Whenever Software as a Service firms start gaining customers after their pre-revenue stage, they tend to follow a pattern of either billing on the basis of data usage or a seats-per-license framework. But just as important as billing accuracy at the rates outlined in the user contract is the concept of maintaining customer loyalty. Such hard-earned kudos is won not only by accurate billing but by ensuring helpful and timely customer support whenever bills are questioned, or service levels may have been perceived as less than perfect.
In the fast-paced world of the Software as a Service (SaaS) industry, where innovation is the lifeblood of success, managing billing, service and support in perfect harmony is no mean feat. Also consider that as any SaaS platform continually improves, so must billing and support keep up the pace. In short, there’s no point in having the best innovation in the world if your customers aren’t kept in the loop on how new innovation benefits them and, crucially, justifies the prices levied.
As such, SaaS billing solutions should go beyond mere transactional processes. The process should involve creating efficient systems that will streamline revenue generation while always keeping an eye on real-world practical benefits. There are sometimes cases of technology being over innovated for their own sake, when possibly these are facilities that customers don’t need to use. In the final analysis, some SaaS firms can charge for innovations that not only offer to solve non-problems, but over complicate an already complex range of service offerings. Indeed, sometimes it can be sensible to take the view that “if it ain’t broke – don’t fix it!”
Let’s take a look at some of the key elements that need to be considered when billing customers using any form of SaaS platform.
Accurate Pricing Structures
Price model management is an intricate art form that involves understanding one’s market, assessing the features and benefits of one’s product and aligning it with customer needs and expectations. First off, don’t create a product that solves a problem perceived in the heads of software designers – first, perform thorough market research and canvas your customer base. Following industry trends should dictate a pricing strategy that garners an adequate profit while remaining competitive. This is one of the reasons why tech start-ups remain in the red financially for some years before becoming profitable, as charging an amount of money to cover early innovation costs would almost certainly price the company out of the market.
Whether you’re dealing with Investment Management Software (IMS) or a simple workplace collaboration tool, offering tiered pricing models can be effective. This allows customers to choose plans based on their budgets, while retaining flexibility for easy upgrades. For example, a SaaS platform offering AI data sorting capabilities could charge in cents per gigabyte, with the rate getting ever cheaper the more data is processed. Thus, if a customer had up to 100 terabytes of data processed per month, they might pay $300 per Tb, but any additional requirements might be offered at a 10% discount of $270 per Tb. Such flexibility requires accurate meter reading – there’s nothing more likely to put customers off than inaccurately charging them for data they haven’t used.
Similarly, if charging a per-user-seat levy, allowing monthly variations without affecting billing periods is a solid strategy. If a customer has 40 employees using a SaaS facility, and , say, five more are added during the mid-part of the billing cycle, it can be better to charge for actual days on seat for the new hires rather than retrospectively billing an entire month. Such flexibility engenders customer loyalty but requires careful setting up by the billing department. This brings us neatly on to subscription management.
The complexities of subs
No, this has nothing to do with nuclear submarines or deli sandwiches! We’re talking customer subscriptions and license management. The easiest way forward when managing subscriptions is to create, whenever possible, a customer self-service portal, which allows users to manage their own subscriptions autonomously. Such transparency not only engenders trust between both parties, but also reduces the workload of the SaaS firm’s customer support team. Occasional audits and random checks can route out any ‘accidental’ errors made by customers; however once a relationship is established, each party recognizes it’s in their own interests to be honest and transparent.
Precise invoicing
First of all, it’s essential to create bills that are not only 100% accurate, but it’s just as important to ensure that those bills are also understandable. A perfect case in point might be a web hosting platform or utility companies sending domestic gas and electricity bills to homeowners. Even accountants and senior managers can find themselves baffled by their own domestic utility bills that land on their doormats. Remember the mnemonic ‘KISS’ (Keep it Simple, Stupid!). Just tell your customer what you owe, for what, with a simple breakdown and a final figure that jumps off the page. Leave the reams of small print to the contract, not the monthly bills.
