Billing & Monetization

SaaS Billing Best Practices: What You Need to Know

April 25, 2022

With benefits for customers and businesses alike, software as a service (SaaS) revenue is expected to reach over $369 billion by 2024. As one of the few business models where customer-centricity is foundational to the success of the SaaS company, customers benefit from convenient shopping experiences and exceptional experiences. From a business perspective, SaaS companies receive a predictable revenue stream for easier and more accurate financial tracking and forecasting. However, when it comes to managing recurring billing, revenue recognition, plan renewals, etc., companies doing SaaS billing face hurdles in achieving their full revenue potential.

Turn SaaS Billing Challenges into Competitive Advantages

Regardless of the size of your SaaS company, you need to deliver value in order to keep your revenue flowing. However, in an industry that’s riddled with billing pitfalls, this is typically easier said than done. To put you on the road to SaaS billing success, we’ve highlighted the top 10 SaaS billing challenges and billing best practices that will enable you to turn challenges into competitive advantages.

1) Managing customer relationships

Challenge: From the moment a customer signs up for your products or services, you need to be able to track their use. This means activations, trials, upgrades, downgrades, suspensions, payments, early terminations, etc. Manually handling these processes is daunting – to say the least. A misstep can lead to not only customer churn but reduce your profitability.

Best Practices: To deliver the exceptional service your customers expect and ensure profitable growth, you need the ability to easily tailor your offerings and prices – without IT involvement. Tracking and managing activations, usage, upgrades, downgrades, billing cycles, accounts receivables, etc., is complex. By streamlining this process with a billing system that automates the entire quote-to-cash process, you’re able to better manage customer relationships, customize payment terms, identify receivable trends, and deliver the outstanding experiences your customers expect while improving your bottom line.

2) Keeping customers engaged

Challenge: In the SaaS world, complexity is inherent – not just for the company itself but for your customers. Many customers struggle with obtaining the information they need to make informed decisions on products, services, and pricing models. And when SaaS purchases are made, customers need fast and efficient ways to interact with your company to ask questions, upgrade/downgrade services, start a service, end a service, make payments, etc.

Best Practices: By providing customers with an intuitive self-service portal, you’re able to share information with your customers quickly and effortlessly and build loyalty. Empowering customers through self-service not only enhances the customer relationship, it enables you to lower costs and operate more efficiently. For instance, the right SaaS billing system will provide your customers with the ability to view account information and usage, pay invoices, and update their payment information. Additionally, given customers’ fluctuating service needs, a billing system built for recurring revenue enables you to accurately track service changes, consumption, and conveniently deliver invoices that are accurate and timely.

3) Managing product bundles

Challenge: Although the number of product bundles offered by SaaS companies varies greatly, the average is 3.5. However, many SaaS companies supplement their offerings with a la carte options and hybrid billing models. While increasing the number of bundles may be inevitable to gain a competitive advantage, this strategy may complicate purchasing decisions, increase the complexity of product packages, and complicate billing processes.

Best Practices: A billing platform that provides unlimited pricing and rating capabilities, as well as provides the ability for you to easily design innovative and flexible bundles gives you the freedom to continually improve your offerings, quickly respond to industry trends, rise above the competition, and deliver the products customers desire.

4) Deploying flexible pricing plans

Challenge: Your customers’ needs are nearly as vast as the number of customers you have. If we take this a step further by including fluctuating requirements, the ability to deliver diverse SaaS pricing can quickly become overwhelming. Not to mention being cost-prohibitive.

Best Practices: You need the ability to quickly and cost-effectively design and deploy any number of simple to complex pricing tactics. All without disrupting your day-to-day operations. With full pricing flexibility you’re able to support any combination of pricing models, from per-user tiers to build-your-own bundles, and everything in between. A comprehensive SaaS billing system that provides point-and-click configuration combined with powerful workflow automation enables you to quickly bring your most ambitious and innovative pricing strategies to life.

