As a software company grows, managing all of its moving parts can become more and more complicated. The last thing any expanding business wants is to lose money simply because they were unprepared to handle the complexities that come with supervising payments, generating invoices, adjusting pricing models, collecting and utilizing data, integrating billing with their current systems, and all in a timely manner.

That’s where billing automation comes in to save the day. Another tool in a SaaS company’s arsenal, automated billing is the best way to streamline the payment process and keep a complex system as simple as possible so you don’t have to worry about delays stunting the growth of the business.

With a proper billing strategy and system that fits the model you’ve designed, the advantages will make you wonder how your company carried on so long without this asset. 

This guide will cover:

  • The benefits of subscription-based payments
  • How automation makes billing more efficient
  • Types of billing systems and how to use them
  • Current examples of highly rated billing systems

Recurring Payments and Their Perks

Subscription-based payments are beneficial to more than just the company receiving these payments–this system also helps consumers. A few of the advantages for you and your customers are:

Availability

Customers are able to easily access your product since there’s no large upfront fee, which attracts a larger customer base into your sales funnel.

Cost value

By providing a price scale for levels of access to the different tools within your software, not only are customers able to choose an option that they can afford, but also only pay for the services they’ll actually use with the option to upgrade later.

Increased return on CAC

The Customer Acquisition Cost depends on your marketing strategy, but is generally a fixed amount. Since payment for your product is ongoing, ROI is high and continues to grow for as long as the customer remains with your business.

Insightful data

Besides being able to more accurately predict revenue from a steady amount of income, companies are able to track customer behaviors like buying habits, product usage, and gauge future intent.

The Standards of Good Automation

No matter how many customers you have, billing automation provides a level of regulation on your accounts so the rest of your team can focus on other tasks. Here are some of the ways that automation enhances the efficacy of a billing model:

Time management

The main point of automation is to streamline a particular process. Since invoicing can be complex, billing systems prevent costly mistakes that come from human error while saving time organizing information and handling subscription tasks. 

Simplicity in pricing and payment methods 

First, the price of your software should be clearly defined and include a description of services so customers know exactly what they’re paying for. 

With this in place, the payment process will be easy to navigate, both for you and the customer. Efficient billing management will help with things like charging the customer when their payment is due, or wrangling the various options for payment methods (credit card, digital wallet, etc.). 

Pricing strategies in the SaaS industry are subject to change as the market shifts or if new companies adjust their models after gaining a better understanding of their growth tactics. Automation tools are flexible enough to allow for easy price modification that won’t stress out your finance team or your customers.

Prevent revenue leakage

Dunning is the most obvious example of revenue leakage, and occurs when a customer is late on payment. Billing management systems can not only take steps to prevent this by sending out reminders of when a bill is due or when a credit card is about to expire, but also retry a failed method of payment and send messages for a client to take action. 

Data collection

Since billing systems can easily track and store financial information, it offers insight to a company’s performance and how to better anticipate change. The data behind a customer’s product usage can point to things like certain trends that haven’t been explored by the marketing team, or might lead to opportunities for upselling services. 

Generated breakdown reports also show where customers need more assistance–if their usage on a specific software is low, providing helpful demonstrations can increase this usage while simultaneously reminding the customer of your wonderful customer support.

Accurate revenue recognition

Calculating and reporting on revenue helps determine a company’s performance, and for a subscription-based payment method, it can be a bit more complicated. Luckily, most billing systems offer this feature and manage it for you, so your company can stay compliant with generally accepted accounting principles (GAAP) for accurate financial statements.

Billing System Toolbox

The main thing to look for when deciding on a billing system is the ease in which it can be set up. You probably want to get the ball rolling as soon as possible, and your billing system shouldn’t be the thing slowing down this process. It should also integrate with any other tools your company uses, like analytics. Lastly, as your business grows, the billing system should also be expansible and capable of accommodating changes to grow with you.

Instead of choosing a system at random, it’s best to understand how their wide range of tools function in order to find the best fit for your company. These are the basic things to look for when researching a billing systems:

Merchant Account

Basically, this is the company’s bank account. If your business doesn’t already have one ready, don’t worry–payment gateway providers often supply this as a feature.

Payment Gateway

This is the route the customer uses to make a payment. The system links their credit card or bank information with your merchant account for easy, secure, and instant transactions. It’s best to choose a system that allows different payment methods besides just credit card information, like digital wallet apps or ACH.

Subscription Billing System

This is the automated system that handles all of the processes related to subscription billing. Its features may include:

  • Charging the customers at the beginning of their billing cycle
  • Sending reminders for upcoming payment dates
  • Handling dunning procedures, like retrying to process a failed payment and sending past due notices
  • Retaining credit card information for faster checkout and automatic recurring payments
  • Creating invoices for customers and your company
  • Providing accurate revenue recognition
  • Generating tax information 

Be aware that new systems emerge constantly, so if the parameters of your billing model have outgrown the system you initially chose, it may be time to upgrade to a newer system.

Billing user interface

This is the page customers interact with when they go to make a payment. The process wants to be as simple as possible for customers to manage their end of the subscription, like updating payment methods or downloading invoices. Besides leaving the customer with a positive user experience, this interface should integrate with your subscription billing API (Application Programming Interface). Look for an option that’s easy to add to your website’s billing page without spending exorbitant amounts of time and effort to manually develop this page.

Best SaaS Billing Tools

As stated before, these tools change constantly and new ones emerge that may better suit your billing model. Here is a current list of different examples and some of their features:

#1 Stripe

  • Payment Gateway
  • Provides a Merchant Account
  • Has a powerful API
  • Price is ideal for new companies

#2 Stripe Billing

  • Subscription Management System
  • Supports multiple regions and currencies
  • Integrates with third-party tools
  • API documentation

#3 Braintree

  • Payment Gateway and Subscription Management Platforms
  • Provides a Merchant Account, but integrates with pre existing accounts
  • Supports multiple regions
  • Owned by PayPal

#4 Chargify

  • Subscription Management System
  • Real-time analytics
  • Integrates with third-party tools 
  • Handles complex billing strategies
  • Great customer support for faster onboarding
  • Geared towards B2B companies

#5 Chargebee 

  • Subscription Management System
  • Integrates with third-party tools
  • Generates in-depth metrics including revenue recognition 
  • Great for testing strategies and experimental pricing

#6 Recurly 

  • Subscription Management System
  • In-depth reporting
  • Flexible billing models
  • Integrates with third-party tools

#7 SaaSOptics

  • Subscription Management System
  • Integrates with third-party tools
  • Automated revenue recognition
  • Generates in-depth analytics
  • More difficult to set up
  • Representatives are designated to each account for customer support

Bottom Line

Billing automation systems provide so much more than just a streamlined link between your customer’s credit card and the business bank account. They give your finance team as well as the rest of your company peace of mind that the billing process is organized, up-to-date, and analyzing valuable data. In the end, this tool improves not only business tactics, but also the customer’s experience with your brand.