Subscription Billing

3 Ways a Manual Billing Process Holds Your Business Back (and What to Do Instead)

Shawn Medeiros | December 6, 2022

Manual billing processes might seem like a good enough idea—or at least a cheap one—when you’re in the early startup phase of your SaaS subscription business. You’re only working with a handful of customers; you don’t need anything fancy yet. But what happens when you’re ready to scale your business while still relying on that manual billing process?

Often, your billing procedure becomes incredibly tedious. In the worst-case scenario, you simply won’t be able to scale beyond a certain point—definitely not ideal in the fast-paced, growth-oriented SaaS industry.

Plus, using manual billing processes can negatively impact customer experience as well as employee experience, and cause serious consequences for your bottom line. As the folks at email automation provider, Mailparser succinctly sum it up, “Legacy processes are inefficient, time-consuming, and error-prone.”

In other words—if you want your business to grow, you simply can’t leave a function as important as your billing in the hands (pun intended) of manual processes. Otherwise, you’ll find you’re creating cash flow problems as quickly as you’re adding customers.

The lack of scalability is due to three major bottlenecks that tend to occur with a manual billing process:

Bottleneck #1: Involuntary churn and revenue leakage

Manual billing at scale is downright impossible. Your accounts receivable (AR) team will be working at maximum capacity to create invoices and get them out to all your customers on time. As a result, they likely won’t have the bandwidth to chase down failed payments or outstanding invoices.

All too often, failed payments can snowball into involuntary churn—a phenomenon where customers passively churn as a result of missed payments without actually intentionally canceling their subscription.

It’s not uncommon for 40% of churn to be caused by failed payments, which is a huge problem—and an entirely preventable one. Payments can fail because of simple issues like an expired credit card or incorrectly entered billing information. These customers aren’t dissatisfied with your product or service, and they often don’t even realize their payment has failed until they go to use your software and find themselves locked out.

Or, perhaps they won’t even notice at all that they’ve churned. In that case, they likely aren’t power-users of your service—they might fall into the category of U.S. businesses who wasted a collective $30 billion on unused software over a 4-year period.

Customers who passively churn have generally either failed to engage with your service from the get-go or they’ve gone inactive over time.

Will they jump through the hoops of contacting your customer service team, resolving the billing issue, and reactivating their subscription?

Maybe…but probably not.

Of course, this scenario assumes you have some kind of system in place that’ll weed out customers who haven’t paid their subscriptions. Again, if your AR team is working overtime just to generate invoices on time, it’s unlikely they’ll want to moonlight as gatekeepers.

In that case, customers whose payments have failed might continue using your service indefinitely without ever paying.

Sure, you won’t have any involuntary churn. What you will have is out-of-control revenue leakage, which puts another nail in the coffin for your business’ growth potential.

The good news is there’s a goldmine of revenue to be recovered. Plus, your inflated churn rate can be dramatically reduced once you upgrade your billing process to an automated solution that handles dunning communication, automatic payment retries, and so forth. (More on that toward the end!)

Related: Tips for Recovering More Revenue in Your SaaS Business

Bottleneck #2: Human error

While human error on the customer’s part can result in a failed payment as outlined above, internal errors can also cause substantial revenue leaks. Administrative tasks like manual data entry for billing are particularly susceptible to human error, especially as your company scales and the tasks become bigger and more complex.

SaaS founder, CEO, and investor JP Emelie Marcos says, “The problem with manual processes is when they are so prevalent that it becomes an impediment to people achieving their full potential, and companies getting the most out of their teams…People’s abilities to deal with the task of maintaining a complex system are stretched to the limit: ultimately, too much noise leads to time sinks, mistakes and fatigue, in addition to lots of downtime.”

Data synchronization errors can also occur with manual processes, especially if you are using several different billing software platforms, spreadsheets, or sets of data.

When there’s no single source of truth (SSOT), it can create a serious disconnect between various teams and departments and make it extremely difficult to access accurate, up-to-date information about your business. Plus, the potential for errors increases exponentially when data has to be manually transferred.

The consequences of manual billing errors can include scenarios like displeasing a customer by accidentally overcharging them or creating a new revenue leak by undercharging a customer (or not charging them at all). Making a typo that skews numbers which are ultimately reported to investors and stakeholders can have far-reaching effects on the reputation and future of the business.

Bottleneck #3: Wasted time

Finally, manual billing processes can consume an inordinate amount of time, especially as you scale your business. In fact, executing a manual billing process can be downright hellacious for those in charge of sending out invoices—it can require days or even weeks of overtime and stress.

Case in point: JustLogin, an HR software solution provider based in Singapore, had two or three people working overtime for two weeks out of every month just to send invoices to 800 customers. Plus, customers were getting frustrated since they weren’t receiving their invoices until two weeks into the 30-day payment period.

Since adopting Stax Bill’s modern, automated subscription billing software, JustLogin has scaled up to 2,400 customers and invoices are always sent out on day one of the billing cycle rather than two weeks in—no overtime required.

No employee wants to feel as if their time is wasted, especially when they’re tasked with handling a function that is extremely important to the business, such as billing customers.

Digital transformation expert Beth Kanter points out, “Increased use of RPA [robotic process automation] can mean an opportunity for upskilling and reskilling with a focus on more interesting tasks. For the organization, that leads to not just a boost in productivity and a reduction in errors, but an overall greater employee experience.”

For JustLogin, this automation-based efficiency upgrade not only resulted in happier customers and the ability to scale with ease, but it also freed up its accounts receivable staff to focus on fulfilling big-picture objectives. No more dedicating huge swaths of time to manual processes.

What to do instead

If you’re currently using a manual billing procedure, don’t panic. Agile, automated recurring billing solutions exist to eliminate these bottlenecks and help your business grow.

Look for one that allows you to automate your billing process as well as other AR processes like dunning management, payment retries, and auto-updating billing information.

At Stax Bill, we’ve seen businesses that use our recurring billing software:

  • reduce time spent on billing by up to 90%,
  • put up to 10% of revenue back on their bottom lines every month, and
  • reduce late and failed payments by up to 700%

Automating your billing virtually eliminates the possibility of human error. Your accounts receivable team can take their invoicing schedule and simply set it and forget it. Then, they’ll be able to dedicate their expertise and energy to higher-level tasks that help grow and improve the business—in essence, they can thrive rather than simply survive.

Customers won’t notice the implementation of automated invoicing software, but they will absolutely notice the absence of one—or rather, the pain points that come without it.

As outlined above, a manual billing process increases the chances of negative customer experiences like passive churn wherein the customer can no longer access your service. Alternatively, late, inaccurate, or otherwise bungled invoicing can lead to dissatisfaction and completely intentional churn.

The bottom line: adopting an automated billing process improves both the employee and customer experience and eliminates bottlenecks that prohibit effective scaling. Plus, a modern billing solution can quickly pay itself off thanks to:

  • the person-hours saved,
  • the addition of the revenue that would have been lost to manual billing woes back into your bottom line, and
  • the added potential for business growth.

 That’s a win-win no matter how you slice it.

Written by:

Shawn Medeiros
Shawn Medeiros
Business Development Representative, Stax Bill

Shawn is a member of the Business Development team at Stax Bill. He amassed over 6 years of experience in the real estate industry before making the jump into the SaaS industry. At work, Shawn works with potential prospects to help find the right solution for their recurring billing needs. In his free time, he can be found at the gym or on a hike.