5) Launching incentives

Challenge: Short-term sales programs such as discounts, promotions, and coupons can help grow your customer base and boost loyalty. If you’re still using a legacy system or trying to implement incentives manually, chances are you’re spending thousands of dollars each year on these initiatives.

Best Practices: A centrally managed and automated billing platform takes the manual effort out of sales programs, enabling you to quickly add promotions, discounts, coupons, free trials, etc. to your product and services offerings.

6) Accelerating the delivery of accurate invoices

Challenge: With hundreds or thousands of customers, just managing the sheer number of invoices can over-burden your financial team. And when invoicing is delayed, contains errors, or inadvertently not sent, your ability to quickly collect revenue is hampered.

Best Practices: A SaaS billing system that increases accuracy and automates invoice processing eliminates this labor-intensive task and puts your SaaS company on track to collect the revenue you’re due.

7) Managing payment methods

Challenge: Unlike one-time purchases, the recurring revenue model of SaaS businesses lends itself to changing payment methods. For example, a customer may initially pay by check and later opt to use an online payment method. Additionally, customers want the ability to pay in the manner they are most comfortable with, whether that’s credit card, check, ACH, wire transfer, etc., and you need the ability to accept a variety of payment methods easily and accurately.

Best Practices: For accurate billing, you need a SaaS billing system that can 1) bill customers repeatedly every billing cycle, 2) accept a variety of payment methods, including check, credit/debit card, ACH, PayPal, wire transfer, etc., 3) proactively detect card expirations, upgrades, downgrades, etc. and respond appropriately.

8) Recognizing revenue

Challenge: Revenue recognition for SaaS companies is not as straightforward as it is for more traditional business models. In addition to adhering to revenue recognition rules such as ASC 606, you also need to take into consideration several other factors such as revenue recognized over time, various billing methods, subscription additions, upgrades, downgrades, contractual commitments, and more.

Best Practices: With a billing platform that gives your finance teams total control over revenue recognition, you’re able to stay in compliance with ASC 606, IFRS 15, and other regulations, while realizing revenue as soon as possible. A SaaS billing system that combines billing and revenue recognition simplifies revenue management by assigning financial transactions and executing revenue recognition in real-time – as events happen.

9) Managing failed payments

Challenge: When payments fail, whether that’s a result of non-payment or credit/debit card expirations, it’s important that you have the ability to quickly address the problem with the appropriate action.

Best Practices: To minimize involuntary churn and revenue leakage, you need a billing system that automates the dunning process, enables you to use the right mix of manual and automated actions, keeps customers informed of outstanding balances with automated notifications, and provides a comprehensive view of outstanding debt and collection strategies.

10) Expanding your footprint internationally

Challenge: When taking your offerings across borders there are numerous considerations before the launch. To expedite your entry into new countries and to avoid complications that arise when expanding globally, your SaaS billing system must support localization.

Best Practices: To ensure that your expansion delivers on your internationalization objectives, such as customer and revenue growth, your SaaS billing system needs to have the ability to localize your offerings. Essentially, the billing system needs to be able to support multiple languages, currencies, number fields, tax providers, payment providers, regional regulations and much more. In addition, you’ll need the ability to easily configure the user interface (UI), pricing, packaging, and invoices, as well as other documents to meet local requirements.

Unleash the Power of Your SaaS Business Model

Only an easy-to-use, yet sophisticated billing system can address the complex needs of SaaS businesses. BillingPlatform provides a complete solution that enables you to leverage billing best practices to not only solve today’s SaaS billing challenges but be prepared for the uncertainties of tomorrow. BillingPlatform’s cloud-based software removes the complexity, simplifying the entire billing process.

With us, you’re able to respond to changing customer needs and industry trends on the fly, exceed customer expectations, minimize revenue leakage, and rise above the competition. Our open architecture, custom data model, and vast array of features enables you to take innovation to the next level, outpace the competition, and profitably grow your business. Every day, BillingPlatform gives SaaS companies the ability to achieve their highest level of revenue potential. If you’re ready to monetize SaaS offerings on your own terms and outpace the competition, request a demo to learn more.

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