Recurring Billing

6 Small Changes That’ll Make a Big Difference for Your Recurring Billing Business

Lois O'Rourke | September 20, 2022

A couple of years ago, I lived in a beautiful tenth-floor apartment right in the middle of town. It had four big balconies, six bedrooms, an open plan kitchen, and three bathrooms… my friends and I thought we’d hit the jackpot.

There was only one problem.

The elevator used to break. All. The. Time.

There’s nothing quite like coming back from the store with a week’s worth of groceries—for six people—and realizing you’ve got to climb 10 flights of stairs. In summer, temperatures regularly broke 100°F. I’ll leave the words that came out of my mouth to your imagination.

Just like I paid rent to my landlord on a recurring basis to live in his apartment, your customers make recurring payments to continue using your SaaS product or service.

Subscription businesses without proper subscription management software are like old apartment buildings without a working elevator. And the more people that come to live in your building, the bigger the problem becomes. If you don’t fix it, residents will start to move out. (In case you lost me, we’re talking about increasing your customer base, business growth, and customer retention).

It’s amazing how a small change can make such a big difference. Here are six minor changes that will have a massive impact on your business when you automate your recurring billing system.

1. Automate invoicing

Getting invoices out on time and error-free is a crucial part of your business. Any slip-ups here can directly affect cash flow and recurring revenue.

Unfortunately, subscription businesses often spend days or even weeks of manual time on billing. This is especially true in a subscription business when the billing cycle and amounts may be irregular, requiring variable recurring billing. Even customers with a fixed-price subscription and payment cycle could decide to upgrade, downgrade, or cancel at any time, leaving you to manually track and adjust the information.

CloudPlus, a hosted services distribution and management platform, was no stranger to those challenges. Its billing process used to take up an entire week of every month. Aside from being a massive drain on time, the sheer volume of manual reviews and revisions meant errors were bound to happen, causing interruptions in cash flow. Statistics show incorrect invoices are responsible for over 60% of late payments!

Clearly, the CloudPlus team needed to optimize the order-to-revenue workflow. So they implemented an automated recurring billing system that worked wonders: it cut the billing process down to a couple of hours.

Automation drastically reduces the recurring billing work per month, freeing up time for your in-house talent, or saving you money on external accounting services. It also eliminates the chances of human error appearing on a customer-facing invoice, which will help keep your reputation intact and payments coming in on time.

2. Think bigger picture

Billing is just one slice of the subscription management cake, which covers everything from customer signups to retention, renewal, and expansion. Stop thinking about recurring billing as a standalone task that requires separate tools. Think about it in terms of a larger subscription management solution.

For example, the solution you bring in to automate invoicing could include self-service portals that empower the customer to make changes to their subscription and update their personal or payment information. Giving customers the ability to add new credit and debit cards will reduce failed payments when their old cards expire.

Not only does that improve customer experience but it keeps operating costs down too. Your customer service department will have more time and energy to spend on more complex inquiries.

Let’s go from bigger picture to biggest picture: world domination! I mean, global expansion. Small business accounting software is often unable to support foreign currencies, whereas an innovative subscription billing and management solution should have that capability built in. This opens the door for you on a worldwide scale. And speaking of scaling, automating recurring billing is critical for the operational efficiency your business needs to do so.

3. Automate more repetitive AR tasks

When you think about recurring billing in the greater context of subscription management, there are plenty of other tasks you can and should start automating. This will help you recover leaking revenue which, according to statistics, accounts for around 1 to 5% of total revenue.

Reliance on manual processes and pricing errors are major sources of revenue leakage, with data entry errors being the main culprit. Humans make mistakes, and even something small like a misplaced decimal, an extra 0, or duplicating a line of data can wind up causing hours of headaches for multiple departments and the customers it affects. Or in a worst-case scenario, “fat finger” can cost billions of dollars.

Automating your recurring billing process removes the risk of human error. Plus, it provides the technology to mitigate repeated trials, another potential revenue leak. It also gives you control over auto-renewals to reduce forced churn—when a subscription gets canceled involuntarily, usually because payment has failed due to out-of-date payment information.

Sometimes, payments fail for another reason, like a technical glitch or insufficient funds. In many systems, that event triggers the dunning communication sequence. But here’s something a surprising amount of SaaS businesses don’t realize: retrying the card a few days later is highly effective. In fact, it could recoup up to 75% of the revenue that would otherwise be lost to failed payments! We helped one business recover over $360,000 in a single year using this method. 