It’s also important to ensure that invoices are generated promptly to avoid delays and minimize the risk of human error. Ideally, a bill received on the 31st of the month should reflect the products or services provided for the previous 30 days, not the month before the previous one!
Compliance with regulations and standards
Adhering to accounting systems’ standards and regulations for certain industries is essential. A case in point is the recent furore over the UK’s horrendous 20+ year GB Post Office software scandal that left employees wrongly imprisoned and led to bankruptcies and even suicides. Getting financial transactions badly wrong can have very far reaching consequences.
Accordingly, billing teams should work closely with legal departments to keep abreast of regulatory changes. For example, The California Public Utilities Commission (CPUC) proposed a system in late 2023 that included an income-based flat fee and further fees based on consumption. This effectively meant that low-income residents would pay less per unit of energy than the wealthy. Whether or not you approve depends on your politics, but can you imagine the burden these regulations might impose on the billing departments of power companies? It’s always good to design billing systems with flexibility for regulatory changes in mind…
Dunning
The word ‘dunning’ refers to the process of methodically communicating with customers to ensure the collection of monies owed. In the SaaS industry particularly, customer churn is an ongoing pain point. So, implementing an effective dunning strategy should involve automated communication with customers whose payments have failed, providing them with clear instructions on how to rectify the issue.
Most importantly, this is where 1:1 customer support is paramount. Automated systems are all well and good, but there’s no substitute for a customer being able to pick up the phone and chat with a human being about whatever complex issue may have caused their payments to fall behind. Thus is why dunning management is not just about recovering revenue; it’s an opportunity to enhance customer relationships. An old adage in business still stands:
“Most dissatisfied customers don’t complain, they just walk away at the first opportunity and don’t return. But there’s none so happy as a customer with a problem that’s swiftly and efficiently rectified.” SaaS business might do well to think about that before outsourcing dunning and support to AI chatbots.
Informed Decision-Making through Business Intelligence
Tracking key performance indicators (KPIs) such as monthly recurring revenue (MRR), customer lifetime value (CLV), and churn rates are essential when assessing why a company’s billing structure is working well, or whether an overhaul is required. This is especially true of e-commerce platforms rather than subscription-based business models, as the number of transactions for the former are likely to be substantially higher.
The regular analysis of customer behavior, market trends and pricing effectiveness can help managers to make informed decisions. Another saying heeded by successful business owners is that “all salespeople have two ears and one month; they should use those organs commensurately in that proportion”.
Collaboration and Integration
Successful and efficient billing extends beyond the finance department; it should involve effective collaboration with customer relationship management (CRM) tools, marketing platforms, and customer support systems. For example, integrating your billing content and messages with the output from your marketing department is essential – imagine telling prospective customers that they can use your service for $40 per month, then those new customers’ bills are being sent out at $50. That’s complaint line central, right there!
Synchronizing billing data with CRM systems allows sales and support teams access to real-time business intelligence, fostering better customer engagement and facilitating problem resolution.
Always be Customer Centric
Just as salespeople should stick to their ABC (Always Be Closing!), so should billing & support teams be keeping to their motto of ABCC (Always be Customer Centric). The process of billing must be centered around customer satisfaction. For example, providing transparent communication about changes in pricing or terms & conditions ensures that customers feel informed and valued. This customer-centric approach not only reduces lost custom, but also encourages customers to recommend a SaaS solution to friends and colleagues.
Sealing the Envelope
In summary, we can see how the art and science of efficient SaaS billing goes beyond just the processing of transactions and onward to enable technology market predictions. It must also involve efficient subscription management, accurate pricing models, precise invoicing, compliance with regulations (and the readiness to adapt to external factors) together with proactive dunning practices.
Moreover, the examination of insightful analytics, seamless integration within departments and a strong commitment to customer care. The right approach to billing not only optimizes revenue generation, but also builds enduring relationships with customers.
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