SaaS

How Automated Billing Improves Your Business’s Financial Health

Matthew Boucher | October 25, 2022

We’ve all been witness to the vast digital transformation of businesses big and small these last few years. Especially during the COVID era, when it seemed everything moved online that wasn’t there already.

Remote working became the norm and we discovered automated employee performance management. From a customer perspective, live chatbots replaced agents and on-demand self-service put the customer firmly in control.

But while businesses prioritized the ongoing digital transformation of the more glamourous front-office functions like sales, marketing, and customer success, many have dragged their feet on updating back-office functions.

“Digital transformation is a horizon goal […] You will never actually get there […] but keep running towards it.”

Tony Uphoff, 4-times CEO and Senior Advisor at Xometry

Accounting software may not be sexy, but it’s an often-underestimated necessity for any small SaaS business serious about scaling. If you neglect this area of business until you hit a growth spurt, you’re likely to lose revenue as managing your growing subscriptions becomes chaotic and you scramble to implement a solution.

Modernizing your billing process isn’t just about streamlining recurring invoices. It impacts your business’s overall financial health, from top to toe.

And, remember: customers hate nothing more than businesses that over-promise and under-deliver. So, if you’re to dazzle with your marketing and sales, you better have slick billing automation to back it up!

An automated billing system plugs revenue leaks

You’ve invested a lot of time and effort into earning customer subscriptions. So it’s really frustrating to see your hard-earned money leaking through the cracks. What really twists the knife isn’t just the fact revenue leakage is unintended—it’s knowing it’s often preventable.

One of the main reasons for revenue leakage in subscription businesses is failed payments. Think back to last month. How many of your customers’ credit cards were declined on the first payment collection attempt? If your existing accounting software (or your payment collections team) didn’t retry customers’ cards, you may have waved goodbye to 9% of your monthly recurring revenue (MRR).

Did that prick your ears up? It’s understandable. I mean, what’s the point in generating new signups if you can’t actually get paid?

That’s where an automated billing system helps out. It ensures you collect more of the revenue you’re owed and performs vital dunning activities like monitoring late payments and following up on outstanding invoices—without you needing to lift a finger.

At any interval you choose, automated billing software retries a customer’s card and then runs it automatically. It even manages dunning communications, like notifying customers when their card is about to expire.

This will by far have the largest and most direct impact on finances, with some businesses recovering an average of $600,000 in revenue annually after implementing automated billing software.

It reduces or eliminates human error

People are only human, and every once in a while, even the most competent employees make mistakes. In fact, research shows a typical person commits around 118 workplace blunders a year—and that’s only counting the ones we know about.

There’s not much we can do to change our naturally error-prone ways. And considering that manual billing is such a tedious process, it makes errors inevitable somewhere along the way.

Whichever way you slice that, it’s not good. Accidentally undercharging customers creates a new revenue leak. Overcharging makes them angry. Both cases will damage customer confidence and create a reporting headache further down the line.

On the other hand, an automated billing system pulls customer data from a single source of truth (SSOT) to send invoices with 100% accuracy. And when customers receive error-free invoices, you’re likely to get paid faster too, improving cash flow. This will improve your business’s financial health massively, as the invoicing process happens on a monthly basis, so the impact of errors accumulates over time.

The process of generating invoices isn’t the only time human error can lose you money. Employees also make mistakes updating customer data like a billing address or payment terms. Something as simple as a digit in a credit card number being misheard over the phone can trigger a whole load of problems. Giving customers the ability to change their own personal info via a self-service portal empowers them and reduces the likelihood of errors.

A self-service portal has other benefits too, which leads us to how…

Automated billing software reduces customer churn

Basically, billing automation provides a smooth customer experience (CX) that makes people want to stay. Because if the industry has learned anything recently, it’s that service is the most important part of SaaS.

Accordingly, 67% of customers cite a negative support experience as a main reason for canceling a subscription. Data from SaaS pioneer Salesforce echoes the sentiment, too. It found 82% of B2B buyers say a personalized approach strengthens their brand loyalty.

Achieving great service and customer intimacy comes down to a lot more than having helpful support agents. Considering almost 1 in 3 customers would leave a brand they loved after a single, one-off bad experience, it’s important to get things right. All. The. Time.

Automated billing software improves customers’ experience at every stage of their subscription journey—from sign-up to renewal—by providing technology for:

  • predictable, accurate invoice generation,
  • online payments with a choice of payment methods,
  • a variety of plans and payment options (like monthly or yearly), and
  • a self-service portal so customers can update personal info or change various aspects of their subscriptions.

