What is a subscription in your bookkeeping? Explained

What a subscription is

With a subscription you deliver the same service in fixed periods, such as hosting, maintenance, an advisory retainer or a licence. Each period is followed by a recurring invoice with the same lines. The agreement is recorded in a contract or quote, with a term and a notice period.

A subscription is different from a one-off job paid in instalments. With a subscription the revenue keeps coming back and the end is far away or absent. For you, what matters is knowing what to expect each period; for your client, knowing what they pay for and how to stop.

What to put in the agreement

• what you deliver and what you do not
• the amount per period, excluding VAT
• the start date and the invoice date, for example the first of the month
• the term, and whether it renews automatically afterwards
• the notice period and how to give notice
• whether and how you raise prices, for example an annual indexation
• the payment term and what happens on late payment

A business client expects agreements to be easy to find. So send the agreement with the first invoice or let the client accept it along with the quote. If the agreement changes, it is wise to ask for acceptance again.

Rather than relying on a general rule, put cancellation and renewal in writing. Your lawyer can help with the best wording.

How it ends up in your records

Each period is its own invoice, with its own number and the period in the description, for example Hosting October 2026. In your turnover each invoice counts in the period of its invoice date. If your client pays a whole year in advance, agree with your accountant how to book it, because part of the revenue then belongs to later periods. How VAT works on an advance payment is also covered in the guide on asking for a deposit.

Two figures are handy for your overview: monthly recurring revenue (MRR) and annual recurring revenue (ARR). Together they show how much fixed revenue you can expect in the coming period.

An example with figures

An invented web agency has three clients with a maintenance contract:

• Client A: € 95.00 per month
• Client B: € 150.00 per month
• Client C: € 600.00 per quarter, which is € 200.00 per month
• Monthly recurring revenue: € 445.00 excluding VAT
• Per year: € 5,340.00 excluding VAT

If you raise client A's price by 4 per cent from 1 January, it becomes € 98.80 per month. Put the increase in the agreement in advance and announce it in good time.

How to invoice a subscription

Choose a fixed invoice day, for example the first of the month, and stick to it. Your client then knows when to expect the invoice and you have a steady rhythm. Always check the first invoice yourself before it goes out, so you are sure the amount, VAT and period are right. After that you can choose to have the following invoices prepared automatically.

Checking before sending stays sensible as long as amounts can vary, for example with hours you settle afterwards. If the amount is the same every period, sending automatically is safe, provided your client knows. The payment term is on the invoice. For business clients in the Netherlands, 30 days generally applies if nothing else was agreed.

Pausing, cancelling and changing

A subscription can stand still, for example because your client needs no maintenance for a while, or it can end after notice. Record the date on which a subscription stops, so you no longer create an invoice after it ends. If you do not want to charge for a period, make clear whether you will catch up later or let it lapse.

If the service or the price changes, record it in writing with an effective date, even if your client's request came by email. That way you can show later which amount applied from which date. You correct a wrong invoice with a credit note.

Common mistakes

• A subscription without a written agreement on term and cancellation.
• Forgetting an invoice, so a period goes unbilled.
• Old prices keep running because nobody scheduled the increase.
• No view of which subscriptions are active, paused or ended.

Checklist

• Is the agreement on paper, with a term and a notice period?
• Do you know the next invoice date for each subscription?
• Is the period stated on every invoice?
• Is a price increase planned and announced?
• Do you know which subscriptions are paused or ended?

Frequently asked questions