can focus on impactful work rather than manual data entry. Ultimately, it helps with increasing productivity and reducing human errors.
- Business Intelligence
Business intelligence is one of the key features of Subscription ERP, which provides a comprehensive view of each functional area. BI tools provide actionable insights in the form of intuitive reports and customizable dashboards at a deeper level.
- Order Processing System
Sage X3 ERP incorporates a strong order processing system that automates various procedures, such as payment confirmation, customer shipping address verification, and tracking number updating, in order to facilitate timely order fulfillment.
- Mobile Access
Cloud-based ERP for a monthly subscription makes businesses responsive by providing the flexibility of remote work. With role-based access control, businesses can define access privileges for specific employees. They can access organizational data and perform their tasks seamlessly, regardless of their physical location, device, and operating system.
- Customizability
ERPs can be tweaked and customized to fit with an existing environment, such as multiple legacy tools being used in the company. Companies can change ERP’s language, currency, time zone, appearance, and layout settings. Moreover, they can configure the standard security configurations and install third-party add-ons to meet their specific business needs.
- Scalability and Flexibility
ERPs are scalable and flexible. They can handle an increased workload and spikes in data and transactions without compromising the system’s performance. As your business grows in size and complexity, ERP continues to keep up with the workload without failing.
- Data Analysis and Reporting
ERP builds a unified database that stores data at a deeper level across multiple business entities and departments and prepares a comprehensive report with visually intuitive charts. With access to real-time data across production, inventory, marketing, finance, and other departments at their fingertips, decision-makers can make accurate decisions at the right time.
- Data Consistency
ERP implementation improves the reliability of information by providing access to up-to-date and accurate information in a standardized format. Implementing such a system reduces the number of duplicates and inconsistencies and ensures the seamless sharing of information across several departments.
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Benefits of Using ERP for Subscription Businesses
- Streamlines Subscription Management
ERP supports setting deferred revenues and creating recurring revenue transactions with automated transfers of deferred revenues. It also sends periodic reminders with flexible payment options to customers when their subscription is about to expire.
- Demand Predictability
Subscription businesses benefit from demand predictability, a key feature of the sales management system. Businesses can leverage demand planning and analysis, historical trend analysis, seasonal trend analysis, statistical forecasting, and complete visibility into the subscription revenue model.
- Enhanced Reporting
ERP solution builds a centralized database with access to real-time data across all departments. It eliminates multiple spreadsheets and provides real-time insights into different business aspects such as inventory, warehouse operations, sales, and financial reports.
- Enhanced Compliance and Risk Management
India’s compliance and regulatory environment is complex, and it’s easy to get overlooked. Non-compliance can cause fines, penalties, and legal proceedings. With ERP, your business can stay on top and minimize non-compliance risks.
- Reduced Overhead Costs
Product life cycle management in ERP system automates various tasks, brings standardization across different tasks, minimizes disruptions, compares actual and planned costs, and eliminates inaccuracies and human errors, which can be very costly for businesses.
- Reduced Procurement Costs
Reduced procurement costs translate into higher profit margins and improve the company’s financial stability, agility, and competitiveness. The Best ERP software in India helps make better buying decisions by keeping track of different vendors, their past performance, pricing, and current market conditions.
- Improved Company-wide Collaboration
ERP solutions facilitate comprehensive company-wide collaboration across different departments. It provides employees with vital information at their fingertips, ensures smooth business operations, and reduces delays and disruptions.
- Automated Invoice Generation
ERP system reduces financial discrepancies and oversights by streamlining the invoice generation and validation processes using the Accounts Receivable Automation module. Similarly, it minimizes human interventions and human errors while paying your suppliers and vendors using the Accounts Payable Automation module. Such a system helps minimize processing time and speed up revenue generation.
Conclusion
ERP has become an integral part of the success of many subscription-model businesses in unleashing their true potential. It consolidates data from all departments and automates routine tasks so employees can focus on revenue generation.
ERP provides an abundance of tools that help your subscription businesses optimize the customer acquisition cost (CAC), improve demand forecasting, build solid pricing strategies, become agile & responsive to market trends, and adopt a customer-centric and solid data-backed culture. Ultimately, your business will achieve a growth trajectory and benefit from recurring and predictable revenue streams.