These key features should bring your churn rate down and boost your customer lifetime value (LTV) higher. Metrics like these allow us to measure a business’s financial health and…

Enable smarter business decisions

Taking care of your business’s financial health means keeping your finger on its proverbial pulse, and the way to do that is through report analyses.

Real-time data provided by your automated billing system makes it easier to discover trends and identify strengths and weaknesses. This information guides growth and scalability-focused strategic decisions. After all, you can’t improve what you haven’t measured.

A solid automated billing system will show in-depth reports on sales, cash, and revenue—three important GAAP (Generally Accepted Accounting Principles) metrics. You’ll also get extensive reporting on monthly recurring revenue (MRR), a vital key performance indicator (KPI) you can use to summarize financial results to investors, board members, and other decision-makers.

The right billing system improves human capital and sales efficiency

An automated billing system creates greater efficiency in your business, by transforming what was once a time-consuming process into a fast and simple automated task. As they say, time is money!

Imagine how much more your teams could achieve if they were able to redistribute 80% of their billing effort to higher-level business operations. If they can sustain and generate more annual recurring revenue (ARR), this is the premise for increased human capital efficiency.

Sales efficiency measures the value created per dollar invested. Broadly speaking, it looks at the efficiency of sales and marketing. As metrics go, it’s one to watch: 82% of investors tipped it as being more important than last year, according to the popular SaaS Napkin by Christopher Jantz of Point Nine.

The right billing software empowers support and marketing departments by:

  • giving them confidence in error-free data from a single source of truth (SSOT),
  • reducing the need for inter-departmental fact-checking,
  • freeing up their time (fewer low-level inquiries) as customers self-serve via an online portal,
  • giving them more agency to customize deals with a flexible back-end system, and
  • reducing operational friction by simplifying and automating manual processes.

These benefits allow sales and marketing to spend more time on revenue-sustaining and generating activities, thus increasing sales efficiency.

Automated billing systems and subscription management benefits

At the very least, automated billing systems deal with invoice generation, recurring billing, and payment processing. A subscription management software solution is more holistic. It allows you to experiment with pricing plans and billing models, control every element of the customer’s subscription journey and offers seamless integration with your entire fintech stack.

Compliance

Revenue recognition, cutely nicknamed rev rec, refers to the process of collecting, deferring, and finally recognizing revenue once value has been delivered to the customer.

Thanks to the varied and ongoing nature of subscriptions, revenue recognition can get confusing real fast. As brain-boggling as rev rec may be, there’s no excuse to be non-compliant with the latest GAAP principles. These include the infamous ASC 606 revenue standard which is what gets businesses in trouble the most—year over year, improper revenue recognition is responsible for the most enforcement actions taken by the Securities and Exchange Commission (SEC).

An effective automated billing system takes the stress of out compliance. Not only does it recognize revenue automatically, but it also keeps your business compliant in other complex areas like:

  • tax—calculating and applying rates according to different jurisdictions, and
  • data security—protecting customer payment data and personal info.

By ensuring you adhere to operational best practices, these automated billing system features support your business’s current financial health and safeguard its future, too. Financial repercussions for non-compliance can be a business killer.

Maximize profits

We’ve already discussed the importance of invoicing customers the right amount—as in the agreed amount—but how do we know we’re charging the right amount as in the best amount for your business goals?

To find the sweet spot where price matches value, you need to test multiple pricing strategies.

To avoid disrupting your entire customer base, you should experiment with different pricing plans for small cohorts of customers. Automated billing software provides catalog flexbility and customer-level pricing to make this easy. Once you’ve nailed your pricing, roll it out to the rest of your customers and smile knowing you’re no longer leaving money on the table. Still, don’t forget to review your pricing every three months (with a view to changing it every six) if you want to stay in shape!

Improve finances with automated billing software

When it comes to your business’s financial health, efficiency is just what the doctor ordered—and automated billing software is the best remedy.

An automated billing system lets you get paid faster, reduces churn, and improves cash flow—the lifeblood that feeds the beating heart of your subscription billing business. It repairs revenue leaks with smart dunning management and turns lengthy manual billing processes into quick automated tasks that run with precision and accuracy.

Data-rich reporting gives you real-time updates on your business’s vital signs so you can take swift, effective action. Ultimately, an automated billing solution supports steady revenue growth for a financially healthy SaaS business.

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Written by:

Matthew Boucher
Matthew Boucher
Director of Sales, Stax Bill

Matt is the Director of Sales at Stax Bill and loves the challenge of helping businesses figure out how to scale by bringing efficiency to their processes.