To build or to buy, that is the question when it comes to business software.
Sure, there are some business functions where it makes sense to build your own supporting software in-house.
But is the recurring billing process one of those functions?
In my opinion, no.
Here’s why: If your business develops a subpar in-house communication platform for customer support, what’s the worst that could happen? Maybe it takes your support team longer to do things, or they become frustrated with the user experience.
Recurring billing, however, is a much more regulated and nuanced business function. The worst-case scenario with a subpar in-house build is worse than simple user frustration. Your revenue is on the line if the platform isn’t up to snuff.
Still not entirely convinced? Here are four reasons your business shouldn’t build its own recurring billing software.
1. Lack of revenue recognition compliance.
It’s one thing to build software that handles simple automated billing and accepts customer payment methods online. Sure, the automation helps make your billing clerks’ lives a bit easier. But sending out invoices isn’t the only accounts receivable (AR) task that needs simplification.
There are plenty of tasks I could mention here, but the big one is revenue recognition.
You’re probably familiar with ASC 606, the GAAP standard that came into effect a few years ago. You also know that recognizing revenue for a subscription-based business is virtually impossible to do manually.
Recurring billing system options on the market today fully automate revenue recognition in a way that is completely compliant with ASC 606. These billing platforms are backed by a general ledger (GL) and allow for double-entry bookkeeping—”one of history’s great advances”, according to investor Charlie Munger.
This accountant-friendly, GAAP-compliant foundation is what allows the billing platform to facilitate simple recognition of revenue.
However, developing to such a complex standard requires deep accounting knowledge. This is something the average developer doesn’t have.
Read more: 7 Requirements of an ASC 606-Compliant Recurring Billing System
2. Missing PCI and data security features.
For software customers and vendors alike, recurring payments are easier when the business retains the customers’ credit card details. This way, neither party has to act when a payment is due. The vendor’s payment gateway automatically charges the payment method on file when a new invoice is due.
While this makes online payments simpler, it also means recurring billing businesses store plenty of sensitive information, making them prime targets for hackers.
This is precisely why the Payment Card Industry (PCI) Data Security Standard (DSS)—a set of cybersecurity guidelines set forth by leading credit card brands—exists. While nothing can make a company immune to cyberattacks, it does lessen the likelihood of an attack being successful.
Consider that:
- PCI Level 1 certification takes months or even years to complete, and it’s common for businesses to fail on their first try,
- less than 30% of businesses are able to maintain PCI compliance after first attaining it, and
- in 2021, the number of corporate cyberattacks per week increased by 50% compared to 2020.
Built a cloud-based recurring billing software that doesn’t meet the PCI DSS? It’s probably only a matter of time before your customers’ credit cards and personal information are exposed in a cyberattack.
The best recurring billing software you can buy is already PCI-certified. That allows your business to offload some of the requirements for certification and more easily attain—and maintain—PCI compliance.
3. Your devs aren’t experts in accounting.
When you hired your developers, you probably did so because they were experts at…well, developing code. I’m willing to bet they aren’t also coincidentally certified accountants.
AR tools, your recurring billing platform included, are heavily tied to accounting. The thing is, accounting is a heavily-regulated and very complicated business area.
Without a deep understanding of GAAP principles, it’s very likely your developers will build an in-house billing solution with functionality gaps. Normally, integration with other solutions in your fintech stack maximizes the efficiency of automated billing software. Without a GL foundation, however, it won’t integrate well with your ERP or accounting solution.
That means you can’t:
- automatically recognize revenue,
- distinguish sales from collections, or
- handle all of the various types of transactions your business makes, among other limitations.
It might also lack the checks and balances necessary for ensuring your billing clerks aren’t making errors. Don’t let mistakes cost your business hard-earned revenue.
4. It’s probably not the most cost-effective solution.
Just because you build it in-house doesn’t mean it’s free recurring billing software. Quite the opposite, in fact.
Developing custom software can take up to a year. Keep in mind, too, that 85% of development projects go over schedule.
That means you’ll probably spend hundreds of thousands of dollars just on developers’ salaries for the initial software build alone. Not to mention:
- paying them for the time spent updating the software as bugs are found,
- the time developing your recurring billing platform takes away from developing your own product, and
- the cost of any accounting training courses you have your developers attend.
Maleka Momand, co-founder and CEO of cloud provider Esper, agrees that building in-house software is generally not the best use of development resources.
“It’s the SaaS provider’s job to keep the platform sound, secure, and release new functionality as your organization evolves,” she writes. “Empower your IT resources to focus on real operational problems.”
A better recurring billing software option
For most businesses, enterprise or otherwise, buying a web-based recurring billing platform is almost always a better option than building your own.
Think about it this way: Your SaaS business also needs a phone connection. But you wouldn’t try to build your own phone lines, would you? No. You’d leave that to the people who are experts in building phone lines.
The best recurring billing software for an enterprise SaaS business is one that:
- is built on a general ledger system,
- is fully compliant with both PCI and GAAP standards,
- provides detailed analytics,
- has holistic subscription management capabilities,
- integrates natively with your CRM, ERP, payment gateways, and any other tools in your fintech stack, and
- automates not just billing, but other related business tasks such as dunning and more.
That’s a pretty tall order.
Your in-house developers build great software, there’s no doubt about that. However, when it comes to your subscription billing, being great isn’t enough. Billing needs to be compliant, functionally robust, and cost-effective.
The simplest way to get your hands on the best recurring billing software for your business? Buy it from the experts.
