As your subscription business scales, it’s important not to rest on your laurels or become too complacent—that is, if you want it to keep scaling. And in today’s business world, it seems you can never grow too quickly if you want to stay ahead of the competition.
To keep fostering that continued growth, you need to keep optimizing your systems and processes to ensure your internal teams are always working as efficiently as possible. This is true for your accounts receivable processes as much as any other area of your business.
The adoption of a modern, adaptive automated billing system is imperative for achieving this—automation saves your business so much time and patches up enough revenue leaks that the platform practically pays for itself. We’ve seen businesses:
- reduce their time spent billing by up to 90%,
- recover $600,000 a year in recurring revenue leakage, and
- create enough efficiencies to scale their business by 3X without also being forced to scale their staff.
All thanks to the benefits of billing automation.
And while the possibility of experiencing results like these for your business is certainly exciting, it’s perhaps more exciting to realize these results are far from the only potential benefits.
This kind of fintech digital transformation has numerous ‘side perks’ that can also have a big impact on scalability and your subscription business’s future success.
1. Better product, plan, and pricing flexibility
You know that flexibility is huge—different customers have different requirements for your product and sometimes to land a lucrative deal or retain a long-time customer, you have to tailor your offerings to your customers’ needs. This could mean offering a discounted subscription price to a customer or completely customizing a product or plan at the customer level.
Businesses using the wrong billing system tend to suffer here. For these businesses, it’s not easy to bill customers for anything other than their standard subscription offerings—forget about adding on a one-time sale, creating a custom plan to secure a big customer, or offer any special discounts or promotions. Even annual pricing upticks are off the table because it’s just too much work to implement.
For anything outside of the standard offerings, the billing clerks need to come up with workarounds. This often takes the form of:
- creating new and/or fake subscriptions and then canceling them to accommodate one-time sales,
- manually adjusting invoices to accommodate customized products, plans, or pricing, or
- foregoing both regular pricing updates and any necessary changes to pricing strategy or billing model.
Besides being a massive headache for your poor billing clerks, this lack of catalog flexibility can cause inaccuracies in your month-end reporting, create plenty of room for human errors, and cause you to miss out on a whole lot of well-deserved revenue.
Modern billing automation software enables your subscription business to offer customization in just a few clicks, and price upticks can be set to take effect automatically. It also supports any billing model—i.e., one-time, recurring service, hybrid, etc.—and pricing strategy—i.e., standard, tiered, volume-based, etc.—that might resonate most with your customers.
2. Robust reporting to improve your business strategy
Automated billing software comes with a ton of reporting features and functionality—we’ll continue to tackle them throughout this article—and many different departments throughout your organization can take advantage of these insights to do their jobs better.
More accurate marketing and sales messaging
These are the teams in charge of bringing in new business leads. And there’s tons of data housed in your automated billing system that can be leveraged by your sales and marketing teams. Data such as:
- the types of customers that contribute most to your business’s revenue over time
- the industry types and sizes of those customers, and
- the performance of different products and plans over time.
A modern billing platform is a single source of truth (SSOT) for all this information for your business. That means there’s no conflicting information living in another software—your teams can open these reports and know that the information contained within is accurate and up to date.
Any of this data can be used to inform:
- marketing strategy and sales pitches
- predictions of what to expect from sales at different points throughout the year
- the creation of new products and plans, and
- which plans or products should be heavily pushed, which require changes, and which can be axed.
Better-informed customer experience
With detailed insights into customer adoption and uptake, customer success and support both benefit from your automated billing system’s data, too.
These teams can see:
- which customers are spending more and might benefit from a push to upgrade
- which customers could be at risk of churning and should be reached out to, and
- which customers have left and why.
Using this data to identify any patterns can help enhance your onboarding, support, or success strategy to mitigate any common issues in the future.
3. Deeper expansion and contraction MRR insights to help you take action
One of the biggest differences between a subscription-based business and a traditional business dealing with one-time sales is the idea of customer retention. While customer retention is important in the retail or e-commerce world for repeated sales, the idea of establishing a customer relationship and long-term partnership is much more imperative for a subscription business.
A modern automated billing system’s monthly recurring revenue (MRR) reports can help you craft just such a partnership.
- If you’re seeing a lot of downward movement—that is, contraction MRR and churn—it’s an obvious sign something’s wrong. Maybe your customers don’t see the value in your product, maybe there’s a common bug, or maybe there’s a feature that’s difficult to use.
- You can also monitor your expansion and contraction MRR, as well as churn, based on the activation cohort. This enables you to segment customers based on the month they became active users of your product and enables you to see whether there are any trends between these customers’ lifecycles.
Having the ability to see these patterns through your billing system’s MRR reporting functionality enables your customer success team to know when to leverage that ongoing relationship to identify the root of an issue. Then, the rest of your organization can act accordingly.
4. Features and functionality to deal with unpaid invoices
In business, you need to get paid. And when you’re billing on a regular basis, it’s unfortunately common for customers to sometimes default on a payment or two.
If you’re billing manually, it may be hard to keep on top of the follow-ups and reporting required for payment collection. Automated billing software has a whole suite of features meant to ensure you get paid with as little manual effort from your team as possible.
These features include:
- Automated payment retries—up to 75% of lost revenue from failed payments can be recovered by simply retrying the transaction. You can schedule these retries to happen automatically within your billing software.
- Automated dunning messages—your billing system can take care of sending email communications to customers with outstanding charges. These emails can contain links to a self-service customer portal (also created through the recurring billing software) to enable customers to make online payments or update any information necessary, without needing to get in touch with your support team.
- Comprehensive aging accounts receivable reports—it’s important you have a thorough and accurate picture of what’s going on with your accounts receivables. Modern automated billing software provides this through a variety of reports that enable you to see anything from a high-level overview of what’s outstanding and for how long, to a detailed breakdown of each delinquent customer’s payment history.
5. Features and reporting to make accurate revenue recognition a breeze
Revenue recognition for a subscription-based business can be challenging. Since your business receives payment up front for services rendered over time, you haven’t earned all that money until the services have been completed.
So what happens to any unearned revenue when a customer wants to cancel a subscription or change to a different plan?
Done manually, it’s a headache, and another situation in which your billing clerks need to come up with a workaround to make it more doable—they’ll often cancel the existing subscription and sign the customer up for a new subscription on a new plan. And just like with the workarounds we talked about earlier, this creates reporting inaccuracies.
But an automated billing platform uses double-entry accounting logic to keep track of your earned and deferred revenue. So any time a customer needs to make a change or cancel a subscription, it can be done easily with no extra effort required from your finance team and no inaccuracies in your financial reporting.
Software that empowers you to do so much more than just automate billing
While automated billing systems make end-to-end recurring billing, invoicing, and payments processes faster, more efficient, and more accurate, they really does so much more than that.
Modern subscription billing software brings with it a host of powerful reports, features, and functionality adjacent to your billing operations that can be harnessed on their own to fuel growth through different departments.
As your business grows, you add new pieces of software to your tech stack to help facilitate the continuation of that growth. Automated billing software is one piece of fintech that a scaling subscription business can’t afford not to have.