6 Red Flags to Avoid When Choosing a Billing Automation Solution

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So you're looking for a subscription billing solution, and you've decided automation is the way to go. Congratulations! An effective automated billing system is a huge step toward efficient revenue operations and more money on your bottom line.

As you evaluate your options, you'll likely focus on the features you need in a billing system. These include:

  • basic billing automation,
  • a customer payment portal,
  • online payments capability,
  • revenue recognition support,

...and the list goes on.

However, as important as it is to think about what you want in your billing software, you should also keep an eye out for things you don't want. If you're not certain what shortcomings to keep an eye out for, you may not see them until it's too late.

Every solution has its pros and cons. In many cases, the positives will outweigh the negatives. But in some cases, depending on your business's specific needs, certain features (or lack thereof) may be dealbreakers.

As you research your automated billing software options, keep these red flags in mind:

1. Penalties for growing too quickly

Most automated billing systems set their pricing by revenue band. This means the amount of revenue your business brings in through the billing platform dictates the price you pay for the product.

Fine.

But your business is using this product as a tool to facilitate growth. What happens if you grow more quickly than expected, exceeding that revenue band sooner than you thought you would? Most billing solution options resolve this in one of two ways:

  1. Allow you to finish out your annual billing cycle at the current pricing level before moving you up the following year, or
  2. Charge you overage fees—typically a percentage of the revenue you bring in over the revenue band limit.

For some businesses, the overage fees may not be a big deal. For others, the lack of cost assurance and the potential hit to revenue is an unwanted setback.

2. Crazy-long implementation times

How long should it take to get up and running once you purchase an automated billing software solution?

Data migration, catalog setup, testing, and troubleshooting take time. The exact timeline may vary depending on the specifics of each business, but on average it takes 1-3 months.

Your business's implementation time depends on how organized your data is when it's handed to your billing system implementation manager. If you weren't using billing automation before, you've got customer payment data stored somewhere—perhaps in a piece of existing accounting software or even a spreadsheet.

If this data is disorganized, it will cause delays in software implementation. By contrast, well-organized data can significantly speed up the process.

That said, if you're reading reviews online and see multi-year implementation times for a particular automated billing platform, take pause. Consider whether you can afford to wait such a long time to automate billing.

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3. Inflexible catalog

Many businesses handle recurring billing through a clunky legacy system or another software that wasn't designed for subscription billing. This results in a lack of catalog flexibility.

This problem may be one of the very issues that prompted you to find an automated solution in the first place, making it a priority in your search.

Every big-name automated billing software on the market does at least an okay job with its catalog flexibility. However, some options far outshine others. When evaluating your billing system contenders, dig into the use cases and product types it supports.

For example, if your business issues one-time charges, be sure your solution has a simple, dedicated process for this.

If your subscription business model requires a flexible catalog, be very discerning. Not all billing solutions are up to par in this department.

4. Little or no ease-of-use

A comprehensive automated billing system is, without a doubt, a good thing. This is especially true if you have more complicated billing needs.

Some billing software options on the market, however, sacrifice usability in favor of comprehensiveness. They’ll take this so far that the average billing clerk feels uncomfortable using the platform. This can cause:

  • more errors,
  • delays in getting tasks done,
  • strain on your development team as they help with catalog updates, pricing adjustments, and so on, or
  • the need for a new hire—a certified specialist in that software.

Your billing team may also ultimately under-use the software, leveraging only its basic capabilities and letting the more granular functions you're paying for go to waste.

This leads us to...

5. Too many nonessential features

Some billing software solutions include all the bells and whistles in the base price. This may work well for enterprise subscription businesses with complex billing cycles and comprehensive needs.

But bigger isn't always better. Perhaps you're running a small business or have a relatively simple recurring billing cycle. In these cases, all you need is automated invoicing and payment collection.

But can you bundle or unbundle features from your billing automation as needed?

If not, you may end up significantly overpaying for features you don't need. In fact, over the course of a four-year study, the average American business was found to be wasting 37% of its software spend on unnecessary or unused software.

You don't want this to be you.

6. No ASC606 revenue recognition support

If you're familiar with the generally accepted accounting principles (GAAP) around revenue recognition for SaaS and other subscription-based businesses, you know how complicated it can be.

Most businesses find any software that supports the process is a huge help. It recognizes different types of revenue within the platform, right down to small details like ASC606-compliant terminology.

But some of the biggest automated billing systems out there don't support proper ASC606 revenue recognition on their own. Instead, they require you to purchase an additional piece of software to handle it

Why shell out for two separate pieces of software when there are options on the market that do both?

Knowledge is power when seeking the right automated billing system.

Choosing the right billing system is an important task. While most options seem comparable at first glance, the degree to which they simplify billing processes and help your business maintain a healthy cash flow may vary greatly.

The right system is a growth aid. The wrong one creates more problems than you had before.

When you have a clear idea of what you don't want, in addition to what you do, you're much less likely to find yourself suffering from buyer's remorse. Use these insights to choose and implement an automated billing software that meets your needs without dragging down your bottom line.

Tags: SaaS Billing

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