6 Best Practices for SaaS Billing

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As more software as a service (SaaS) companies switch to a pay-per-use business model, automated billing software is becoming an increasingly important financial tool. This is especially true for the growing number of subscription-based SaaS companies that manage recurring billing.

SaaS subscription billing revolution

In the past, the approach to software delivery was through a one-time purchase. But companies are now adopting a pay-per-use pricing strategy for their software services. This means rather than selling a single unit—which would have been a package of floppy disks or CD-ROMs back in the day—they now sell centrally hosted software licenses on a subscription basis.

These licenses or subscriptions are based on recurring billing, which can certainly be great for the bottom line.

However, this model can also become quite complex as companies acquire more customers and serve up more offerings.

This pricing shift opened a large window of opportunity, especially for companies with scalable business models. Moreover, the rapid growth of companies shifting towards subscription-based pricing models has created greater demand for billing automation and management.

Today, there are solutions to automatically manage your subscription billing—a process that helps reduce billing errors, accurately tracks and predicts revenue, and much more!

Download the Complete Guide to Subscription Billing
Complete Guide to Subscription Billing.

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

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How does SaaS subscription billing automation help?

Subscription billing automation helps SaaS companies struggling to efficiently invoice customers, and manage their overall billing processes manually. Manual billing costs companies thousands of dollars in revenue every month due to billing errors, inefficient resource allocation, and late collections. Here are a few of the ways subscription billing automation can help.

Refer to this article to differentiate between rating and billing.

1. Efficient time management

Many people believe time is the most valuable commodity. Manual and inefficient billing requires hours of work and the task is complex and understandably subject to human error.

With subscription billing automation, manual processes related to subscription activations, invoicing, renewals, payment processing, dunning management, and more are dramatically reduced. Your business will see a return on its investment instantly from time savings alone, enabling redeployment of resources spent on billing to other strategic focus areas.

2. Prevent revenue leakage

Many companies using manual billing processes experience revenue leakage. This means they're providing a service but aren't being compensated for it in full. Reasons for this can include:

  • not having a process to remind customers about upcoming payments
  • delaying payment requests to customers
  • having a lack of checks and reminders for customers about upcoming credit cards expiries, and
  • failing to send notifications of declined credit cards.

An efficient, automated dunning management system that involves automated emails and payment collection retries can recover 1 to 4% of leaked revenue.

From a SaaS perspective, it's important to recognize that services offered by your company can include ongoing technical support and continuous access to web interfaces, API integrations, third-party vendors, and data reporting. It's easy to see how without automation these services become impossible to track and collect on effectively.

3. Gain insight

High-level reporting and quick insights are important for every executive. With a subscription management system, a company is able to review and compare financial performance (week to week, month to month, year to year), access monthly recurring revenue (MRR) analyses and cash-flow trends, monitor customer activity, and track lost payments and deferred revenue.

Aside from subscription metrics, there are other SaaS metrics you should understand as they might be helpful to automate your reporting. A modern subscription billing and management platform helps you by tracking all the relevant data and lets you make better business decisions in real-time.

Finally, these platforms can also consolidate and safely manage all the data from your recurring revenue business in one place, acting as a financial system of record. This means every member of your team will always be performing their duties and making business decisions based on the most accurate, up-to-date information available.

4. Churn rate reduction

It's a well-known fact that it costs more to acquire a new customer than to retain a customer. Unlike manual billing methods, an automated billing platform is able to provide customer payment and renewal notifications to recover revenue and identify churn risk in a timely manner.

These regular, automated communications enable businesses to keep in touch with their customers, maintain active customer payment methods for successful collections, and avoid preventable customer cancellations.

5. Quick pricing changes

Product and service pricing can change for a variety of reasons, from market fluctuations to periodic sales or discounting and evolving customer demand. Companies that are growing tend to modify their pricing strategies more frequently and the process of price changing can be long and frustrating, especially if you're dealing with multiple currencies.

Automated billing platforms enable you to build a new pricing catalog in one to two minutes, without breaking the backs of your finance team members. These platforms also offer the flexibility to make pricing changes at the plan and even customer level for further pricing customization.

Want to offer coupons or discounts? The catalog flexibility of an automated billing platform makes this simple on both a large and small scale. Discounts can be immediately applied across your entire catalog for any length of time you choose. Alternately, your team can offer specific coupons or discounting to select plans or even customers. These capabilities create tons of opportunities for both your marketing and sales teams.

Being nimble enough to adapt to market changes and customer preference changes makes for a strong competitive advantage.

 


 

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6. Accurate revenue recognition

Another important benefit of employing an automated billing system is it will handle your revenue recognition all on its own. Revenue recognition becomes much more complex and difficult to manage for a recurring billing business. But in order to remain in compliance with Generally Accepted Accounting Principles (GAAP) and the ASC 606 revenue recognition standard, businesses need to make this a priority.

In addition to compliance concerns, earned and deferred revenue are important measurements of business performance and therefore are critical metrics to report on accurately and in real-time.

To learn more about revenue recognition, refer to the revenue recognition datasheet.

Conclusion

Subscription billing management and automation are essential capabilities for SaaS businesses. The right SaaS billing and subscription management platform will enable you to focus on growing your business and bottom line rather than struggling with spreadsheets and manual processes. 

 

Fusebill simplifies subscription and billing management by automating many manual accounting and financial processes and workflows. It also integrates seamlessly with some of the most popular CRM and accounting software to provide businesses with enhanced operational ability. And furthermore, it ensures the safety of your customers’ information with PCI Level 1 certification.

Our cloud-based platform gives companies the freedom to grow their businesses, the flexibility to capitalize on new product opportunities, and the agility to maintain a competitive edge.

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Tags: SaaS Subscription Billing

Fusebill Inc.

Fusebill simplifies subscription and billing management by automating many manual accounting and financial processes and workflows. Our cloud-based platform gives companies the freedom to grow their businesses, the flexibility to capitalize on new product opportunities, and the agility to maintain a competitive edge.

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The Complete Guide To Subscription Billing