As the term implies, recurring billing (also known as automatic bill payment) takes place when a business automatically charge customers a fixed amount for products or services on a predetermined basis such as monthly, quarterly, or annually. While commonly used by software-as-a-service (SaaS) subscription-based businesses, this payment method can be successfully used by any business that offers goods or services on an ongoing basis. When this happens, implementing an enterprise recurring billing software solution becomes a heavy topic of conversation.
But why exactly is that? Consider the number of upgrades, downgrades, pauses, reactivations, discounts, promotions, and cancellations you handle. Now put it on a monthly basis across an increasing customer base. When looked at it from that perspective, is it any wonder that the manual processes many rely on are riddled with human errors that affect your bottom line and customer satisfaction?
What to Expect from Recurring Billing Software: Features, Functionality and Benefits
Widely used by SaaS organizations, automated recurring billing offers convenience and flexibility to both businesses and customers. There are many benefits of recurring billing including:
Benefits
1) Predictable and stable income stream
The predictability of receiving revenue on a recurring basis enables the business to better forecast future revenue and provides higher financial stability.
2) Increased business validation
Given that most investors prefer businesses with predictable revenue, the recurring revenue model lowers risk and provides more consistent return on investment (ROI).
3) Streamlined payment processes
By automating payments, businesses can reduce the manual effort required for invoicing and debt collections. In addition, it reduces account receivable risks by eliminating the possibility of human error, helping to ensure accurate and timely payments. From a customer perspective, the payment process is seamless, as they only need to sign up and provide payment information once.
4) Enhanced customer satisfaction and loyalty
A byproduct of recurring billing is that it helps foster long-term customer relationships. Customers that subscribe to your products or services are more likely to become loyal customers, which leads to higher customer lifetime value (CLV) and increased profitability.
5) Lower customer acquisition costs (CAC)
Once a customer is onboarded and as long as they are satisfied with your products or services, they will continue to provide revenue, enabling you to reduce marketing and sales efforts and investments.
6) Expansion of customer base
Recurring revenue lends itself to allowing customers to spread payments out over time, enabling the business to appeal to a wider customer base by making more expensive products or services more affordable.
7) Increased revenue potential
The recurring revenue model allows organizations to offer tiered pricing structures, as well as provides the ability to upsell and cross-sell products and service, creating additional revenue streams.
8) Business expansion opportunities
Leveraging steady and reliable finances and a base of loyal customers, businesses can explore new opportunities like expanding their products or services, entering new markets, or taking the business internationally.
To recap, recurring billing is a powerful payment model that can help optimize revenue streams and foster customer loyalty. However, there are a few potential challenges and obstacles that you should consider.
Challenges
While there are many benefits, there are also some challenges to consider when using this billing model. Several key challenges of a recurring billing payment model include:
- Delivering consistent value: Customers expect continued value for the goods and services they are paying for on a regular basis. For the business this means adding features and functionality and making improvements on a frequent basis. When this doesn’t happen, customer dissatisfaction and churn can result.
- Customer churn: In addition to delivering consistent value, businesses need to focus on initiatives to develop long-term customer relationships, such as providing high-level, consistent customer service and support.
- Complex forecasting: While the recurring revenue business model provides a high degree of revenue predictability, variables such as CAC, churn rates, and changes in customer usage can make forecasting long-term revenue more challenging.
- Complicated billing: Inherent to revenue billing is the intricacies of managing subscriptions, customer renewals, tracking payments, etc. Handling recurring billing manually or using a traditional rigid billing system can result in overcharging/undercharging customers, failed payments, and complex invoices, among other issues. For this reason, specialized recurring revenue billing software is highly recommended.
What is Recurring Billing Software?
Simply defined, recurring billing software simplifies the management of subscriptions, invoices, and payments. It enables businesses to offer a variety of product/software tiers, as well as multiple payment scheduling options. Further, the system provides detailed reporting and analytics tools for the tracking of customer usage patterns, sales data, etc.
