Gone are the days when businesses had to create and send dozens of invoices to their clients. With subscription-based billing on the rise, agencies can automate their invoicing process and focus on what they do the best – help clients achieve their goals.

Let’s look at the rise of subscription billing and how agency businesses can benefit from cloud accounting software for digital marketing agencies.

What is Subscription Billing?

Subscription billing or recurring billing is a billing model that enables you to automatically collect payments from clients and customers at fixed intervals. For subscription billing to be active, the customer needs to turn on the ‘auto-pay’ option.

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Once the option is turned on, the specified amount is deducted from the customer’s selected payment mode at a selected interval.

Subscriptions for Netflix and Amazon prime are common examples of subscription billing. You enter the card information and allow the provider to bill you automatically at the end of the month or year. You, the customer, can cancel the subscription anytime to avoid any automated payments in the future.

While the concept of subscription billing has become popular in the 21st century, its history dates back to the late 19th century. AT&T, a telephone service provider, charged its users for monthly access. As we entered the 20th century, news publications, magazines, electricity providers, and milk companies started using subscription services.

In the 21st century, the rise of SaaS businesses made subscription billing the new normal. As of now, all SaaS providers use a recurring business model.

How Has Subscription Online Billing Software Become the Norm for Agency Businesses?

SaaS companies continue to leverage subscription billing. But lately, digital agencies have also adopted this model.

Back in the day, digital agencies worked on a post-paid revenue model. They took a project, completed the work, submitted it, and after reviewing it, the client made the payment. This had a major drawback. Since the client received the completed work first, he could use it without paying the agency.

To tackle this, many agencies started charging upfront. Clients aren’t very fond of prepaid services, and agencies that require advance payments often struggle in getting new clients. So, until recently, agencies were using both postpaid and prepaid models as per their preferences.

But both these models have a problem – repetitive invoice generation. Agencies have to create new invoices every month, even when the services rendered each month are the same.

Subscription billing has emerged as a solution to this hurdle. Now, instead of creating invoices every month for each client, agencies are providing their services on a subscription basis.

Clients who want to avail the same set of services every month can subscribe to the plan and turn on the ‘auto-pay’ option. The online billing software will deduct the desired amount and send an automated invoice to the client. You can have multiple plans with different services and benefits to cater to various client needs.

Why Should Accounting Software for Digital Agencies Be Used For Subscription Billing?

By implementing a recurring billing model, you can scale your business, attract more customers, and grow your revenue. Let’s discuss the key benefits of subscription billing for digital agencies.

1. Attract More Customers

Ask yourself this. You’re to choose between two businesses. They provide the same service – quality, credibility, and other variables remain constant. But one provider charges a one-time fee of $525, whereas the other charges $30 per month, and you can cancel anytime. Moreover, the $30 per month will get deducted automatically, so you don’t have to remember paying every time.

Which one sounds more appealing? Of course, the second one.

When you offer subscription-based billing, you engage the client at two levels. First, you remove the burden of paying a hefty amount at a time. Second, you provide a way out. If the client doesn’t like your services, he can tap out anytime.

2. Earn Predictable Revenue

Since customers in the subscription model pay on a regular basis, you can anticipate your monthly revenue. By doing so, you can efficiently manage your costs and determine your estimated net profit.

3. Increased Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is one of the primary metrics every digital agency should track. The subscription billing model helps you increase the CLV.

Let’s say a client avails your services for a one-time cost of $500. In that case, $500 will be the only revenue generated from that client till the project is completed. And even after finishing the work, there’s no guarantee the client will re-subscribe to your services.

But when you use a subscription-billing model, you charge for the services rendered every month. The acquisition cost is minimal, and the CLV keeps on increasing month after month.

4. Up-Selling and Cross-Selling Opportunities

When you charge a huge one-time amount, the scope for up-selling and cross-selling diminishes. But when you provide recurring payment capabilities, you can up-sell and cross-sell your services.

For example, you can send offers telling the client about how he can upgrade his plan and get an additional service for a negligible cost increase. All the client has to do is subscribe to the higher plan. No complexities involved.

5. Increase Customer Satisfaction

When you use cloud accounting software for digital marketing agencies, you put your clients in the driver’s seats. They can avail of your services as they like and can walk away when they want to. This freedom and flexibility enhance customer experience and satisfaction.

Which Type of Agencies Should Use Subscription-Based Billing?

Ideally, any agency business that can provide a fixed set of services on a monthly basis should use online billing software. However, it’s mainly used by:

  • Digital marketing agencies
  • Web design and development agencies
  • Social media agencies
  • UX and CRO agencies
  • Tech support agencies

Also Read: Software Tools For Startups To Run With The Extra Mile In The Digital Age

Wrapping Up

Using cloud accounting software for digital marketing agencies can help you generate consistent revenue and increase customer lifetime value. It makes customer acquisition easier and enables you to provide a better experience to your customers.

If you’re looking for a feature-rich online billing software solution, check out Moon Invoice.