Subscription Billing in Business Central: Basics for setting up and using recurring billing
Subscription Billing is a powerful tool. This article is dedicated to its structure, basic setup and some application examples. I hope it will provide helpful insights.
An article by Product Owner Tobias Oertel
What you can learn from this article:
This article provides an overview of the new subscription billing module in Microsoft Dynamics 365 Business Central.
1. Basics and structure:
You will learn how subscription billing is structured and which elements enable recurring billing.
2. Settings and options:
You will learn which configuration options (e.g. "sale without obligation" or "sale with obligation") exist for items and how they influence the billing processes.
3. Typical use cases:
Practical examples of the use of subscription billing, such as for billing software subscriptions, managed services, software, prepaid services, hardware maintenance and usage-based computing power.
4. Useful tips and enhancements:
Notes on linking with customer and vendor contracts as well as notes on supplementary functions that close gaps in the standard system.
With these basics, you will be able to design recurring billing efficiently in Subscription Billing and adapt it to your business needs.
The most common use cases for subscription billing:
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Sale and billing of managed services
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Subscription fees for the use of a software or platform
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Sale of software users
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Sale of software assurance per user
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Hardware and maintenance
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Resale of licenses and subscriptions
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Sale and invoicing of processing power from a data center (all based on usage data)
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Leasing (sort of)
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Guarantee (sort of)
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Selling and invoicing prepaid service (sort of)
In principle, anything that is invoiced (or purchased) on a recurring basis can be carried out in Subscription Billing. However, it is important to understand the possibilities and limitations. Knowledge of the structure and setup should make this possible.
I. Structure
Although very complex in depth, Subscription Billing is surprisingly simple on the surface. The basis is formed by service commitment packages and their lines. These contain information on the billing frequency, whether they are invoiced in a customer or vendor contract, how the price is calculated, the initial term, etc. (e.g. monthly subscription fee, yearly maintenance, etc.). Service commitment packages can be assigned to items with a specific service commitment option (new field in the item).
If an item is entered in a sales line, sales service commitments are created from the lines o the service commitment package. These can be opened, edited and deleted if necessary. When the sales order is shipped, a service object is created. The sales service commitments create service commitments in the service object. These can be assigned to customer and vendor contracts. As soon as a service commitment is assigned to a contract, it can be invoiced on a recurring basis. The service commitment keeps track of the next date it can be invoiced.
Subscription Billing sales process
Contract invoices have no influence on the inventory. Service objects and service commitments can be created manually.
II. Setup (basics)
Knowledge of the general structure should make it easier to set up.
Service commitment option The service commitment option is an option field in the item. This is located on the "Prices and sales" tab. The following options are available:
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- Sale without service commitment
- This is the default value.
- Service commitment packages cannot be assigned.
- Ignores all subscription billing features
- If you cannot assign a service commitment package, check this first.
- Sale with service commitment
- Item type must be "Inventory"
- Is invoiced in the sales order as it normally would
- Assignment of service commitment packages possible
- Creates sales service commitments from the service commitment package lines when the item is added to the sales order/quote
- Always creates a service object when shipped in a sales order
- If there were sales service commitments on shipping, service commitments are created in the service object
- Service commitment item
- Item type must be "Non-inventory"
- Service commitment items will not be invoiced in sales orders!
- Cannot be used in manually created sales invoices
- Assignment of service commitment packages possible
- Used exclusively for the creation of service objects and service commitments that are billed in contracts.
- Invoicing item
- Item type must be "Non-inventory"
- Cannot be used in sales quotes, sales orders or manually created sales invoices!
- Used to set dimensions in service commitments
- Used to provide the posting group for contract invoices
- Sale without service commitment
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Service commitment packages
There are several ways to assign a service commitment package to an item. For example, the "Service commitment" action on the Item tab opens the "Item service commitment packages" page. Here, the assigned service commitment packages are displayed at the top. The bottom half displays the service commitment package lines. The "Standard" field is important here. If a package is set as "Standard", sales service commitments are automatically created from the service commitment package lines. Otherwise, they can optionally be added in sales documents (and service objects).
III. Use cases
Now that the basics have been explained, here are some use cases:
Sale and invoicing of managed services
Managed services are very diverse. From software-as-a-service and technical support to complete outsourcing of hardware, everything is possible. Most of them are quite easy to bill in Subscription Billing.
Selling Software-as-a-Service without a one-off payment is relatively simple. Create an item with the service commitment option "Service commitment item" and assign a service commitment package. The item can be used in sales quotes and sales orders. It is never invoiced in a sales order. Once the sales order has been shipped, the service commitment can be assigned to a customer contract and invoiced monthly.
The same procedure applies for technical support. As long as there is no budgetary restraint associated with the support (see Prepaid Service).
Hardware as a service can be set up in the same way. However, Subscription Billing does not deal with fixed assets. The transition to fixed assets must be done manually.
Subscription fees for the use of a software or platform
Subscription fees can be implemented using a service commitment line item. Depending on the setting in the service commitment package line, the resulting service commitment line can be invoiced monthly, quarterly, monthly, etc.
Sale of software users
If the software user is sold for a one-off payment and there is no recurring invoice, the item should have the service commitment option "Sale without service commitments". The item is invoiced in the sales order. No service object and no service commitment is created.
Sale of software assurance with each user
If a software assurance is attached to the software user, the service commitment option "Sale with service commitment" should be used for the item. The item can still be invoiced in the sales order. A service commitment package can be added to the "Software user" item. Each time a user is shipped, a service object and a service commitment are created. The software assurance can be invoiced periodically (e.g. yearly).
Hardware and maintenance
Same setup as for the sale of software users with assurance.
Resale of licenses and subscriptions
The service commitment package can contain multiple lines. One line can be used for invoicing the customer side and another for invoicing the vendor side. If there is no one-off payment, the line item should use the service commitment option "Sale with service commitment".
Sale of processing power (based on usage data)
The item uses the service commitment option "Service commitment item". The service commitment packages line must be marked as usage-based billing. The contract invoice is created by importing and processing the usage data.
Leasing
Invoices can be created for customers on a monthly basis using a service commitment item. The transition to fixed assets must be carried out manually.
Warranty
An item with the service commitment option "Sale with service service commitment" creates a service object each time the item is shipped in a sales order. The service object saves the date on which the item was shipped. There is an option in the Service Commitment Package line that is not invoiced in a contract. If additional information needs to be saved, assign a service commitment package with this option (Invoicing via = Sales).
Prepaid service
If a service is sold and billed periodically, Subscription Billing can be used. However, Subscription Billing can neither track the fulfillment nor the remaining budget of the prepaid service. Singhammer IT Consulting AG has extended the original Subscription Billing app to close this gap. This app (DYCE Recurring Prepaid Services) will be extended for the Business Central Standard in the coming months.
About the author Tobias Oertel joined Singhammer seven years ago as a Business Central Consultant before moving to the product team in 2020. As Product Owner and Product Designer, he made a decisive contribution to the development of various DYCE apps. His detailed knowledge and high quality standards are highly valued both internally and externally. You can talk to him for hours about new feature ideas, test cases, AI-supported language models and apnea diving. Follow Tobias Oertel on LinkedIn to make sure you don't miss any more articles about subscription billing!
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