Popular among software-as-a-service (SaaS) organizations, billing consolidation is a methodology that merges multiple transactions or subscriptions into a single invoice. This approach simplifies the process by consolidating multiple financial transactions. It’s also referred to as consolidated invoicing, consolidated subscription billing, and consolidated billing in SaaS.
Let’s assume that your SaaS business offers a wide range of products and services, and on average customers subscribe to seven different products and/or services. Without consolidated billing, each product/service would be billed separately, resulting in multiple invoices for the same customer within the same billing cycle. Handling billing in this manner is cumbersome and time-consuming, leading to customer confusion, increased staff time and effort, and missed or delayed payments.
Consolidated billing addresses multiple transaction billing challenges by providing a unified view of the customer’s subscriptions and charges in a single invoice. So what do you need to know before deciding if it’s the right move for your organization?
What to Consider if You’re Considering Consolidated Billing
While the consolidated billing definition makes it appear straightforward, it’s more than just consolidating customer invoices into a single bill. Here are three factors you need to consider before implementing consolidated billing.
1) Billing Date Alignment
Key to the success of consolidated billing is billing date alignment. When customers purchase multiple products or services the purchases typically happen at various times throughout their subscription period, leading to different billing dates. For instance, a customer’s first purchase is made on August 27, their second purchase on September 30, and their third purchase on November 21. Traditionally, billing for each of these purchases would take place on the date of purchase – the 27th of every month, the 30th of every month, and the 21st of every month. Consolidated billing requires a single billing date regardless of the product/service purchase date.
To sync billing dates, you may need to prorate charges and adjust billing cycles. You can use the first purchase date and align the subsequent dates to this billing date. Alternatively, determine a new common billing date that encompasses all purchased subscriptions. Regardless of the method used to align billing dates, it is important that billing date changes are communicated to the customer in advance of implementation.
2) Payment Method Alignment
Customers may use different payment methods (credit card, debit card, ACH, digital wallets, etc.) for each of the product/service subscriptions purchased. The use of different payment methods negates billing consolidation. To rectify the situation, a uniformed payment method is required. When a single payment method is not an option, subscriptions using the same payment method can be consolidated into a single invoice, leaving those that retain a different payment method requiring a separate invoice.
3) Currency Alignment
Do you operate in more than one country? If so, dealing with different currencies and exchange rate fluctuations can be a challenge. Add to that consolidated billing and complexities mount. While a single payment currency has advantages, it is not always feasible.
For payments received in different currencies, you can consolidate bills that are paid with the same currency and send separate invoices for those where payment is received in different currencies. Regardless, receiving payments in different currencies requires billing software that can handle multi-currency invoicing – localizing the experience to meet region-specific requirements.
As previously mentioned, consolidated billing is well suited for subscription-based businesses. It also works well for companies embarking on long-term projects with multiple billing stages where the products/services provided are invoiced individually.
Best Practices to Follow
To ensure the best outcome of your consolidated billing implementation, we advise adherence to the following three proven best practices.
1) Determine the Billing Cycle
Defining the billing cycle, whether weekly, monthly, quarterly, or annually ensures that customers know when to expect the invoice and when payment is due. Further, it enables the business to better forecast revenue and manage cash flow.
2) Provide Clear and Comprehensive Invoice Details
Creating a consolidated invoice requires precise attention to detail. Be sure to include:
- Invoice issue date
- Unique invoice number
- Contact information of your business, as well as that of the customer
- Subscription ID
- A list of the services/products with their individual charges
- Additional one-time charges, if applicable
- Total payment due amount, including taxes when applicable
- Payment due date
- Payment method
- Payment terms and conditions
- Billing interval dates
- Other pertinent business-related information
By providing clear and comprehensive information within the invoice, you reduce the chances of customer confusion, minimize the likelihood of disputes, and enhance the overall customer experience.
3) Use Automated Billing Software
While consolidated billing shares many similarities with standard billing procedures, there are nuances that make it more complex, laborious and error-prone. To streamline the entire process, enhance efficiency, and reduce errors, many SaaS companies are onboarding automated billing software.
Automated billing software can automatically calculate charges, generate invoices, send reminders, and process payments. Even AI invoicing is starting to change how billing is done. Taking it one step further, best-in-class automated billing software provides the ability to automatically handle dunning actions, manage collections, deliver financial reporting, and much more. These SaaS billing best practices share how the right billing platform can turn challenges into opportunities.
Delivering a Cornucopia of Benefits
Consolidated billing provides a host of benefits to not only your SaaS company but to subscribers, streamlining the operations and enhancing the billing experience. Here are some of the key benefits you (and your customers) can expect to receive from consolidated billing.
Streamlines the Billing Process: While consolidated billing is more complex, it simplifies the billing process by reducing the number of invoices generated. This reduces administrative tasks, minimizes errors, enhances productivity and efficiency and delivers cost efficiencies.
Reduces Missed or Delayed Payments: From a business perspective, consolidated billing reduces the time your staff spends chasing unpaid invoices – improving efficiency and keeping revenue flowing. On the customer side, consolidated billing provides a clear view of their total spend across all product and service subscriptions for that billing period, making it easier for them to make timely payments.
Simplifies and Accelerates Invoice Processing: Creating multiple invoices for a single customer is time-consuming and error prone, all while affecting productivity. Consolidated billing removes the need for multiple invoices, accelerating invoice processing and reducing errors that could negatively affect payment.
Boosts Revenue Opportunities: While this benefit may not be immediately apparent, consolidated billing can help retain customers, which is less costly than acquiring new customers. It also encourages customers to purchase additional subscriptions in the form of bundles and discounts. It also helps build customer loyalty.
Enhances the Customer Experience: Given consolidated billing’s payment process simplicity, transparency, and convenience, SaaS organizations deliver a frictionless billing experience, as well as reduce billing disputes.
Are You Ready to Revolutionize Your SaaS Business?
If so, billing consolidation can help! However, handling the process manually is riddled with complexities, errors, and staff over-utilization. The right billing system, one that was built to seamlessly handle today’s complex subscription-based billing scenarios, provides everything you need to take billing to the next level.
BillingPlatform is the industry’s leading multi-tenant, cloud-based solution that can support any business model with any combination of one-time charges, subscription, consumption/usage, or hybrid-based billing – all on a single platform. We pride ourselves on our ability to tackle even the most complex billing scenarios. But don’t take our word for it…
With multiple billing systems that required extensive custom coding for pricing changes, discounts, and new product/packaging launches; as well as a large number of calculations that were done outside of the billing system, and a lack of upstream and downstream billing integration, N-Able required a billing solution that could support its increasing billing complexities and growing customer base… and BillingPlatform delivered.
Hear from Joel Kemmerer, CIO at N-Able on how BillingPlatform has revolutionized their billing by standardizing on a single platform, consolidating billing and financial reporting, providing a unified customer experience, and enabling innovative pricing models to capture more revenue faster.
With us, you get a complete solution and the unmatched agility to run your SaaS business with greater efficiency, accuracy, and control. Are you ready to revolutionize your SaaS business? Let us help!
