Annual vs monthly plans: how to offer both
10 Aug 2026 · 2 min read · By the Knock team
Key takeaways
- Annual plans improve cash flow and retention but need a clear incentive.
- Monthly plans lower the barrier to start.
- Be explicit about refunds, renewals and mid-term changes.
Most subscription products offer both. The trick is to make annual attractive without making monthly feel punishing.
Why annual plans help
- Cash arrives up front.
- Customers commit for longer, so churn events happen once a year.
- Less billing and payment-failure overhead.
Why monthly still matters
Monthly plans let cautious customers start. Many later switch to annual once they trust the product.
Structuring the incentive
A discount on annual, often expressed as a number of months free, is the usual lever. Choose an amount that reflects the real benefit to you, and show the monthly equivalent so the saving is clear.
Policies to define
- Refunds: will you refund unused months if the customer cancels?
- Renewal: automatic or manual, and how much notice you give.
- Upgrades mid-term: how proration works.
- Price changes at renewal and how early you announce them.
Accounting impact
Annual prepayments are recorded as deferred revenue and recognised over the year. See the article on revenue recognition for the basics.
Nudge customers sensibly
Offer the switch to annual at natural moments, such as after the first successful quarter, not on every screen.
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