Why the NetSuite Sales Order Record is Broken for SaaS and Subscription Businesses

NetSuite is a powerful ERP system, widely regarded for its flexibility and capability to handle various business needs. However, when it comes to SaaS or subscription-based business models, a fundamental challenge arises: the NetSuite Sales Order record. Originally designed for one-time purchases, the Sales Order record struggles to meet the demands of ongoing, recurring contracts—critical for SaaS businesses that rely on long-term customer relationships and evolving pricing structures. It’s like comparing a photograph to a video—Sales Orders capture a static moment in time, but SaaS businesses need a solution that can handle the continuous, evolving nature of their customer relationships.

In this article, we’ll explore why the standard NetSuite Sales Order record is fundamentally flawed for SaaS or subscription models and how it falls short when managing contracts, recurring billing, and complex usage-based pricing. We’ll also discuss how tools like ZoneBilling can bridge this gap and turn an ERP designed for traditional businesses into a SaaS powerhouse.

Sales Orders: Built for One-Time Transactions

If you’re a SaaS business using NetSuite, you’ve probably experienced the frustration of trying to make the Sales Order record fit your recurring revenue model. Sound familiar?

Raise your hand if...

• You’ve had to de-book and re-book Sales Orders because of contract changes.
• You’ve had to book separate Sales Orders for mid-contract add-ons.
• You’ve had to book a Return Authorization for a cancellation, product swap, or downgrade.
• You’ve had to create custom Billing Schedules for every Sales Order.
• You love managing dozens of individual transactions just to represent a single contract with a customer. (I didn’t think so.)

The NetSuite Sales Order record is deeply rooted in traditional commerce, where businesses sell products or services on a one-time basis. A customer places an order, the business fulfills that order, and the transaction is completed. While this structure works perfectly for product sales or single-service engagements, it’s incompatible with recurring revenue models.

For SaaS businesses, where long-term contracts, renewals, and usage-based pricing models are the norm, the Sales Order's one-time snapshot model is inadequate. The need for ongoing management of contract changes, price adjustments, and billing cycles exposes the limitations of a system designed for finite transactions.

Lack of Flexibility in Managing Subscriptions

SaaS businesses require more than just a static order record; they need contracts that can evolve. The Sales Order record in NetSuite lacks the dynamic flexibility necessary for managing mid-contract changes. SaaS customers often upgrade or modify their subscriptions, but the Sales Order is not built to handle these adjustments smoothly.

For example, co-termed upsells are a common scenario in SaaS where additional services or licenses are added to a contract mid-term. The Sales Order system does not easily accommodate these changes without creating a tangle of amendments. This not only makes tracking more difficult but also introduces opportunities for billing errors.

For example, consider a customer’s original purchase where the Sales Order lists out what they bought, how many, and for what term. A few months later, the customer decides to expand their contract, perhaps by adding new users, add-on modules, or other product expansions. You cannot modify the original Sales Order—once booked and invoiced, that record is locked and non-editable. So, you have to create a new Sales Order for the additional products or services. However, this new Sales Order has no association with the original one. The system isn’t smart enough to recognize that this is part of the same ongoing contract, which leads to several issues:

• It can’t co-term the end dates of the new items to match the original contract.
• It won’t prorate the pricing for partial periods.
• It doesn’t align the billing cadence of the new add-ons with the original products, leaving everything unsynchronized.
• If you have complicated revenue recognition requirements under ASC 606 that require re-allocating revenue across all products, including those from the original contract, this would also be a manual task (I plan to write an entire article on Revenue Recognition, so more on this to come).

Instead, the system treats this transaction as a standalone purchase, forcing you to manually adjust all of the above. This manual intervention not only adds complexity but also increases the chances of errors in billing and contract management

The Challenge of Customer 360 View and Renewals

Now, let’s expand on the previous scenario. Imagine that over the course of a three-year contract, the customer adds and removes products multiple times. Every time this happens, you’re generating separate Sales Orders for each transaction, potentially creating Return Authorizations for product downgrades or cancellations. Now, instead of a single, cohesive view of the customer’s account, you have several disjointed Sales Orders and Return Authorizations that all represent different pieces of a single contract.

At this point, you’re probably wondering: How can I tell, at any given moment, what exactly the customer owns? The answer is: it’s difficult. There is no singular place within NetSuite where you can view everything this customer has—what products they own, how many, at what price, and how much time is left on the contract. Instead, you’re forced to sift through multiple individual transactions to piece together this information.

This issue becomes even more pressing when the customer’s renewal period approaches. What exactly is up for renewal? Without a clear, consolidated view of the contract, answering this question becomes a complicated and manual process. As the number of separate transactions increases over time, so does the difficulty in tracking and managing what the customer actually owns and what should be renewed. This lack of visibility not only creates operational inefficiencies but also opens the door for potential errors that could harm the customer experience.

Struggles with Usage-Based Pricing Models

One of the standout features of modern SaaS businesses is the use of usage-based billing models. Customers are often billed based on actual consumption, whether that’s API calls, user activity, data usage, or many other metrics. Unfortunately, the NetSuite Sales Order record is not designed for this level of complexity.

