What Is Billing Mediation & Why Does It Matter?
One of the most important steps in the billing process is mediation. Often overlooked, mediation plays a huge role in how usage data becomes customer invoices.
Historically, mediation has either been developed in house by IT resources, outsourced to third-parties or performed manually by the finance team. Today, sophisticated billing systems can automate mediation to normalize and route different types of data from a wide variety of sources.
A strong mediation capability enables enterprises to deploy innovative, usage-based payment models and offer pricing flexibility to customers. Moving forward, the benefits of good mediation will continue to differentiate product and service providers and enable them to keep pace in a rapidly evolving landscape.
What is Mediation?
More and more, companies are tailoring, consumption-based pricing packages for individual customers. Telecommunications companies have leveraged usage predominantly. And other industries have moved in on the action. We’re seeing very complex, usage-based packaging examples in airports, software, utilities, as well as media companies. Modern-day payment models come in all shapes and sizes.
For example, Amazon now offers per-second billing for AWS services. Many digital marketing agencies charge clients based on how many emails they send per month or how many subscribers they carry. Rather than force a rigid payment model on an entire customer base, usage-based pricing facilitates a more personalized experience for each customer.
However, consumption data isn’t always immediately ready for billing processing. Data often comes in different forms from many sources. It needs to be normalized and converted into a format that can be easily understood by pricing engines.
Mediation is the process by which usage data is converted into formats that billing engines can then translate into currency values. Through mediation, billing systems normalize different types of data from many sources and generate invoices that correspond to customer usage.
In general, mediation converts consumption data into billing data. The fundamental steps within mediation are:
1. Data Enrichment and Normalization. Usage data comes in disparate pieces from various sources. To create a billable record, the usage data is enriched and normalized (connected together from it’s sources), deduplicated, and aggregated. Each process can be complicated by multiple types of sources--as a result many billing vendors seek to outsource this expertise.
2. Data Routing. Once the data is enriched, it must be assigned to accounts within the system. Many account relationships are complex, so usage must be routed appropriately to ensure the billable charge to your account is represented correctly for your relationship to the customer.
It’s possible to perform these mediation steps manually. However, this can be highly inefficient, especially for organizations that have a high number of usage events. Additionally, manual mediation is likely to lead to more errors in the quote-to-cash cycle. For enterprises that deploy usage-based payment models for large customer bases, automated mediation is a no brainer.
Why is Mediation Important for Billing?
Mediation is a key billing function for a number of reasons.
Without mediation, companies can’t monetize usage-based payment models. They need some way to convert consumption metrics into billable values.
Mediation prevents teams from having to manually prepare data before it enters the billing cycle. Automated mediation can also filter out unnecessary usage records, which would otherwise burden internal personnel.
In the past, billing systems could only be programmed with a few rules. Modern, sophisticated billing platforms can be configured to follow many usage rules. Robust systems will allow enterprise clients to customize these rules to fit their specific needs.
Robust billing systems can also perform mediation in real time for high volumes of usage data, a critical need for fast-growing organizations. Other, rigid billing systems can only perform weekly or monthly usage updates, which can leave customers guessing at their current usage. Through real-time mediation, robust billing systems may proactively identify errors and prevent inaccurate invoicing, providing up-to-the-second usage information to customers.
Looking ahead, mediation will enable organizations to continually deploy innovative pricing models that align with bigger organizational goals. As companies explore new ways to further differentiate themselves, mediation will become increasingly important for billing at scale.
With BillingPlatform, Master Your Mediation
BillingPlatform’s cloud-based solution includes a built-in mediation capability. Rather than manually performing calculations or having to purchase a third-party application, our enterprise customers automate mediation and capitalize on any metered offerings.
We know the value that real-time mediation can provide to any business, so we make it easy for our customers to work with multiple sources of usage data. While other billing vendors require that their customers add on a separate mediation application, we’ve made it a critical part of our platform.
Our mediation engine can be customized for any usage-based payment models. With our simple usage mapping interface, you can set custom rules that correspond to your unique pricing strategy and quickly deploy complex models with relative ease.
With BillingPlatform, you can automate mediation for any industry in any part of the world. As you scale, your mediation capability will too. Should your competitors deploy potentially disruptive payment models, you can quickly respond and update your mediation processes as needed.
Our professional services team will work hard with yours to ensure that your mediation capability is designed to convert any data into a format that your rating engine can use. You don’t have to worry about launching a highly customized mediation process without help.
Interested in learning more about BillingPlatform’s next-gen mediation capabilities? To help SaaS companies interested in usage-based pricing models, we offer the Enterprise Guide to Billing for SaaS.Contact our team today