Recurring Billing in Microsoft Dynamics 365 Business Central
In the previous article, we explored Customer Subscription Contracts and learned how subscription lines define the services, billing frequency, quantities, and contractual terms associated with a customer.
But creating a contract is only the beginning.
The real value of Subscription & Recurring Billing becomes visible when Business Central needs to turn those active contracts into recurring invoices.
Imagine an organization managing 2,000 customers, each with different subscription start dates, billing frequencies, quantities, prices, and contract terms. Creating every invoice manually every month would be time-consuming and highly prone to errors.
This is where Recurring Billing comes into the picture.
Microsoft's Subscription Billing functionality allows organizations to create billing proposals based on contract lines and their Next Billing Date, review what is due, and then create the corresponding posting documents.
Understanding the Recurring Billing Process
The recurring billing process can be understood as a controlled sequence:
Active Subscription Contract > Subscription Lines Due for Billing > Billing Proposal > Review & Validation > Contract Invoice / Credit Memo > Posting Document > Customer Ledger & G/L Entries
The important point is that Business Central separates the proposal stage from the posting stage.
This gives finance teams an opportunity to review the billing information before invoices are actually posted.
What is a Billing Proposal?
A Billing Proposal is essentially the system's calculation and preview of what needs to be billed.
When you create a billing proposal from the Recurring Billing page, Business Central evaluates eligible contract lines and proposes the subscription lines that should be billed based on their billing dates and billing rhythm.
This makes the proposal an important control point.
Instead of immediately posting hundreds of invoices, users can first review the proposed billing information and identify potential issues such as missing data, incorrect dates, or unexpected amounts.
How Business Central Determines What to Bill
The Next Billing Date is one of the key fields used during recurring billing.
Business Central compares the next billing date of the subscription line with the billing date specified when the billing proposal is created.
If a subscription line isn't yet due, it isn't included in the proposal.
If it is due, Business Central calculates the relevant billing period according to the subscription line's Billing Rhythm and other billing information.
For example, suppose a customer has:
Billing Rhythm: 1 Month
Next Billing Date: August 1, 2026
When recurring billing is run for August, the subscription line becomes eligible for billing.
After the billing process advances the subscription, the next billing date moves forward according to the configured billing rhythm.
This is what allows the same contract to participate in recurring billing month after month.
Billing From and Billing To Dates
Recurring billing isn't simply about calculating an amount - it also determines which service period the customer is being charged for.
Billing proposal lines contain information such as:
>Billing From
> Billing To
> Quantity
> Price
> Discount
> Amount
These dates establish the service period represented by the billing line. Microsoft documentation explains that multiple proposal lines can be created when a subscription's billing rhythm occurs several times within the selected billing period.
For example, if an annual subscription is being billed for a 24-month period, Business Central may need to generate multiple billing periods rather than treating the entire duration as one billing event.
This becomes particularly important when organizations use different billing frequencies within the same contract.
Billing Templates
Billing Templates help determine which contracts should be processed and how billing should be handled.
Instead of manually defining the billing parameters every time users run recurring billing, templates can provide reusable rules for the billing process.
Microsoft's current Subscription Billing functionality also uses billing templates as a foundation for billing automation. Templates can define items such as posting-date formulas, document-date formulas, invoice grouping, and the level of automation.
This makes billing templates particularly useful when an organization has different types of contracts requiring different billing approaches.
For example:
Monthly Support Contracts
>Bill monthly
>Group by contract
>Manual review before posting
Annual Software Contracts
> Bill annually
> Group by invoice recipient
> Automatic document creation
The exact design depends on the organization's commercial and financial requirements.
Creating a Billing Proposal
The billing process starts from the Recurring Billing page.
When the user chooses Create Billing Proposal, Business Central evaluates the relevant contract lines and creates proposal lines for the subscription services that are due.
The proposal provides visibility into:
Customer > Contract > Subscription > Subscription Line > Billing Period > Amount
This relationship makes it easier for finance teams to understand exactly why a particular amount is being proposed for billing.
Microsoft describes billing proposal lines as a preview of the billing lines that will form the basis for contract invoices.
Reviewing the Billing Proposal
The review stage is particularly important in real-world implementations.
Before creating posting documents, users should review the proposal for unexpected amounts, missing billing information, unusual billing periods, or warnings.
For example, imagine a customer has a monthly subscription of $500.
The expected monthly billing is:
$500
But the proposal shows:
$750
Instead of blindly creating the invoice, the finance user can investigate the subscription line, quantity, price, discount, or contract amendment that caused the difference.
This simple review process can prevent incorrect invoices from reaching customers.
Creating Contract Invoices
Once the billing proposal has been reviewed, users can choose Create Documents.
Business Central then creates the relevant subscription contract invoices or credit memos for the billing proposal lines that don't already have documents.
The resulting posting documents can then be reviewed and posted according to the organization's financial controls.
This creates a clear separation between:
What Business Central thinks should be billed
and
What the organization actually posts to the customer.
That separation is valuable for auditability and financial control.
Invoice Grouping
Large subscription businesses may have many subscription lines belonging to the same customer.
Creating a separate invoice for every subscription line would create unnecessary document volume.
Billing proposals therefore support grouping options.
