The Fundamental Challenge in Subscription Status Management

Current Industry Standard: A Simplistic Approach

Many teams rely on Stripe Billing features like Subscriptions and Entitlements to provision customer access to product features. As suggested by Stripe for ease of integration, customers often use the subscription status (IF status=active) as the sole determinant for granting or revoking access to paid features. While this approach seems intuitive, it masks several complex underlying issues that can dramatically impact revenue integrity and customer entitlements.

Deep Dive: Limitations in Subscription Status Determination

Stripe's method of determining subscription status primarily based on the latest invoice status introduces several challenges, as will be detailed in the following sections.

1. Uncollectible Invoices and Active Subscriptions Anomaly:

• Issue: Even if the latest subscription invoice is marked as 'uncollectible'(e.g., due to failed payment), the subscription status remains 'active' in Stripe.

  
  

  

  
  

• Impact: This can falsely indicate an active subscription, granting users continued access to paid features despite non-payment, leading to revenue leakage.

• Recommended Actions:

  • Stripe's Revenue Recovery: When utilizing Stripe's smart retries, ensure to explicitly configure the invoice and connected subscription statuses for unsuccessful recoveries through the Stripe UI. This facilitates proper management of subscription statuses following the recovery process. Stripe's configurable automation is limited and doesn’t support advanced status configurations, potentially restricting flexibility for complex billing scenarios.

    

  • Custom Billing Automations: For payment recovery or internal billing operations requiring specific statuses beyond Stripe's limited automation UI, leveraging the Stripe API provides granular control over subscription lifecycle management, though this approach demands dedicated development resources to implement and maintain effectively.

2. Asynchronous Payments Masking Subscription Payment Failures:

• Issue: When a recurring subscription invoice is 'open' and the customer modifies their subscription, Stripe creates a separate proration invoice (proration_behavior=always_invoice). If this proration invoice is immediately paid or has a $0 amount, Stripe will show the subscription as 'active' due to this being the latest successful payment, even if the original recurring invoice remains unpaid. Similarly, successful one-time payments related to the subscription (e.g., add-ons or extra usage) can also cause the subscription to appear 'active' despite an unpaid recurring invoice, potentially leading to inaccurate access management.

  

  
  

• Impact: This can mislead into believing the subscription is still valid, again leading to inappropriate access control.

• Recommended Actions:

  • When a subscription is 'past-due', restrict customers from making changes to their subscription plan that could trigger Stripe's proration flow. This prevents the creation of one-time invoices (with billing_reason=subscription_update) under the subscription that are separate from the original billing cycle invoices (with billing_reason=subscription_cycle). Consider disabling the billing update section in your app for past-due accounts, prompting customers to settle outstanding invoices before making changes or to contact support.

  • Additionally, if possible, generate invoices for one-time purchases separately from the recurring subscription to maintain clearer billing distinctions.

3. Refund Invoice Misrepresentation

• Issue: Stripe marks refund invoices as 'paid', which doesn’t represent the actual subscription status when this is the latest invoice.

• Impact: Introduces potential synchronization challenges between billing and the product entitlement systems.

• Recommended Actions: When processing refunds, proactively verify the subscription status before creating the refund invoice, and if the status has been altered, revert it to the previous state. Additionally, consider implementing an internal operational policy that allows discretion in withholding refunds for delinquent customers.

  

Recommended Subscriptions lifecycle

To mitigate these challenges, we recommend developing a multi-layered approach to subscription status management:

1. Define Your Own Cancellation Logic

Create a custom cancellation flows that take into account more nuanced factors beyond Stripe’s latest subscription’s invoice logic and the basic post recovery status automation. This ensures that access to services based on the subscription status (Entitlement) is managed more accurately and in line with actual payment statuses.

2. Do Not Rely Solely on Stripe's Subscription Status

Enhance your status verification by implementing custom validation logic beyond Stripe's default status, that can be achieved by:

• Carefully processing all Stripe webhooks events

• Cross-referencing multiple invoice and payment signals

• Creating a more nuanced entitlement determination process

3. Run a Proactive Anomaly Detection with FlyCode

• Run real-time monitoring for payment and subscription inconsistencies

• Create alert mechanisms for unusual billing patterns

• Develop flexible response mechanisms for various billing scenarios

• Establish automated remediation workflows

• Maintain clear documentation of edge cases and resolutions

There are many more nuances to this as there are with each of your businesses so it’s important to adjust the settings and reporting to you. If you want help with this, please reach out and we’d love to help you for free. You can reach out here or to install our Stripe app.

The Solution: Flycode's Advanced Subscription Management

Flycode offers a comprehensive solution to overcome these Stripe Billing limitations:

1. Flycode’s Workflow - Define Your Own Cancellation Flow:

• Customizable Logic: Go beyond relying solely on Stripe's subscription status. Implement custom rules and logic to define your cancellation flow based on various factors like payment history, multiple invoice statuses, metadata, your {SaaS provider} business/accounting needs.

2. Flycode Subscription Anomaly Agent:

• Proactive Monitoring: Flycode's AI-powered Subscription Anomaly Agent monitors subscription and payments data and identifies potential issues or anomalies.

• Early Detection: Identify potential billing issues and subscription management errors before they impact your revenue or customer experience.

• Automated Alerts: Receive real-time notifications about suspicious activities, enabling prompt action and preventing revenue leakage.

Reference and Further Reading: for more detailed and technical information about the topics discussed above please check:

• Stripe Subscriptions Management Guide

• Stripe Subscriptions events

• Stripe Invoicing Guide

• Stripe Proration Settings

• Stripe Provisioning Access