Billing & Monetization

6 Things to Look For in Usage-Based Billing Software

July 28, 2021

Did you know… companies that adopt a usage-based pricing model grow revenue 38% faster than their peers and that they have 50% higher revenue multiples when compared to the broader scope of software-as-a-service (SaaS) businesses? Usage-based billing  isn’t a new concept. Think metered services such as electricity, gas, and water, or early day mobile phone plans before the arrival of unlimited data. One thing is certain, however, the future of usage-based billing software is here to stay.

Traditionally, price per seat (sometimes referred to as price per user) was the most popular billing model but that’s changing. Usage-based pricing is nearly as common as seat-based pricing, with 39% of companies saying they offer usage-based pricing. Closely aligned with providing exceptional customer service, usage-based billing allows customers to start small or trial a product for little-to-no initial outlay of cash. From a company perspective, usage-based billing provides a nearly seamless route for customers to expand usage. This enables the company to grow revenue from their current customer base. If you’re ready to join the increasing number of companies switching to usage-based billing, just automating your billing processes isn’t enough.

Set Yourself Up for Usage-Based Billing Success with the Right Billing Software

Before exploring what you need in usage-based billing software, let’s agree to the definition of usage-based billing. It’s a consumption-based pricing model in which customers are only charged when they use a product or service.

Sending timely and accurate invoices is essential for the financial health of your business. Your billing platform needs to provide more across all aspects of your quote-to-cash (Q2C) processes. From mediation, payments, revenue recognition, collections, refunds, reporting and more. It’s essential that the solution you choose provides all the capabilities needed for usage-based billing success.

As we dig a bit deeper, there are six critical features/functionality you need in order to streamline the entire Q2C process, ensure regulatory compliance, and build customer loyalty.

1) Billing Automation

Although billing automation sounds like a given for any usage-based billing software solution, there are three criteria it must meet. This allows you to streamline bill cycle processing, reduce manual errors, minimize revenue leakage, and maximize efficiencies. Essentially, you should be able to automate any process. Automating all aspects of the billing cycle relies on three key components – workflow engine, notifications, and document generation. Let’s take a closer look at each of these.

  • Workflow engine: Should fully integrate with every aspect of the application. It should provide a point-and-click interface for maximum productivity with minimal manual labor. The usage-based billing software solution should provide both built-in workflows and the ability to configure custom workflows.
  • Notifications: When critical events occur like missed payments, expiration/decline of a credit card, or an approaching threshold, speed is essential. This requires a sophisticated usage-based billing solution that provides proactive notifications to both users and customers.
  • Document generation: Used for a variety of deliverables, the billing solution needs the ability to dynamically generate and populate the most common file types. This helps with new account welcome letters, invoice supporting documentation, credit memos, and more.

2) Seamless Integration

Your billing ecosystem consists of much more than the billing platform. To unlock the intelligence held in your data, you need to connect and integrate all of the applications that make up your ecosystem.

Application programming interfaces (APIs) enable you to create a completely integrated ecosystem. The most straightforward API approach leverages the application’s metadata to externalize the data model for database-style access using REST protocols, providing for unlimited billing integration capabilities.

The ability to pull and push data from your billing system to third-party applications. These include customer relationship management (CRM), enterprise resource planning (ERP), general ledger, tax solutions, etc., requires a variety of connectors. Whether pre-built, custom-built or APIs, the ability to seamlessly integrate to multiple external systems enables you to streamline virtually everything. This spans from sales to provisioning to accounting – dramatically reducing errors and revenue leakage.

Integrating everything for a seamless billing experience isn’t complete without a payment gateway framework. A billing software solution that leverages a microservices-based integration framework enables payment partners to quickly and easily connect their solutions directly into your billing platform. The billing software should also allow customers to monitor the entire payment journey. This goes from payment initialization and tokenization, through payment processing and settlement to chargeback notifications.