SaaS and subscription businesses commonly use multiple pricing plans and pricing models, like tiered or volume-based. There are also options within the recurring billing model itself: fixed recurring billing, variable recurring billing, or hybrid. This means that recurring payments can look very different between customers and even between months for the same customer.

It makes pricing flexibility essential to recovering lost revenue. You need to be able to invoice for custom plans or pricing and make adjustments at any time. Using a manual system often involves inefficient workarounds, or sometimes it’s even not possible due to system limitations–which leaves money on the table.

You can also automate time-consuming tasks like maintaining records, preparing reports and analyses, and updating logs and ledgers. Automated recurring billing streamlines dunning activities like sending out payment reminders, highlighting missed payments, recognizing patterns in payment failures, and communicating with customers for payment.

4. Put CX front and center

Empowering your customers with something like a self-service portal—where they can edit their subscriptions, update payment details, and make online payments—can do wonders for elevating the customer experience.

Other benefits of an automated recurring billing system include:

  • sending accurate invoices out on time,
  • flexibility of billing mechanism,
  • integration with multiple payment gateways,
  • secure financial transactions,
  • secure storage of the customer’s payment information, and
  • a generally smooth payment process.

All of these things lend to a better customer experience (CX) and an improved perception of your business.

Subscription management software also increases communication, which is essential due to the ongoing nature of the business-customer relationship in a subscription business.

Communication is particularly impactful in dunning management. A recurring billing platform can do things like

  • send instructions when a payment fails,
  • alert the customer before their subscription expires due to failed payments,
  • let a subscriber know their credit card is about to expire,
  • tell customers how much is due for payment, and
  • provide the date their payment method will be retried, in the case of a failed payment.

Clear and timely communication, especially around dunning, will vastly improve CX with the added benefits of reducing churn and plugging revenue leaks.

5. Revisit your pricing frequently

There is a multitude of reasons you should stay on top of your pricing, like remaining competitive, adapting to changing market and customer needs, and making sure your pricing evolves in line with your product. Experts say the strongest SaaS businesses run regular pricing experiments and revisit their pricing model every three months.

Recently in the world of SaaS, we’ve seen many businesses switch from a classic tiered pricing strategy to a usage-based one. In fact, the adoption rate has doubled in four years, from 27% in 2018 to a projected 56% in 2022.

A recurring billing process that calculates a customer’s usage can be more convenient for your customers, as they pay only for what they use, which could help with CX. It also helps you find the SaaS Goldilocks zone, i.e., balancing value and price in a way that’s “just right”. Naturally, what’s “just right” differs vastly between customers, so your recurring billing system needs a high degree of flexibility.

Essentially, a usage-based billing system complicates the recurring billing process. It’s critical to have the right tools in place to simplify it and maintain the reliable cash flow associated with recurring billing.

6. Leverage subscription analytics

Basing your strategies on solid data helps you make better decisions across all areas of your business.

  • Calendar reports can forecast sales and even break down projected revenue per day.
  • Sales reports influence product development by showing which products and pricing plans are popular and which aren’t catching on.
  • Customer reports help you define your best-fit and biggest-spending customers so you can refine marketing messaging and targeting.
  • Monthly recurring revenue (MRR) reports give you insights helpful in improving customer retention.
  • AR aging reports give you a high-level overview so you can stay on top of unpaid invoices.
  • Your SaaS billing software automatically recognizes revenue, but the revenue report is extremely handy for tax calculations and to ensure you’re compliant with regulations.

All in all, if your recurring billing toolset has analytics, take advantage of them.

A little change goes a long way

When your business is successful, you want it to grow. It’s the logical course of things. Sadly, businesses often scale to the detriment of customer experience because they don’t have the right tech stack to handle the additional load. This is where recurring billing software comes in.

Recurring billing software should do more than handle recurring payments. It should be part of a holistic subscription management solution that empowers your customers, removes operational friction, and supports your business growth. It’s the cutting-edge technology you need to keep up with the other players in the SaaS industry as you hurtle into the super flexible, automated, customer-centric future.

Written by:

Lois O'Rourke
Lois O'Rourke
Freelance Writer

Lois O’Rourke is a professional copywriter with a background in digital marketing. She loves the power of the written word to connect with people and inspire their actions. Originally from the UK but an avid adventurer, she currently writes from Cyprus—an island where the cats outnumber the people!