Subscription-based services are becoming the new standard for companies that value predictable revenue streams and ample opportunities for growth. SAP Subscription Billing (SAP SB) allows your company to manage business transactions whether they consist of simple subscription requirements or complex service monetization scenarios. However, the question is, how can you maximize your return on existing investments and get started with minimum cost and effort?
The CLARITY approach helps you to leverage existing SAP ECC investments and increase your earning potential with pay-per-use and outcome-based subscription offerings while simultaneously creating seamless billing and payment experiences.
Here are some of the different ways you can grow your business with SAP Subscription Billing:
1. Improve forecasting with predictable revenue streams
Moving to an SAP Subscription Billing method allows companies to strengthen their earning projections as subscription fees can be forecast into the future, with many B2B business willing to pay an annual fee upfront. This creates a predictable revenue stream that is crucial for planning and growing your business.
2. Streamline workflows with integrated partner settlement strategies
Partner revenue sharing is becoming an important aspect of the digital economy. When a customer uses a service offered by your company’s partner, the transaction can result in receivables from one or more parties as well as multiple potential payables—all on the basis of a single transaction. However, SAP SB’s integrated partner settlement processes will enable your company to:
- Create separate commission fees for third-party partners involved in the process of selling a subscription.
- Develop royalties and partner charges in scenarios where you are selling services on behalf of other companies.
- Facilitate smooth intercompany billing processes.
3. Engage diverse audiences with variable subscription models and rate plans
SAP Subscription Billing allows for the creation of diverse and flexible pricing models to suit the individual needs of your varied customer base. These can be generated automatically through the use of pricing schemas developed in the pricing configuration application, which also supports a number of different rate plans including one-time, recurring, usage-based, and tiered pricing.
4. Integrate pre-existing ECC’s with SAP Cloud Platform Integration (SAP CPI)
SAP CPI enables a seamless integration between SAP Subscription Billing and your existing SAP ECC. SAP CPI executes integration flows via the SAP Event Mesh. By utilizing the SAP CPI’s scheduling capabilities, integration flows can be programmed to transfer data between systems based on predefined periods, such as billing cycles. SAP CPI integration flows are configurable and can be extended to meet any customer preferences or requirements.
5. Enhance your invoicing process with full accounting integration
Billing records from SAP Subscription Billing are pushed into the Sales Distribution (SD) component of ECC. An SD sales order will be generated based on the transaction data and follow standard invoicing processes. Furthermore, the integration process unlocks the entire set of SAP ERP system functionalities such as revenue recognition, customer financial management, tax engines, payment gateways, and so on.
6. Enjoy comprehensive support with subscription lifecycle management
SAP Subscription Billing supports the entire lifecycle of a subscription contract from registration through to renewal and termination—along with any changes to the deal or contract extensions.
7. Stay flexible with adaptable billing cycles
SAP Subscription Billing offers flexible configuration capabilities to support various types of billing cycles and meet the ever-changing requirements of a growing business. Easily design your business models with a variety of subscriptions while also choosing your preferred billing period with recurring fees that can be billed in advance or in arrears, along with proration support.
8. Maintain consistency with full master data integration
Customer, product, and billing record data are all crucial for accurate invoicing, and with a full and complete integration of your company’s master data, you can ensure you maintain data consistency across your entire system landscape for a streamlined and robust order-to-cash process.
9. Ensure compliance with revenue recognition standards
Subscription businesses operate under a vastly different financial model than those who sell products or services on a one-off basis. Instead of a single transaction, subscription revenue is paid in advance for future services. Therefore,subscription revenue must be recorded on an accrual basis in financial statements, and as your business model becomes more complex, it is crucial to remain compliant by ensuring you have access to all of the necessary data to meet the IFRS 15 and ASC 606 revenue recognition standards.
How it works: An Order-to-Cash breakdown
1. SAP SB receives a request to create a subscription contract from an external system. Once engaged, it will maintain the full subscription lifecycle including the initial deal, renewal, up/down/cross selling, and contract termination.
2. SAP SB will then generate and maintain billing records with charges and credits based on predetermined rate plans, billing cycles, and pricing schemes.
3. Once a bill is closed in SAP SB, it is pulled by SAP CPI and pushed to your SAP ECC. The timing and frequency of this action is configurable in SAP CPI.
4. Finally, SAP ECC will receive billing records data and generate an SD sales order that follows through to SD invoicing.
Start your subscription journey with CLARITY
The CLARITY will support you at every stage with solutions that run alongside your current ERP systems and provide efficient and automated end-to-end processes.
Start your journey to becoming a Subscription Business by taking our free Discovery Workshop and tackle the following milestones:
1. Consolidating your business requirements
2. Identifying priorities and mapping out next steps
3. Developing a high-level solution design
4. Validating integration architecture and data migration requirements
5. Providing commercial proposals for the first phase of the project and estimations for future phases
6. Creating scope documents with key requirements and assumptions
7. Defining your Quote-to-Cash architecture
We hope this post helps you to see why SAP Subscription Billing is crucial for keeping your company competitive in a rapidly-changing digital market. Which of the points above resonate with your company practice the most? How might this affect your daily business interactions? Let us know in the comments and take the first step to becoming a subscription-based business by signing up for our workshop today!
Learn more about SAP Subscription Billing Integration
Download Brochure about SAP Subscription Billing Integration with SAP ECC.