TL;DR

Use subscription billing in Microsoft Dynamics 365 Business Central with service commitments to link customer and vendor contracts from a single sales order. This enables structured billing, better visibility, and streamlined management of recurring revenue and costs.

Subscription Billing for Both Customers and Vendors in BC

In this walkthrough, I’ll show you how to use subscription billing in Microsoft Dynamics 365 Business Central to track both customer and vendor contracts together. Before landing on the right approach, I evaluated three different methods—and quickly found that not all of them hold up in real-world scenarios.

Evaluating the Options

Non-Inventory Subscription Billing (Contract-First Approach)

The first option was starting with non-inventory subscription billing directly from a contract. While this sounds logical, it falls short because non-inventory items don’t generate purchase orders. That makes it difficult to manage vendor-side transactions effectively, so this approach doesn’t meet the requirement of linking both sides of the contract.

Recurring Sales Order Lines

The second option was recurring sales order lines. This works operationally, but it lacks a true contract structure. You don’t get a clear start date, duration, or lifecycle view. Without that, reporting and contract management become limited, so this option was also ruled out.

Service Commitments + Subscription Billing (Recommended)

The most effective approach is combining service commitments with subscription billing. This allows you to start with a sales order and generate both customer and vendor contracts from it. From there, everything is managed within a structured contract framework—making billing, tracking, and reporting much easier.

Creating the Sales Order

The process starts with a standard sales order for the customer. In this example, it’s for cellular service. After selecting the customer, I choose a special item that includes subscription functionality.

Selecting Subscription Options

This item allows me to attach subscription lines. For example, I can select a vendor like T-Mobile, which becomes part of the subscription. At the same time, the system automatically adds a customer subscription line.

Setting Quantity and Pricing

I enter the quantity, such as 10 licenses. The sales order price is set to zero because billing will occur through the contract. Once posted, the system generates a sales invoice and creates both customer and vendor subscription lines.

Reviewing Subscription Lines

After posting, I can review the subscription lines tied to the sales order.

Customer vs Vendor Lines

There are typically two lines: a customer line that is automatically created, and a vendor line that was selected during order entry. You can also update descriptions here to make contracts clearer and easier to manage later.

Assigning Subscription Lines to Contracts

Next, I go to the role center and open the subscription billing area. Here, I’ll see subscription lines that haven’t yet been assigned to contracts.

Creating a Customer Contract

For the customer line, I create a new contract. The system auto-fills key details like the customer number. I can add a description and adjust settings, such as turning off deferrals. Once done, I assign the subscription line to this contract.

Linking to a Vendor Contract

For the vendor line, I assign it to an existing vendor contract. This allows multiple subscriptions to roll up under one vendor agreement, keeping everything organized.

Managing Customer Contracts

Once assigned, I can open the customer contract and configure billing.

Setting Pricing and Billing

I enter the contract price—for example, a one-year agreement for 10 licenses—and generate a contract invoice. This invoice posts to accounts receivable.

Billing Cycles

After posting, the system updates the next billing date automatically. Since this is an annual contract, it will continue billing yearly unless an end date is defined.

Managing Vendor Contracts

On the vendor side, I open the vendor contract and review the newly added subscription line.

Creating Vendor Invoices

Instead of generating a purchase order, the system creates a purchase invoice. This is posted to accounts payable, ensuring vendor billing is tracked correctly.

Billing Control

The system enforces billing dates, preventing invoices from being generated before the next billing cycle. This adds an extra layer of control over vendor expenses.

Subscription Analysis and Reporting

Business Central provides built-in tools for analyzing subscriptions across customers and vendors.

Built-In Subscription Analysis

You can view high-level subscription records that combine both customer and vendor data. This gives you a complete picture of each subscription.

Power BI Reporting

For deeper insights, Microsoft Power BI provides prebuilt dashboards available through AppSource. These reports include KPIs, revenue trends, churn analysis, and monthly recurring revenue.

You can filter by customer, item, or contract and drill down into detailed data. These insights help you understand performance and make better decisions.

Sharing Insights Across Teams

One major benefit of Power BI is that reports can be shared across your organization without requiring access to the ERP system. This makes it easier for teams to collaborate and stay informed.

Item and Subscription Setup

The process relies on properly configured items within Business Central.

Subscription-Enabled Items

In this example, the item is a non-inventory item with subscription options enabled. This allows it to generate subscription lines during sales order entry.

Subscription Packages

Some subscription packages are automatically included, such as the customer line, while others—like vendor options—can be selected manually. This gives you flexibility while maintaining consistency.

Recap and Key Takeaways

This approach allows a single sales order to generate both customer and vendor subscription lines. These lines are then assigned to contracts, enabling structured billing and tracking on both sides.

We covered how to create contracts, generate invoices, manage billing cycles, and analyze subscription performance using both built-in tools and Microsoft Power BI.

Final Thoughts

Using subscription billing in Microsoft Dynamics 365 Business Central provides a unified way to manage recurring revenue and vendor costs. By combining service commitments with contracts and reporting tools, you gain better visibility, control, and efficiency across your subscription business.

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