Subscription (term licence)

A subscription, or term licence, grants the right to use software only while you keep paying, on a recurring monthly or annual basis. It is the dominant model for modern SaaS, and it contrasts with a perpetual licence, which is bought once and owned outright.

Every subscription has a renewal date and, usually, a notice period, which is what makes ongoing tracking necessary rather than a one-time purchase decision. Subscriptions are frequently sold on an annual term billed monthly, so leaving one part way through can still mean paying out the rest of the committed year.

Two tools are both quoted at £100 a month, and the invoices are identical. One is a monthly rolling subscription that ends at the next billing date. The other is an annual term billed monthly, so leaving in month four does not save the remaining £800: the committed year is owed whatever the billing cycle does.

The difference is in the term, not in the billing cycle, and nothing on the invoice shows it. It is the contract that says whether £1,200 is one commitment or twelve monthly decisions, which is why the renewal date and the notice period have to be read off the agreement rather than inferred from how often the money leaves.

Licence type is a field on every record, so subscription, perpetual, usage-based and open-source tools sit in one register and can still be told apart. Cost and billing cycle describe how the money is invoiced; the renewal date and notice period describe the term, and they are recorded separately for exactly the reason above.

That separation is what lets a subscription billed monthly on an annual term be right in both places at once. The billed amount annualises into the spend rollups on the same basis as every other tool, while the renewal date carries the end of the committed year and is what the cancellation deadline and the reminders count back from.