An Introduction to Subscription and Recurring Billing in Business Central

Subscription and Recurring Billing is a new module within Microsoft Dynamics 365 Business Central. It allows users to generate subscription bills for contractually agreed-upon services on a recurring basis. 

This flexible billing module is compatible with many different custom pricing models, pricing management, renewals, billing periods, and frequencies.

According to Microsoft’s documentation, with subscription and recurring billing businesses can:

• “Create individual and automated billing periods
• Preview all existing monthly recurring billing and upcoming invoices
• Simplify billing with billing templates
• Automatically calculate notice periods
• Use accrual-based posting of income and expenses to profit and loss accounts”

In this blog series we’ll take a closer look at what this module includes and how to use it.

Basic Elements of Subscription and Recurring Billing in Business Central

There are three main elements within this module:

• Contracts: These are referred to as service commitments within the subscription billing module in Business Central. Customer agreements with periodic billing are called customer contracts, and supplier agreements with periodic billing are called vendor contracts. Contracts are used to group service commitments containing multiple service objects so they can be billed simultaneously on a recurring basis.
• Service objects: These are either items that a customer buys or any instance where a contractual agreement results in multiple commitments. The service object is typically static but the service commitments can vary. Service commitments that are not invoiced via contracts also belong to a service object as warranties.
• Service commitments: These detail the agreement type with customers and suppliers. They exist in both customer and vendor contexts but always belong to a service object. These commitments contain the key billing information, such as the quantity to bill, billing period, and the amount. Service commitments involving service objects include both service commitment templates and service commitment packages assigned to items. If the service is a service commitment itself, you can add that to a contract as a component to bill on a recurring basis.

The module’s process flow from master data to transactions is detailed in the below diagram from Microsoft Learn:

Now let’s get started with setup. For this blog series, I will be using the newly added Subscription & Recurring Billing Role Center shown below:

General Service Contract Setup, Configurations, and Permissions

The Service Contract Setup Page shown below can be used to enter default settings to manage both customer and vendor contracts. These settings include inventory pick default start dates, contract period calculations, customer/vendor contract no. series, and service object text setup as part of the service invoice lines.

The reports that are enhanced as part of the Subscription & Recurring Billing module include:

• Purchase Order and Blanket Purchase Order
• Sales Quote, Order Confirmation and Blanket Sales Order
• Shipment Invoice (including details of service commitments that are invoiced)
• Credit Memo and Reminder

There are also four new general posting setups available in which to populate G/L accounts, as shown in the image below:

In addition, Business Central has four new permission sets for accessing and using the new Subscription and Recurring Billing module. These permissions are as follows:

• Subscription Billing All: Gives read-only access to subscription billing tables
• Subscription Billing Admin: Intended for administrators who need to create, modify and delete service commitment templates or packages and customize setup.
• Subscription Billing Basic: Gives access to perform basic day-to-day setup tasks in the module.
• Subscription Billing User: This is the permission set for all users working within the module (but not creating new templates or packages).

Setting Up Service Commitments

Service Commitment Templates can be created as shown below. This simplifies the process of creating service commitment packages with their line details by including item pricing information.

Service Commitment Packages are where service commitments are grouped together and assigned to specific items via the Assigned Items action. The service commitment package corresponds to the tangible or intangible unit that’s sold to the customer. Both the service liabilities to the customer and the receivables towards the suppliers can be stored here.

The key setup fields in the service commitment package shown above are as follows:

1. Unique Code and Description fields, along with an optional Price Group
2. The Partner field specifies whether to create customer or vendor service commitments.
3. The Template field pulls from the service commitment templates. You can manually enter the package line if preferred as this field is optional.
4. Description specifies the description of the service commitment.
5. Invoicing Via has options for contract or sales. Choosing “contract” will bring the service commitment for a service object to invoicing within the defined billing cycle. A “sales” service commitment won’t be invoiced and is informational only.
6. The Invoicing Item No. filters to only invoicing items.
7. Calculation Base Type defines the price of a service commitment and has three options: item price, document price or document price and discount. 
8. Calculation Base % is the percentage for calculating the service amount. When selling an item with an additional recurring service commitment, the calculation base amount is equal to the good’s value.
9. The Billing Base Period specifies the period to which the service amount should relate based on time periods.
10. The Billing Rhythm refers to how often service commitments are billed.
11. Service Commitment Start Formula allows you to offset the time of when a service commitment is valid.
12. The Initial Term field specifies the minimum term of the service commitment.
13. The Subsequent Term field specifies the duration of the automatic extension after the initial term is completed.
14. The Notice Period denotes the lead time before the service commitment can be cancelled based on the initial term.
15. The Discount option field is used to control whether the service commitment is used for discounts in billing.

