SaaS companies need accurate recurring revenue management, automated billing, and proper revenue recognition (ASC 606). Get any of these wrong, and you’re either manually correcting billing every month or explaining revenue discrepancies to your board.
NetSuite handles SaaS subscription billing well—when configured correctly. When configured poorly, you end up with spreadsheets supplementing your ERP system, which defeats the purpose of having NetSuite.
Here’s how to configure NetSuite for SaaS subscription billing based on what actually works.
Understanding NetSuite’s Subscription Billing Architecture
NetSuite has native subscription billing capabilities through:
- Subscription Plans – Define your pricing tiers and billing frequency
- Subscription Records – Link customers to plans
- Subscription Change Orders – Handle upgrades, downgrades, add-ons
- Subscription Billing – Generate invoices automatically
- Revenue Recognition – Handle ASC 606 compliance
You don’t need third-party billing platforms for most SaaS models. NetSuite’s standard features handle:
- Monthly, quarterly, annual billing
- Usage-based pricing
- Tiered pricing structures
- Mid-cycle changes
- Proration calculations
- Contract renewals
Setting Up Subscription Plans
Subscription Plans define what you’re selling and how you bill for it.
Basic configuration:
- Go to Lists > Accounting > Subscription Plans
- Create plans for each pricing tier
- Define billing frequency (monthly, annual, custom)
- Set pricing type (flat rate, per user, usage-based)
- Configure renewal terms
Example structure for a B2B SaaS company:
Starter Plan
- Billing Frequency: Monthly
- Price: £99/month
- Renewal: Auto-renew unless cancelled
- Pricing Type: Flat rate
Professional Plan
- Billing Frequency: Monthly or Annual
- Price: £299/month or £2,990/year
- Renewal: Auto-renew
- Pricing Type: Per user
Enterprise Plan
- Billing Frequency: Annual
- Price: Custom pricing
- Renewal: Manual (requires new contract)
- Pricing Type: Tiered usage
Key decisions:
1. Proration Method
- Full Period Proration: Most common for SaaS
- Partial Period Proration: Use if you bill arrears
- No Proration: Rarely appropriate for SaaS
2. Advance vs. Arrears Billing
- Advance: Bill at period start (most SaaS companies)
- Arrears: Bill at period end (usage-based models)
3. Auto-Renewal Settings
- Auto-renew: Customer stays until they cancel
- Manual renewal: Requires explicit renewal action
- Notification timing: When to warn about upcoming renewals
Creating and Managing Subscription Records
Subscription Records connect customers to plans and track their billing history.
When to create subscriptions:
- New customer signup
- Existing customer adds subscription
- Customer upgrades/downgrades
- Contract renewal with new terms
Best practices:
1. Subscription Start Dates Set subscription start dates to align with your billing cycle:
- If you bill on the 1st, start subscriptions on the 1st
- Mid-cycle starts should prorate to next billing date
- Annual subscriptions can start any time (one invoice)
Real example: A SaaS company bills monthly on the 1st. Customer signs up on January 15th. They have two options:
- Start immediately, prorate Jan 15-31, then bill full months
- Start February 1st (delay service start)
Most SaaS companies prorate.
2. Subscription Line Items Add clear line items showing:
- Base subscription
- Per-user charges (if applicable)
- Add-ons or modules
- Usage charges (if relevant)
This clarity helps with:
- Customer understanding their invoice
- Finance reconciling revenue
- Sales tracking MRR by component
3. Linking Subscriptions to Opportunities Connect subscriptions to the Opportunities that generated them:
- Tracks sales performance
- Connects customer acquisition cost to revenue
- Enables cohort analysis
- Supports sales commission calculations
Handling Subscription Changes
Subscription Change Orders manage upgrades, downgrades, and modifications.
Common scenarios:
Upgrade (mid-cycle)
- Customer moves from £99/month to £299/month
- NetSuite calculates: Credit unused portion of £99, charge prorated £299
- New billing continues at £299/month
Downgrade (mid-cycle)
- Customer moves from £299/month to £99/month
- Options:
- Immediate: Credit and adjust now
- End of period: Apply at next renewal
- Most SaaS companies process at next renewal
Add Users/Seats
- Customer adds 5 users mid-cycle
- NetSuite calculates prorated charge for remaining period
- Next billing includes full amount for all users
Configuration tip: Set change order defaults:
- Upgrade: Immediate with proration
- Downgrade: At period end
- Add-ons: Immediate with proration
- Cancellation: At period end (no refund)
Automated Billing Execution
NetSuite generates subscription invoices automatically through scheduled billing runs.
