Meta Desc: Still using manual payment processing for your SaaS platform? Click on this link to learn how automating payouts can be a game-changer for SaaS subscription models.
By 2032, the global Software as a Service (SaaS) market is expected to reach a valuation of USD 1,228.87 billion. Thus, if you are a player in this segment, there is ample scope for long-term growth. However, this also entails increased competition from rival firms to occupy a higher market share.
Under such circumstances, regular cash flow is essential to ensure that your business operations continue smoothly. Automating payouts can be a masterstroke in this regard.
Keep reading to find out how.
The Importance of Efficient Payouts in SaaS
SaaS platforms usually offer a wide range of services that customers can access by paying a subscription fee. However, to ensure seamless availability, these companies have to bear several expenses, such as server and hosting costs, infrastructure costs, licenses and permits, customer support, development, and more.
Thus, SaaS platforms’ operational expenses usually tend to be higher than those of other businesses. As a result, any delay in customer payments can lead to a significant deficit in cash flow, which can affect operations as well as revenue.
Additionally, a report including 512 SaaS companies shows that by improving just 1% of their monetization processes, such platforms can enhance their revenue by 12.7%.
Thus, optimizing your company’s payouts will not only ensure a more stable cash flow but also higher revenue margins.
Challenges Faced by SaaS Companies in Managing Payouts
If you are managing the payouts of your SaaS platform manually, here are some of the challenges that you may face:
- Chances of errors in data entry and miscalculations leading to revenue leakage
- Delays in raising invoices, processing payments and resolving billing-related issues
- Increased risk of missed billing cycles
- Lack of flexibility to adapt to complex subscription plans, varying pricing models and customized billing requirements
- Insufficient scalability during seasonal surges or when your customer base grows
- Handling sensitive payment data that can increase the chances of security vulnerabilities and data theft
- Lack of analytical and reporting features that can provide useful insights about your company’s operations
How Automation Transforms Payout Processes?
Automating payouts can transform SaaS payment collection in the following ways:
- Automated systems are programmed to capture data, validate the information and generate invoices without the need for any manual entries.
- Payment requests are routed to the appropriate entities through automated systems.
- Enables instant payouts to vendors and also to customers in case of refunds.
- All transactions are automatically recorded and synced with the company’s accounting system, negating the hassles of manual reconciliations and providing up-to-date financial data.
- Allows collection of funds through multiple sources like debit/credit cards, NEFT, RTGS and more.
- Helps maintain a clear record of all financial transactions, which can come in handy during audits.
- Automated dunning management features enable you to handle failed payments or delinquent accounts with ease.
- Facilitates accurate revenue forecasting capabilities by assessing customer trends, usage patterns and subscription data.
- Promotes adherence to the latest regulatory compliances and data privacy laws as automated billing software caters to such requirements on your behalf.
Key Benefits of Automating Payouts for SaaS Businesses
Some of the major benefits of automating payouts for SaaS businesses are as follows:
- For subscription-based SaaS models, automated payment systems can seamlessly manage recurring invoices, ensuring timely and accurate billing.
- Seamlessly collect recurring payments without any manual follow-ups.
- Automated invoice generation, tracking and delivery, along with the option to send timely reminders to customers.
- Hassle-free management of subscription plans, enabling you to effortlessly create and customize subscription models whenever needed.
- Identifying and rectifying revenue leaks due to underbilling, billing errors or unauthorized usage.
- Maximizing Average Revenue Per User (ARPU) and enhancing overall revenue potential.
- Streamlining promotional offers, discounts, and coupon management.
- Offers self-service portals that enable customers to view their subscription details, invoices, and payment history.
Instances of Successful Payout Automation
Now, before implementing payout automation on your SaaS platform, you should know which other businesses have integrated such solutions and what the results were. Here are some instances:
SoulCycle
SoulCycle is a multinational fitness company offering 45-minute indoor cycling classes. The organization had expanded to almost 100 locations across the United States and Canada, and its manual accounts payable and budget management processes were affecting its accuracy and productivity.
As a result, SoulCycle was looking to automate its vendor payments process, reduce invoice flows, and achieve better cost savings.
By implementing these solutions, the company was able to centralize all vendor sites and logins to a single location, consolidate 1,500 invoices to a single bill, and offer substitution options, which resulted in rewards earnings of more than $7,000 per month.
WeWork
WeWork provides physical and virtual coworking spaces in 39 countries around the world. The company was generating over 1 million invoices per year and due to its manual invoicing process, had to incur high associated costs ranging from $20 to $24 per invoice.
To solve this issue, the firm integrated payout automation in order to improve its transaction visibility and spend control. For scalable processing, it adopted a streamlined P2P system, along with automating a three-way match and invoice reconciliation process that consolidated invoices, reducing the overall number of individual payments.
These solutions enabled WeWork to reduce its number of invoices to just 3,000 per month. Also, it allowed the company to track orders and fulfillment metrics hassle-free, along with controlling its spends across all vendors and locations.
Clinton Management
Clinton Management offers property management services for more than 3,000 residential, retail, commercial, and garage units across the United States. As the company’s operations were spread across 12 locations, it became really difficult for them to accurately track spends and create budgets.
As a result, Clinton Management decided to adopt payout automation in order to gain better visibility of their spendings and consolidate invoices to prevent late payments.
They automated their entire offline vendor ordering process to reduce dependence on labor and manual transaction data capturing. Also, they consolidated 109 vendors for a more streamlined purchasing experience and started saving over $1,200 per month via strategic sourcing.
Integrating Payout Automation into Your SaaS Model
Several payment solutions providers, like Decentro, Stripe, and PayPal, offer APIs that can be integrated into your SaaS platform to automate payouts. They enable you to process domestic and international payments across multiple currencies, generate and send invoices, collect funds through multiple payment methods and more.
They also enable reconciling transactions in a single platform, enabling better visibility and easier audits. Furthermore, these APIs can be used to set up recurring transactions with just a few clicks, serving as an ideal tool for SaaS subscription models.
The Future of SaaS with Automated Payouts
As per reports, approximately 85% of business operations will be powered by SaaS solutions by 2025. This growth can be mainly attributed to the growing demand for cloud-based solutions offering benefits like scalability, cost-effectiveness and flexibility.
Thus, as businesses continue to adopt SaaS platforms to streamline their operations, manual transaction handling will become increasingly hectic. As a result, integrating automated payout systems will become a standard for most SaaS players.
Conclusion
So, whether it be SaaS startups or established large-scale enterprises, payout automation can help significantly streamline their overall operations. What’s more, automation can even ease the impact of inflation on small businesses, resulting in better profit margins.
However, before selecting a payment solution provider, ensure that you check its various automation features, supported payment methods, pricing model, and customer support options.
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