Your Billing System as a Financial System of Record

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Businesses are increasingly offering products and services through subscription models, as opposed to one-time transactions. Even those which haven’t completely converted to subscription business now offer multiple purchase options.

Hybrid business models enable customers to enjoy flexibility and convenience, and businesses benefit from the recurring revenue.

These new pricing methodologies create many opportunities for businesses to scale. However, they can also introduce some complexities from a billing perspective. This is where the necessity for a robust billing system comes into play—one that can act as your business’ financial system of record.

Managing abundant data

Recurring revenue based businesses can create a lot of data. This data pours in continuously from across all business processes, and it has to be managed, tracked, utilized, and reported on as needed.

Consider Zendesk—a Software as a Service (SaaS) business offering a customer service and engagement platform. Its clients are able to create their own custom solutions with Zendesk’s products, apps, and integrations. Alternately, they can go with the business’ bundled suite of software products.

Zendesk collects its clients’ data, including their choices of products, apps, integrations, and payment information. Both the custom and bundled options are available on a month-to-month or annual basis, and clients can add to their core plan with additional features as needed. Each of these comes at a different price point per user. All of this paired with the clients’ ability to build up or reduce their plan at any time creates many layers of complex data to be tracked.

Zendesk needs to be able to use its data to deliver its products, apps, and integrations seamlessly, as well as deliver its billing with accuracy and transparency. It also likely makes use of its breadth of data for numerous other functions, from marketing and sales to pricing, customer service, financial reporting, and more.

Many recurring revenue businesses operating on legacy billing systems struggle to collect, manage, and make use of a comprehensive set of data like this. Instead, bits of required information from various areas of these businesses are stored in multiple systems, and this information can often be difficult to stitch together in a meaningful way.

Alternatively, they may have the same data available on multiple systems, but the values of that data sometimes differ. In these cases, it can be challenging if not impossible to determine which is accurate—a situation that quickly becomes a serious liability.

A fractured, outdated legacy billing system like this would undoubtedly lead to a range of problems, such as incorrect or missed bills, disrupted or unpredictable access to services, and ultimately unsatisfied customers.

How an adaptive billing system can help

An adaptive billing system can consolidate and safely manage all the data from a recurring revenue business in one place, acting as a financial system of record. If done well, it can also act as a single source of truth (SSOT) for:

  • Customer service
  • Contract management
  • Sales
  • Quotation systems
  • Entitlement administration

Having a SSOT ensures that when your business’ customer service and sales representatives are working with your clients, the data they’re using is uniform and accurate. There’s nothing more frustrating from a client perspective than playing a game of “he said-she said” between reps with conflicting data. Consistency is key.

For sales and quotation purposes, a SSOT ensures prospective clients are being shown the most accurate and up-to-date offerings and prices. This eliminates any confusion for both the internal team and prospective customers.

In fact, a business’ billing system is often its only reliable source of product catalog, customer hierarchies, and most current pricing data. Accuracy in these areas is imperative for correctly and consistently delivering products/services, billing, and appropriate customer care—not to mention following up with detailed reporting on the back end.

Monetization EngineA SSOT also ensures that everyone on your team is performing tasks and making important business decisions based on the same data. This is critical. Pulling data from multiple silos across departments instead of one accurate, central source can lead to costly errors that impact everything from sales to customer service, compliance, audit, and ultimately profits.

By establishing this hub of reliable, easy-to-access information, a business is in a better position to perform on a daily basis, as well as reach its long-term acquisition and retention goals.

What is an adaptive billing system?

Billing used to be a very disconnected, back-office element of conducting business. Today, the e-commerce landscape involves deep digitization of business processes, and is consumer-driven in nature. There’s a need for billing to communicate with all areas of a business.

Typically cloud-based, adaptive billing systems are integrated with a business’ existing technologies to enable this seamless communication between departments, processes, and strategic business objectives. For example, customer-facing sales systems communicate with back-end systems such as fulfillment, payment, reporting, and more. All of these link with a business’ key objectives, such as increased profit margins, growth in market share, or improved customer service.

