Following up with customers on overdue invoices is standard procedure for subscription businesses. But sometimes, if the billing process is less than ideal, it can produce some not-so-standard results.
Web hosting business DreamHost saw this happen firsthand.
Back in January 2008, the business executed a standard billing cycle in a bid to “clean up stragglers from 2007". But while doing so, a staff member accidentally set the overdue payment parameter for December 31, 2008.
The result? Almost all of its customers received overdue invoices dated December 31, 2008—meaning they were penalized for being late on payments that actually wouldn’t be due for a year.
Hundreds of angry customer complaints poured in as DreamHost mistakenly billed customers a total of $7.5 million. Some customers even threatened to take their business elsewhere.
Fortunately for DreamHost, this was one nightmare it managed to wake up from.
But since that fiasco, other big businesses have also messed up their subscription billing—with equally problematic results.
Here are five of these incidents, and later on we'll share a few tips for how your business can avoid making the same mistakes.
1. Letting customers use your paid subscription service for free
In November and December 2020, tech giant Google failed to bill legacy plan customers for its Nest Aware video recording service. However, these customers could still use the service as per normal.
The happy times didn’t last. In January 2021, Google caught the error.
The company then sent an email to affected customers informing them that:
- their charges had been “delayed” due to a “processing error”, and
- they’d be seeing the appropriate charges for November and December 2020 in their upcoming bills.
Under the legacy plan, Nest Aware subscribers were charged $5 to $30 per camera. So, depending on the number of cameras they owned, having to pay for up to three months’ worth of service at once could have put quite an unexpected dent in their wallets.
2. Billing for subscription services too early
Before Google encountered “delayed” billing issues—the term it used to describe its failure to bill Nest Aware customers for two months—Amazon also experienced something similar.
But on this occasion, Amazon billed customers too early for its cloud computing platform, Amazon Web Services (AWS).
This happened in September 2019, resulting in some customers being mistakenly billed double or triple the amounts of their regular AWS charges.
According to an email sent to affected customers, it appeared the company had “incorrectly issued an early invoice for [their] September AWS usage.”
Fortunately for Amazon, many customers seemed to take the billing oversight well.
In a Hacker News thread about the incident, one user joked about how, “Amazon invented more hours than actually exist in a month for billing purposes. [Amazon founder] Bezos is a genius! I should have thought of that!”
Another chimed in: “I wonder if AWS is prepping for a pricing hike but someone was trigger happy with the big red button :D”
3. Billing for subscription charges that had been waived
Due to the COVID-19 pandemic, entertainment business Disney was forced to temporarily close its Disney World theme parks in March 2020. Recognizing that annual passholders wouldn’t be able to visit the parks while they were closed, Disney also waived the passholders’ monthly payments.
This fee waive was supposed to last until the parks reopened. But one week before Disney’s planned reopening of two theme parks in July 2020, some passholders were “incorrectly charged” hundreds of dollars for up to four months’ worth of payments.
While it didn’t disclose a reason for the billing error, Disney reversed the charges for all affected customers. But this wasn’t enough to satisfy at least two passholders who filed a lawsuit against Disney for breach of contract.
In their lawsuit, the passholders requested class-action status and sought more than $30,000 in compensation after being mistakenly billed a total of $1,425.
4. Billing for services not requested
In Disney’s case, the passholders had wanted the business’s services—only they weren’t able to make use of them. But here’s a subscription billing blunder that’s possibly worse: billing customers for services they didn’t even sign up for in the first place.
In May 2015, a woman subscribed to an add-on service for her cable TV subscription with telecommunications business Comcast. She expected to pay an extra $9.99 per month for the additional channels, but was subsequently charged more than $300 for them.
The bill also included other items she said she hadn’t asked for and never received. And adding insult to injury, customer service was entirely unhelpful. Her exchange with Comcast’s representatives lasted three hours, was unfruitful, and ultimately ended with her being transferred to a fax machine.
After investigating numerous customer complaints about Comcast billing for unrequested services, including the complaint above, the Federal Communications Commission fined the business $2.3 million.
Comcast was also required to develop and implement a five-year compliance plan to improve its subscription billing practices.
5. Re-subscribing customers to your service without their consent
When customers cancel, it’s a good idea to respect their wishes and, well, cancel their service. Seems obvious.
But some customers of movie ticket subscription service MoviePass found themselves in this situation in August 2018. After canceling the service, they were subsequently re-subscribed and billed for MoviePass.
How did this happen?
It turned out that after the cancelation, if the user went back to their MoviePass app for any reason, they were presented with a message asking if they agreed to certain changes to their MoviePass plan.
And if they tapped on “I Accept”, they weren’t just agreeing to these changes—they were also promptly re-subscribed to MoviePass.
Many users didn’t appreciate the move, airing their grievances online. And while this particular incident didn’t sound the death knell for MoviePass, the business struggled with profitability and eventually shut down in September 2019.
Avoid subscription billing blunders with the right billing solution
As seen in the incidents above, even huge corporations aren’t immune to committing subscription billing blunders—but this doesn’t mean smaller subscription businesses are doomed to the same fate.
Review your business’s billing processes and procedures.
- How much of your current subscription billing process is managed manually? Every time humans need to intervene, there’s opportunity for error to be introduced. And because you do recurring billing, those errors can also be recurring, resulting in angry customers and potentially compiling revenue leakage. Automation is key to accurate and consistent subscription billing.
- Do your invoices transparently list all the products and features customers agree to pay for—nothing more, nothing less? The right billing solution should have the flexibility for your business to customize invoices so your customers have all the information they need. This builds trust and helps your business get paid faster.
- Do you consistently obtain clear consent before subscribing customers to new products and features? Adaptive subscription billing solutions enable your business to offer customers full control to upgrade, downgrade, and unsubscribe or re-subscribe to meet their needs all on their own. This also adds another layer of transparency because customers can review and augment their service details at any time.
While there are times when you’d want your business to be featured in the news, getting publicity because of a subscription billing complication isn’t one of them.
Digitally transforming your billing with a solution that offers granular customization and automation can go a long way toward ensuring your customers are charged and invoiced accurately, consistently, and transparently every single time—and all without human intervention.