The following is a contributed article by Katrina Gosek, Vice President at Oracle. The views expressed are solely those of the author.

Today's consumers value convenience and speed above all, and subscription business models offer both, making them increasingly attractive to businesses.

Subscriptions are not new; their history goes back further than we might think. Decades ago, people began paying monthly for gym memberships, newspaper subscriptions, and utilities. Then, DVD collections were replaced by Netflix accounts, and car CD players by Sirius XM Radio. In recent years, subscription box services emerged, delivering pre-made meals, clothing, beauty, and grooming products directly to doorsteps. Now, during the pandemic, we are surrounded by subscription services covering every aspect of daily life: from on-demand fitness classes and regular wine deliveries to private aviation memberships and home maintenance services.

A recent PwC CFO survey shows that 63% of CFOs plan to adjust their products or services, and 41% are considering changing their pricing models. This makes sense. Subscription pricing, as one model, helps stabilize and extend revenue streams while building customer relationships and meeting consumer demand for convenience.

Katrina Gosek (Photo courtesy of Oracle)

Beyond the obvious financial benefits, CFOs also value subscription models for placing finance teams at the forefront of customer experience evolution. Subscription models mark the end of product ownership—a relationship that has defined buyers and sellers for centuries. Unlike sellers transferring ownership at the point of sale, subscription agreements grant buyers the right to access the seller's products, services, and experiences when needed.

However, subscription models also come with challenges. Adding or migrating to a subscription model can complicate a company's financial reporting. Therefore, CFOs must balance financial discipline with strategic flexibility as they move forward.

Here are three pieces of advice for CFOs:

1. Avoid moving revenue recognition out of the ERP system

The main challenge in migrating to a subscription model lies in the degree of cultural and organizational change required. Subscription renewal cycles demand as much time and effort as new sales opportunities. Sales and marketing teams must shift focus from closing large deals to nurturing long-term customer relationships. Customer satisfaction is paramount, and product development teams need to continuously deliver new features and improvements. Today, marketing, sales, service, and finance functions are all deeply involved in customer relationships, thereby impacting revenue streams.

To overcome these challenges, CFOs should invest in subscription management systems and integrate them with financial systems to support the transition to a recurring revenue model. However, CFOs often choose existing CRM and ERP systems for convenience. ERP systems are inherently designed for traditional pricing models and struggle to manage the complex, dynamic, and customer-facing structures of subscriptions. Additionally, the lack of integration between CRM and ERP in reporting processes can lead to inaccurate forecasts, revenue leakage, and improper revenue recording.

A common workaround is implementing an external subscription billing management system, but this creates more data silos, resulting in invoices passed as single compressed line items without detail. If finance teams cannot view invoice details at the line-item level, they cannot report on individual order components or understand the full customer history. Ultimately, moving revenue recognition out of the ERP reduces visibility into subscription model success, impacts reporting and tracking, and raises compliance issues.

For businesses planning to implement subscription operations, the best option is to integrate the subscription management system with the existing ERP to measure pricing model effectiveness and support long-term scaling.

2. Focus on long-term reporting and analysis

Subscription models require businesses to think long-term. The era of one-time transactions is over; now it's about building lifelong relationships with customers. Financial reporting needs to reflect this evolution in business strategy.

To truly measure business success, financial reporting should not only cover what has been closed this month or quarter, but should focus on a long-term view of revenue health and overall profitability. This means avoiding adding manual processes or spreading information across multiple systems, which makes it difficult to manage mid-term changes and cancellations. One advantage of subscription models is that revenue and cash flow are more predictable, enabling forecasts beyond the next quarter—but only if financial reporting also follows this long-term perspective.

Measuring progress and being able to adjust is crucial; defining key performance indicators (KPIs) and sticking to them helps keep business goals on track. But more importantly, CFOs need to establish processes for continuously tracking these metrics. Without real-time, detailed, and clear visibility, finance teams will struggle to manage the transition from traditional pricing models to hybrid or fully subscription models, and to identify critical moments that require adjustment.

Establishing processes to continuously track metrics and generate reports containing long-term data will help measure and stabilize the company's financial health.

3. Focus on customer lifetime value to improve retention

In today's highly competitive environment, customer loyalty is hard-earned. But subscription models inherently lay the foundation for recurring customer relationships, giving businesses a competitive edge.

Customer satisfaction and retention become the new focus, with reducing subscription churn prioritized over acquiring new customers—subscriptions also provide ongoing upsell and cross-sell opportunities, driving organic growth. Additionally, new customers often learn about businesses through word of mouth, so keeping existing customers engaged and recognizing the value of their investment is the primary factor in business growth.

To deliver maximum customer value over the long term, CFOs must identify which financial levers can optimize the value of goods and services as effectively as in traditional sales models. On this basis, finance leaders can better develop effective pricing strategies and contract terms, laying the groundwork for the ultimate goal—lasting and mutually beneficial customer relationships.