Adaptive billing systems are also deeply integrated with a business’ financials, e-commerce, order management, and provisioning systems. Data is fed from the billing solution into the full business process from beginning to end. This data connects with vital systems along the way, improving a business’ accuracy and capabilities with regard to general ledger, revenue recognition, financial close, reporting, forecasting, and more.

Among these, revenue recognition is especially important for subscription-based businesses. For them, getting out of sync with revenue recognition can lead to restating revenue and potential legal ramifications.

The level of robust integration involved in adaptive billing systems would have taken an exorbitant amount of time and money to achieve in the past. However, technological advances have made the process quick, less costly, and more effective on a granular level.

Once in place, these systems use their data connections to create profitable efficiencies and reduce revenue leakage. Agile billing systems eliminate time-consuming manual work—and inevitable human errors—by automating a number of billing-related tasks. These include invoicing, email notifications, and credit card payment failure retries.

Additionally, because an agile billing system integrates with a business’ other technologies, opportunities for evolving to meet market demand are more visible. It becomes easier to jump on these opportunities without delay.

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Complete Guide to Subscription Billing.

This guide will walk you through the wide range of features required to automate your recurring billing, subscription management, and payment processes.

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Adaptive billing systems are fundamental to agile monetization

There are opportunities for monetization across an entire business, from product/service development, to marketing, sales, billing, and even customer management and support. Agile monetization means being able to see these opportunities presented through internal data and external market demand, and quickly convert these into revenues, profits, and competitive edge.

An adaptive billing system is key to agile monetization.

As the financial system of record, it can quickly and accurately pull together data from across an entire business to accomplish robust reporting and forecasting. Additionally, these billing systems provide a modern, intuitive user experience that even multiple stand-alone billing applications could never duplicate.

On a financial level, a sleek and flexible user experience enables businesses to accomplish all of their pricing and billing tasks quickly, easily, and without the continual and often expensive involvement of tech support. On a broader level it enables businesses to rapidly create and implement new offerings and pricing strategies in line with market demand—and evolve old ones as necessary—to convert opportunities to revenue.

Does my business need an adaptive billing solution?

Regardless of the size or sector of your recurring revenue business, the inflexibility and disconnect of an outdated billing system can be a barrier to growth.

It’s always better to be proactive than reactive. Many businesses begin to see an adaptive billing solution as imperative when they start straining to keep up with their competition in terms of time-to-revenue, and struggling to complete basic financial functions accurately. Invoicing is a good example of this.

Even if a recurring revenue business doesn’t interact with its customers frequently, they do send regular invoices.

With each invoice sent, a business has the opportunity to create a positive impression on a customer, or a negative one.

Customers will critique your business based on a variety of factors, including the accuracy of your bills, how closely the services you provide match your original agreement, the readability and level of detail included in your invoices, and more. These critiques form the opinions and dialogues your customers will have about your business, which affects your customer retention, your reputation, and your chances of long-term success.

A competitive prerequisite

When a business lacks a singular financial system of record feeding into its billing—the kind that an adaptive billing system can provide—it lacks a 360-degree view of the process. Data errors can easily begin to crop up.

Errors in billing and reporting can lead to billing disputes, dissatisfied customers, and revenue leakage, not to mention compliance issues and the resulting trouble when it comes to auditing.

Inaccurate data can also lead a business to make uninformed decisions based on incorrect customer purchase information and forecasted revenue.

Acting as the financial system of record for your business, an adaptive billing system provides the data and functionality to ensure your business’ processes are accurate, transparent, reliable, and cutting edge—traits that make it easy for your customers to keep coming back for more.  

Of course, the seamlessly integrated nature of an adaptive billing system also frees your recurring revenue business from the limitations of a legacy system. This makes it easier to scale the business as new opportunities present themselves.

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Tags: Subscription Billing Recurring Billing Subscription Management

Tyler Eyamie

Tyler is CEO at Fusebill and leads the team towards simplifying all aspects of subscription billing and management. Tyler loves optimizing recurring revenue for rapid growth companies

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