Setup:
- Set up Scheduled Billing (Setup > Company > Enable Features > Subscriptions)
- Define billing schedule (typically nightly)
- Configure billing advance notice (how many days before billing)
- Set up approval workflow (if needed)
Billing run process:
- NetSuite identifies subscriptions due for billing
- Generates invoices based on subscription terms
- Applies proration for any mid-cycle changes
- Sends invoices to customers automatically
- Records revenue recognition schedules
What to monitor:
- Failed billing runs (address immediately)
- Invoices requiring manual review
- Customers with payment failures
- Proration calculations (spot-check accuracy)
Real example: A SaaS company with 800 subscriptions runs billing nightly at 2 AM. NetSuite generates ~30 invoices per day (monthly subscriptions starting on different dates). Finance spot-checks 10% of invoices weekly. Errors are under 0.5%.
Revenue Recognition for SaaS
ASC 606 requires revenue recognition over the subscription period, not when you bill.
NetSuite’s revenue recognition:
- Creates revenue recognition schedules automatically
- Amortises revenue over subscription period
- Handles mid-cycle changes correctly
- Supports monthly financial close
Configuration:
1. Revenue Recognition Template
- Create template for subscription revenue
- Set recognition method: Straight-line over subscription period
- Link to appropriate GL accounts
2. Deferred Revenue Accounts
- Set up deferred revenue GL accounts
- Configure recognition schedules to post monthly
- Ensure proper journal entry creation
3. Multi-Element Arrangements
- If you bundle software + services (implementation, training)
- Allocate transaction price across elements
- Set different recognition schedules per element
Example: Customer pays £12,000 for annual subscription + £3,000 implementation.
- £12,000 recognised ratably over 12 months (£1,000/month)
- £3,000 implementation recognised when service delivered
- Total billed: £15,000 upfront
- Month 1 revenue: £1,000 subscription + £3,000 implementation
- Months 2-12 revenue: £1,000/month
Customer Portal Configuration
SaaS customers expect self-service subscription management.
NetSuite Customer Centre enables:
- View current subscription and billing
- Update payment methods
- View invoices and payment history
- Download usage reports (if applicable)
- Submit support tickets
What to expose:
- ✓ Current plan and pricing
- ✓ Billing history and invoices
- ✓ Payment method management
- ✓ Usage/consumption data
- ✗ Plan changes (handle through sales for control)
- ✗ Cancellation (require human interaction)
Why restrict self-service plan changes: Most SaaS companies don’t allow instant self-service upgrades/downgrades because:
- Sales wants to talk to customers about upgrades
- Finance needs to verify proration calculations
- Customer success should understand downgrades/cancellations
- Contract terms may require approval
Configure the portal for transparency, but route changes through your team.
Reporting and Metrics
SaaS companies need specific metrics from NetSuite:
MRR (Monthly Recurring Revenue)
- Saved search: Active subscriptions, sum monthly value
- Segment by: Plan tier, customer segment, acquisition channel
- Trend over time
Churn Rate
- Cancelled subscriptions / total subscriptions
- Track by: Plan, customer size, tenure
- Goal: Identify churn patterns
Customer Lifetime Value (CLV)
- Average subscription value × average lifetime
- Compare to customer acquisition cost (CAC)
- Track by cohort
Revenue Recognition
- Recognised vs. Deferred revenue
- Forward revenue (contracted but not yet recognised)
- Revenue by product line or module
Billing Metrics
- Successful vs. Failed charges
- Days sales outstanding (DSO)
- Collection rates
Build these as saved searches and add to dashboards for your team.
Common Mistakes to Avoid
1. Overly Complex Subscription Plans Don’t create 50 different subscription plans for minor variations. Use add-ons and customisation fields instead. More plans = more confusion for customers and harder administration.
2. Inconsistent Billing Cycles If you bill monthly, don’t let customers start subscriptions on random days. Align start dates to your billing cycle (1st or 15th typically). Makes accounting cleaner.
3. Poor Proration Configuration Test proration calculations thoroughly before going live. Customers notice incorrect charges immediately, and fixing them retroactively is messy.
4. Manual Revenue Recognition Don’t override NetSuite’s automated revenue recognition unless absolutely necessary. Manual adjustments create audit nightmares.
5. No Testing Environment Test all subscription changes in sandbox before production. Billing errors are expensive to fix and damage customer trust.
When You Need More Than Standard NetSuite
Standard NetSuite subscription billing works for ~80% of SaaS companies. You might need customisation if you have:
- Complex usage-based pricing with multiple tiers
- Sophisticated entitlement management
- Integration with external billing platforms
- Multi-currency with complex exchange rate handling
- Advanced seat management with complex hierarchies
Even then, try to work within standard NetSuite before building custom solutions. Custom subscription billing becomes technical debt quickly.