Organizations that use recurring billing software can easily create a variety of subscription plans that contain different features/functionality and different price points. Enterprise-grade recurring revenue billing software simplifies and automates the billing process, enabling companies to streamline payment processes, effectively manage subscriptions, ensure timely payments, and generate a consistent cash flow.
What to Look for in Recurring Billing Software
Although the recurring revenue received from your subscribers provides many benefits (think: predictable cash flow, improved revenue, and increased validation), processes associated with recurring billing are more complex than one-off billing. Take for example the number of pricing models available – from usage-based to hybrid and everything in between – as well as the types of recurring revenue business models.
While most recurring payment software vendors provide basic features and functionality, software providers with enterprise-grade, robust billing platforms offer the flexibility to scale and drive business growth. This gives you the ability to exceed customer expectations and gain competitive advantage. Here are 10 of the top features and functionality an enterprise-grade recurring billing software solution should provide.
1) Single product catalog
Easily define and manage products and services, define rating, apply discounting rules, define dependencies, make bulk changes to rates, and standardize offerings across all product lines.
2) Automate payment processing and reminders
Reduce manual intervention by automatically charging customers at predetermined intervals and automatically sending payment notifications.
3) Point and click configuration / seamless workflows
Seamlessly and effortlessly create packages and bundles, as well as manage coupons, discounts, and prorations.
4) Customizable and configurable invoices
Recurring billing software allows you to view invoices by geography, subsidiary, customer, or industry. It also supports complex account hierarchies for invoices that can be consolidated or separated dynamically.
5) Increased security
Give customers an easy and secure way to make electronic payments using debit/credit cards, PayPal, digital wallets, ACH, etc. Recurring billing software also provides security and compliance features such SOC1/SOC2, PCI, and more to ensure compliance adherence.
6) Intelligent and compliant revenue recognition
Enterprise-grade recurring billing software streamlines revenue management to allocate, reconcile, monitor, and recognize revenue for any pricing model, billing approach, or promotional offer, while staying compliant with ASC 606/IFRS 15.
7) Single solution
Combine billing, dunning, collections, and payment processing to reduce days sales outstanding (DSO), improve cash flow, and plug revenue leaks.
8) Integrated business reporting and intelligence
Turn data into actionable insights by harnessing information across reports, dashboards, and analytics. Maximize your business’ potential and capture opportunities by having up-to-date information on total customer value (TCV), monthly recurring revenue (MRR), annual recurring revenue (ARR), cash flow, customer churn rates, CLV, CAC, financial performance, etc.
9) Support for localized billing requirements
Lessen the burden of multi-currency, multilingual, regional tax, etc. issues when you grow internationally. Expand across borders by localizing your solution to satisfy region-specific requirements and meet the unique needs of customers across the globe.
10) Seamless integration of front- and back-end systems
Reduce time to market and gain a single source of the truth with seamless integration of service delivery systems, financial systems, customer relationship management (CRM), business process management (BPM), enterprise resource planning (ERP), tax solutions, etc. to create a fully integrated financial ecosystem.
When the features and functionality above work in unison, you’ll deliver the exceptional experiences customers expect. Automated recurring revenue billing enables you to deliver timely and accurate invoices, gain a better understanding of your customers, and take proactive action to eliminate potential revenue leaks.
Unlock the Power of Recurring Billing Software with BillingPlatform
Recurring billing software gives you the power to unlock process improvements, improve efficiencies, and gain competitive advantage. Its ability to handle even the most complex recurring revenue relationships enables you to run your business with greater efficiency, accuracy, and control.
With BillingPlatform you get an enterprise-grade recurring billing platform that fulfills 100% of your business requirements – mediation, rating, invoicing, collections, reporting, analytics, revenue recognition, and A/R subledger. When it comes to speed, our customers outpace the competition by bringing new products and services to market 30% faster, while reducing operational spend by as much as 50%.
With our end-to-end, cloud-based billing software solution, you’re able to easily handle today’s fluctuating requirements, are ready for whatever tomorrow may bring, and can effortlessly monetize all revenue opportunities. Let our team of experts answer your questions today!