3) Data Security and Compliance

To protect your customers’ data and minimize regulatory risk, the usage-based billing software needs the ability to adapt to any market regulation or standard and provide:

  • Secure architecture: To keep confidential customer data protected the billing software solution needs to enable General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) compliance. It needs to follow the Payment Card Industry (PCI) data security standard for credit card payment processing, and offer DomainKeys Identified Mail (DKIM) protocol. This allows you to securely send emails directly from the billing software.
  • Global compliance: Whether you already sell your products across borders or you might at some point, you need a usage-based billing software solution that enables you to achieve billing compliance through SOC 1 & 2 audit processes. Although not a regulatory compliance requirement, it’s important that your revenue recognition aligns with ASC 606 or IFRS 15.
  • Role-based permissions: You can never be too careful when it comes to your customers’ data. To ensure it doesn’t end up in the wrong hands, you need control over user access and permissions. The software should also record all changes made so that you have an accurate trail available.
  • Audit history: Changes made in the usage-based billing system such as configurations and data modifications need to be easily accessible and deliver a granular level of detail.

4) Extensibility

As your business grows and/or customer requirements change you need the ability to effortlessly add new capabilities and functionality. Doing this requires a usage-based billing software solution that gives you total control through an open architecture and fully configurable and extensible data model.

The system you choose needs to provide:

  • Point & click configuration: With no code required, you can design and deliver new services faster, extend the solution’s user interfaces, data model, and workflows to reflect how you work. You can also synchronize data with other ecosystem applications, and create custom objects, fields, and relationships.
  • Custom entities & fields: When the usage-based billing software uses metadata-based architecture, you’re able to easily configure product offerings, business rules, workflows, reports, dashboards, rating, invoicing, APIs, and formulas to accommodate your specific needs and requirements. Not to mention quickly respond to market or regulatory changes.
  • User interface layouts & widgets: With a billing system that leverages standard web technologies, widgets can create the best user experience for any use case. For example, you can create new pages and access them through custom buttons and actions. You can consolidate data from disparate systems into a single view, add widgets directly to standard page layouts, and build widgets to manage services and automate tasks.
  • Deployment tools: Using configuration deployment tools, you’re able to easily create a bundle and automatically deploy it to a development environment. Then you can move it to production with no manual re-keying of data. This functionality not only simplifies operations but reduces data entry errors. Ultimately saving time in creating, testing, and deploying changes to the usage-based billing software system.

5) Customer Portal

Today’s customers want to be engaged and empowered. Nothing enhances customer relationships like providing the ability to access account information when they want. This requires a billing software solution that provides a customer portal solution. Like usage-based billing software solutions, no two customer portals are the same. While out-of-the-box portals support generic customer experiences, they lack customization capabilities. Giving your customers the best experience requires a customizable portal that gives them 24/7 access via a single login. There they should be able to manage accounts, view usage, make payments, download statements, and more.

6) Internationalization

Expanding globally requires a usage-based billing software solution ready for a diverse and complex portfolio of products in any language, currency, and industry. The system needs to support a variety of languages, currencies, number fields, tax providers, and payment providers. All in order for you to configure the user interface, pricing, packaging, invoices, etc. This will help you to meet local needs, adhere to regional taxation rules, and comply with local regulations.

Automation is just one component of a usage-based billing system. As the foundation of financial growth, your usage-based billing software solution needs to go beyond basic functionality.

Handle Today’s Business Problems With Usage-based Billing Software Solution Built for Tomorrow’s Complexities

There are three requisites that an intelligent usage-based billing software solution should deliver:

  1. A complete solution that supports any product, service, and business model.
  2. The agility to extend the platform to support changing business needs.
  3. Total financial control that enables you to run the business with greater efficiency, accuracy, control and trust.

Built on a metadata model, BillingCloud provides the innovative architecture needed for a highly configurable and agile usage-based billing software solution. With BillingPlatform you get an industry-leading usage-based billing software solution that enables you to bring any billing model to life. It  supports the most complex recurring revenue relationships, and provides the flexibility to be ready for whatever tomorrow brings. Sound like something your organization could benefit from? Reach out to our team to learn more!

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