Depending on the configuration, billing lines can be grouped by Contract or Contract Partner, rather than creating completely separate billing documents for every line.
For example:
A customer has:
Cloud Hosting - $500
Backup - $100
Security Monitoring - $200
Instead of producing three separate invoices, the organization may configure the process so that these charges are consolidated into one customer invoice.
This provides a cleaner customer experience and reduces administrative overhead.
Contract Invoices Without a Billing Proposal
Although the recurring billing page is designed for batch billing, Business Central also supports creating an invoice directly from a customer subscription contract.
This can be useful when a user needs to bill an individual contract rather than processing the entire billing population.
Microsoft's documentation describes the Create Contract Invoice action, where users can specify the billing date, billing-to date, document date, and posting date. Depending on the settings, the document can also be opened or posted directly.
This is particularly useful for exception handling or testing individual contracts.
Credit Memos and Adjustments
Recurring billing isn't always about generating positive invoices.
Customers may cancel services, reduce quantities, receive credits, or have other contractual adjustments.
The subscription billing framework can therefore create credit memos as part of the billing process.
For example, if a customer has already been billed for a service period but becomes eligible for a credit due to a contractual change, the billing process can generate the appropriate negative billing transaction.
This becomes especially important when managing upgrades, downgrades, cancellations, and partial-period adjustments.
Handling Billing Warnings
A good recurring billing process should not simply automate everything without controls.
Business Central provides warnings on billing proposal lines when something requires attention.
For example, a subscription line may have incomplete information or a condition that prevents normal billing.
The Refresh action can be used after resolving an issue so that the proposal is recalculated and the warning can be removed where appropriate.
From an implementation perspective, these warnings are valuable because they help organizations identify exceptions before posting.
Billing Automation
The latest Subscription Billing capabilities also introduce more extensive automated invoicing.
Microsoft supports different automation levels depending on the organization's requirements. A contract can be fully automated when the invoice is predictable every period, partially automated when invoices need review, or handled manually when frequent adjustments are expected.
For example:
Fully Automated
A customer pays exactly $1,000 every month with no changes.
Partially Automated
The invoice is usually $1,000 but may require occasional adjustments.
Manual
The contract requires review and changes every billing period.
This approach is important because not every subscription contract should be treated in exactly the same way.
Job Queue and Automated Billing
For organizations managing large volumes of subscriptions, manually initiating recurring billing every month may still create unnecessary administrative work.
Business Central's billing automation can use Job Queue processing to run billing activities in the background.
Microsoft documents that automated billing uses billing templates and job queue processing to create billing proposals and documents according to configured rules.
This means an organization can move from:
User manually runs billing
to:
Business Central automatically processes eligible contracts
while retaining appropriate controls around document creation and posting.
Example: Monthly SaaS Subscription
Let's consider a practical example.
A software company sells a SaaS subscription for:
$1,200 per year
The customer's subscription begins on:
January 1, 2026
The billing rhythm is:
12 months
The customer contract contains the subscription line with its billing information.
When the billing date is reached, Business Central identifies the subscription line as due.
The system creates a billing proposal showing:
Billing From: January 1, 2026
Billing To: December 31, 2026
Amount: $1,200
The finance user reviews the proposal and creates the contract invoice.
The invoice is then posted according to the organization's financial configuration.
If contract deferrals are configured, the invoice can also participate in deferred revenue processing so that revenue is recognized over the appropriate service period. Microsoft identifies deferral-based posting of income and expenses as one of the capabilities of Subscription Billing.
Example: Monthly Managed Service
Now consider a different customer with:
Managed IT Support - $1,000/month
Cloud Backup - $300/month
Security Monitoring - $500/month
Total monthly recurring billing:
$1,800
All three subscription lines belong to the customer's contract.
When the billing proposal is generated, Business Central evaluates each subscription line and determines which services are due.
Depending on the configured grouping, the billing lines can be consolidated into a customer invoice.
The customer therefore receives one invoice containing the relevant recurring services rather than multiple unrelated invoices.
From Billing Proposal to Financial Statements
The recurring billing process ultimately connects subscription operations with the financial system.
The overall flow can be visualized as:
Customer Subscription Contract > Subscription Lines > Next Billing Date > Billing Proposal > Billing Review > Contract Invoice / Credit Memo > Posting > Customer Ledger Entry > General Ledger Entry > Revenue / Deferral Reporting
This is what makes Subscription & Recurring Billing more powerful than simply maintaining recurring invoice templates.
The process connects the contractual relationship directly with the organization's financial records.
Best Practices for Recurring Billing
A successful recurring billing implementation should balance automation and control.
Not every contract should automatically post invoices. Highly predictable contracts can benefit from full automation, while contracts involving variable pricing or frequent amendments may require human review.
Billing templates should therefore be designed around actual business scenarios rather than simply trying to automate everything.
It is also important to establish clear ownership between sales, operations, and finance. Sales teams may manage contractual changes, while finance teams should control billing validation and posting.
Finally, organizations should monitor the Overdue and Not Invoiced indicators available in the Subscription Billing Role Center to identify subscription lines that haven't been billed or documents that still need to be created.
In the next part, we'll dive deeper into one of the most challenging areas of subscription businesses: what happens when the price or service changes during an active contract?
