How do you know when you’ve outgrown your current billing setup? Very few companies start with the technology they need to grow. Many early-stage SaaS companies begin with simple bookkeeping software or rely on spreadsheets to handle their basic billing needs. Such a decision is understandable, as startups often don’t have the operational capacity to deal with the complexities of a modern, enterprise-class billing system.
But as your business grows, you may find that your existing billing system was built for a business model you no longer use or that it no longer meets all of your needs. If you’ve encountered several of the following signs in your business, then it may be time to update your billing system.
1. You offer a variety of packaging and pricing models
In a purely transactional sales model, you sell once, bill once, receive payment, and recognize revenue. For SaaS companies, however, you’re dealing with multiple variations of your products and pricing that can change over time.
For example, you might provide a product with monthly recurring services, a subscription with multi-year ramp contracts, or a prepaid subscription with drawdown. As your business scales its product offerings and adds new package and pricing models, finance teams must build and maintain processes to send invoices and track payments without sacrificing efficiency. With a modern, enterprise-class billing system, you can bill any price and deal structure, from simple recurring to usage-based, or contracts that ramp up over time with additional seats and features.
2. You accept multiple payment methods and currencies
Selling SaaS globally means that your finance team has a myriad of payment methods and currencies to deal with. When there are over several hundred types of payment methods and currencies available, staying on top of where your customers come from and what currencies they use can be a time-consuming process. And this process will only grow in complexity as your business adds new payment options and subscribers.
A dynamic billing solution makes it possible for you to easily add a variety of local payment methods and set custom prices for each currency. When you enable your customers to pay any way they want, you can significantly reduce churn and increase customer satisfaction. In addition, your finance team can have peace of mind that every customer is billed in their local currency using their preferred payment method.
3. You have multi-year contracts
For SaaS companies, multi-year contracts provide a steady stream of revenue for the length of the contract, as long as requirements are met. More importantly, the predictable revenue of a subscription model enables more accurate forecasting years down the road and provides a gauge for the state of the business going forward. If you’re spending hours staying on top of handling multiple, separate subcontracts with unique terms, it’s time to reevaluate your billing setup.
A modern, enterprise-class billing solution makes it easy to track, manage, and make changes to contracts. In addition, it lets you easily set up a master contract with different line items that have unique billing terms so you can avoid any costly mistakes. As a result, your finance team can save the time spent on manually searching for information and focus on other essential tasks.
4. You have multiple sales channels
SaaS companies can distribute their products to customers across multiple sales channels, both online and offline. For example, you might sell a product through an app store marketplace, a reseller program, a sales-assisted team, or a self-service channel. For finance teams, however, having to bill customers and process orders across multiple, disparate channels can be a huge hassle without the proper billing infrastructure in place. A modern, enterprise-class billing system enables you to power a multi-channel strategy involving self-serve, sales-assisted, and reseller channels simultaneously so you can reach customers where they’re most likely to buy.
5. You have frequent amendments
In SaaS, it’s common for customers to amend their initial purchase by upgrading or downgrading their subscription, buying another product or add-on, or changing the number of seats during the contract period. There are multiple steps involved in making manual subscription changes, even if it’s a simple modification.
Additionally, any change impacts the finance department in multiple ways, including the need to prorate charges for a new subscription, cancel or reverse old subscription changes, and more. These manual changes make the billing lifecycle complex and time-consuming, and increases the chances for errors to ensure all modifications are attended to.
A modern billing system gives you more flexibility and control to easily make subscription amendments. From tracking every subscription change to recording the terms of the relationship, the capability to automate this process helps you manage the billing lifecycle seamlessly.
6. You need auditing and governance support
SaaS businesses need to understand the entire quote-to-revenue workflow to ensure they are consistently driving optimal outcomes. However, many inflexible billing solutions are built on outdated technology that may not integrate with other critical business systems. Organizations need a way to centrally view and govern data across various business systems to ensure consistency, security, and performance across the entire workflow.
7. You need advanced reporting
What is the average annual value for each customer over the course of their subscription? How much recurring revenue is generated by customers within a year? What is the average annual revenue generated from each customer contract?
To answer these questions, you need access to robust and accurate financial reports that provide 360-degree insight into your business’s growth. However, because of the complexity of SaaS subscriptions, data is often spread across different systems and not easily accessible. This results in an overworked finance team trying to manually piece together data from multiple platforms, increasing the risk of data discrepancies and miscalculations. Switching to a modern billing system provides a variety of analytics and reports to monitor failed payments, bookings, invoices, renewals, credit memos, and more. Finance teams will have the consistent and accurate data they need to make informed product decisions and improve forecasting.
8. You have additional system and technology needs
Many traditional billing solutions are built on outdated technologies that do not integrate with newer systems. The older your billing system gets, the slower it performs, and the more maintenance it requires just to stay up and running. Further, these legacy systems are very inflexible. While they can support one or two pricing or products, they are not equipped to handle complex business models with multiple pricing and packaging variations. As your business grows, the cost of maintenance and performance will start to outweigh the cost of replacing your billing system.
A modern billing solution provides deep functionality around ecosystem integration, performance, automation, maintenance, and the ability to scale. This gives finance teams peace of mind that their billing system can manage subscriptions seamlessly.
This blog post is an excerpt from our eBook "The Subscription Billing Buyer's Guide for SaaS." To read more, download the full guide here.