The Sales Order assumes fixed quantities and prices are known upfront, which does not align with the dynamic nature of usage-based models. In many cases, businesses are forced to manually calculate and adjust invoices, creating inefficiencies and increasing the risk of human error. For SaaS businesses, this manual workaround is not scalable and can become a bottleneck in financial operations.

To understand the challenge better, let’s take a look at some common usage-based billing types:

PAYG (Pay As You Go): In this model, customers are billed in arrears based on their actual consumption. For example, if a customer makes a variable number of API calls in a given month, they are billed after the fact based on the total usage during that period. This is highly dynamic, and the Sales Order system struggles to handle the fluidity of this model without extensive manual intervention.

Fixed + Overage: This hybrid model involves customers paying a fixed amount for a certain level of consumption (the assumed minimum), and if they exceed this threshold, they pay additional overage fees. For instance, a customer might pay a fixed price for 1,000 API calls per month but be charged an overage fee for any calls above this limit. Managing the overage calculations and adjustments requires significant manual input within the Sales Order system.

Tiered Pricing: In a tiered pricing model, the rate changes based on the customer’s consumption reaching specific thresholds or tiers. For example, the first 1,000 API calls might be charged at one rate, while the next 1,000 are billed at a lower rate, encouraging higher usage. This creates a complex billing structure that the Sales Order system cannot easily accommodate, often requiring separate manual calculations.

Other Variable Billing Models: Beyond these common types, businesses are constantly experimenting with a virtually infinite number of usage-based and variable billing models. Whether it’s volume discounts, pooled usage across multiple accounts, or custom formulas tailored to specific customer needs, the flexibility required to support these dynamic models is far beyond what the NetSuite Sales Order record was designed to handle.

The rigidity of the Sales Order system means businesses are often forced to rely on spreadsheets or custom scripts to manage these models, adding complexity and increasing the chances of error. For SaaS companies that rely on these billing strategies to drive revenue, the lack of a scalable, automated solution can severely limit growth and operational efficiency.

The Disconnect with Revenue Recognition

Revenue recognition deserves an entire article dedicated to itself, but for now, I’ll touch on the high-level reasons why Sales Orders are a “bottleneck” record for revenue recognition. NetSuite’s Advanced Revenue Management (ARM) module is one of the most groundbreaking products they’ve ever released (in my opinion, the most). It’s an incredibly sophisticated tool for handling revenue and staying compliant with regulatory standards like ASC 606 and IFRS 15.

However, I frequently hear dissatisfaction from customers who use ARM. The frustration, I explain, isn’t because of ARM—it’s because of the Sales Order. The Sales Order record is simply not sophisticated enough to keep up with NetSuite’s Revenue Arrangements and Revenue Elements. The exact scenario we discussed earlier—where multiple transactions represent a single contract—leads to downstream issues when NetSuite ARM tries to manage revenue recognition.

It’s like asking a rotary phone to communicate with a modern smartphone. The ARM module, much like the smartphone, is designed to handle complex, multi-faceted interactions, but it’s trying to pull information from a Sales Order system that’s as outdated as the rotary phone. The Sales Order is too simplistic and rigid to provide the detailed data ARM needs to accurately track performance obligations and allocate revenue across contract terms.

There’s a lot more to unpack here, so I’ll save a deeper dive into revenue recognition for another time. But it’s essential to understand that the Sales Order is the bottleneck that prevents ARM from reaching its full potential in helping companies manage complex subscription-based revenue streams.

The Need for SaaS-Specific Billing Tools

SaaS and subscription businesses need more than a system built for one-time transactions. They require tools designed to handle recurring revenue models, dynamic pricing, and ongoing customer relationships. This is where solutions like ZoneBilling come into play.

ZoneBilling is natively built inside of NetSuite, transforming it from a traditional ERP system into an enterprise billing platform designed for modern SaaS and recurring revenue businesses. Unlike standalone or bolt-on systems, ZoneBilling expands the core functionality of NetSuite, providing the flexibility to manage evolving contracts, upsells, renewals, and complex usage-based billing models—all within a single platform. By leveraging ZoneBilling, businesses can streamline their entire billing process, from subscription management to revenue recognition, while ensuring compliance with standards like ASC 606. With ZoneBilling’s seamless integration, there’s no need for manual workarounds or separate systems—SaaS companies can now automate their billing operations, optimize financial workflows, and eliminate the inefficiencies caused by traditional Sales Orders.

Rethink the Sales Order

NetSuite’s Sales Order record serves a critical role for traditional, one-time transactions, but it is not equipped to handle the complexities of SaaS and subscription-based business models. The rigid structure of Sales Orders conflicts with the ongoing, dynamic nature of SaaS contracts, leaving businesses to rely on inefficient manual processes and complicated workarounds.

SaaS businesses that continue to use Sales Orders for subscription management will face increasing difficulties as they scale, introducing opportunities for billing errors and compliance issues. Tools like ZoneBilling offer the flexibility and automation required to manage the entire customer lifecycle—from initial sale to ongoing revenue recognition and everything in between. For companies looking to streamline their financial operations, it’s time to rethink the role of the Sales Order.