Setting up Service Objects

Service objects represent the product history sold to a customer and contain:

• Master data such as item number and description
• Sale details such as the customer, delivery recipient, and invoice recipient
• Quantity, date of sale, and date of next settlement
• All service commitments

Here’s an example of a service object in Subscription and Recurring Billing:

Now let’s take a closer look at the key fields used to populate a service object card:

• No. can be auto populated from the number series
• Item No. defines the device, license, etc. that will be billed recurrently. You can only select items with the Service Commitment option of Sales if you have Service Commitment or Service Commitment Item enabled on the item card.
• Description comes from the item but is editable.
• Quantity specifies the number of the unit which is billed recurringly via service commitments.
• As additional information, you can maintain the Customer Reference, Version, Provision Start Date, and Provision End Date, whereby the Provision Start Date is automatically entered when the service object is created via the delivery from a sales order.

Two other tabs we want to make sure to mention exist on the Service Object card:

• The End User tab contains the contact and customer information about which customers purchased the item and their related service commitments.
• The Shipping and Billing tab contains information about the original shipment of the product and whether a different invoice recipient paid for the item.

Serial Numbers

Serial numbers can be tracked per service objects as shown below and are determined from the item tracking lines for the sales order line and then transferred to the Serial No. field on the service object. You can only create service objects with serial number tracking with a quantity of 1.

Dimensions

If the service commitment package contains both customer and vendor partner contract lines, then the dimensions of the later customer contract line pass to the corresponding vendor contract line.

Setting Up Contract Types

The Contract Types setup is helpful to manage and organize customer and vendor contracts. You can use contract types as a filter when creating billings. This is very useful for maintenance and support contracts where there are incoming and outgoing recurring invoices.

With contract types you can control whether or not you bill customers on a common due date. You can also default values into certain fields within a customer contract.

Service Commitments are defined by several key fields, as noted in the Contract:

• Partner (options are Customer or Vendor) is used to define the type of billing partner to which the service commitment is related. This also defines whether service commitments are part of Accounts Receivable or Accounts Payable.
• Service Start Date defines the first date from which the service commitment is valid and can be invoiced.
• Service End Date defines the last date the service commitment is valid, after which it can no longer be invoiced. The date can be entered manually when service is terminated.
• Planned Service Commitments Exist shows that a contract renewal has happened for a specific service commitment, but the renewal isn’t valid because the service commitment hasn’t been fully invoiced.
• Next Billing Date indicates the due date for the next billing and is automatically recalculated during the billing run.
• Calculation Base Amount is the basis of valuation for each service commitment. When selling an item, it’s the item’s value.
• The Billing Rhythm is a date formula for the invoicing rhythm of the service (for example entering 3M for quarterly and 1Y for yearly invoicing).
• The Calculation Base % is the percentage from the Calculation Base Amount used to price the service commitment.
• Price is calculated as the product of the Calculation Base Amount and Calculation Base % fields.
• The Discount % indicates the percentage of discount for each service commitment.
• The Discount Amount indicates the discount applied for each service commitment.
• The Service Amount is the result of the Price, Discount, and Quantity of each service object.
• The Calculation Base Period indicates the period to which the Service Amount applies. For example, a service amount would be valid for one year if 12M was entered in this field.
• The Contract indicates the contract through which the service commitments are billed.
• The Initial Term indicates the minimum term of the service commitments.
• Cancellation Possible Until denotes the last date for timely cancellation and is determined by the Initial Term, Subsequent Term, and Cancellation Period.

Here’s an example of service commitments and their associated contracts:

Migrating Contract Lines into Business Central 

The main import tables via configuration package for Subscription and Recurring Billing module are below (shown as Name — Table):

• Items — 27
• Service Commitment Templates — 70920754
• Service Commitment Packages — 70920755
• Service Commitment Package Lines — 70920756
• Item Service Commitment Packages — 70920758
• Vendor Contract — 70920763

There are also a few select tables for importing customer contracts, contract lines, service objects, and service commitments (again shown as Name — Table):

• Imported Customer Contracts — 70920710
• Imported Service Objects — 70920708
• Imported Service Commitments — 70920709

With these import tables you can create the corresponding customer contract, service objects, and service commitment records directly in Business Central, as you can see from these next three images:

Now you have the basis of what elements are included in the Subscription and Recurring Billing in Business Central. In a later blog we will walk through the process of Creating a new Customer Contract.