Recurring Billing

Responsible for a Recurring Billing Budget? 6 Terrible Ways to Spend Your Money

Adolphus McKoy | October 13, 2022

If you’ve been handed free rein of a recurring billing budget and you’re actively looking for ways to waste it, you’ve come to the right place. I’ve carefully curated this list of six things to do with that money that will simply not make your life any easier whatsoever.

In fact, if you’re a particularly enterprising budget-squanderer, you could actually make your recurring billing process more tedious and less effective in one fell swoop!

Without further ado, allow me to present the top six ways to mishandle a recurring billing budget:

1. Not spending it at all.

Perhaps you don’t feel it’s necessary to find a good subscription billing platform option. On the grounds of frugality, you could make the case that you already pay for a Microsoft Office subscription, so you might as well just keep using Excel to keep track of customer credit and debit cards and handle recurring payments manually. Why not reallocate the money towards other needs?

There’s just one small problem that can arise with this plan: as your subscription business scales, manual processes can actually end up costing you far more than a comprehensive recurring billing software. You’ll have to allocate huge chunks of the budget to paying the accounting team for the overtime they’ll work to simply get invoices out and be prepared to deal with manual errors. You’ll start to leak revenue until you’re actually losing more than you saved by not investing that recurring billing budget into a helpful tool.

Not to mention, using Excel to store customer payment information is not copacetic. Like, at all.

“Manual processes just don’t scale, especially when you are dealing with complex pricing models,” James Messer, a 25-year veteran of global enterprise software, says. “By creating an intelligent financial hub, you can integrate business processes to track the money flowing in and flowing out and identify new opportunities as well as points of failure.”

2. Building your own solution in-house.

Okay, so if Excel isn’t going to cut it, why not still save some money by building your own recurring billing system? You’ve already got a team of developers on staff–easy-peasy!

That is, until you do the math and realize that, with the time it takes to develop a basic subscription billing software without any of the bells and whistles, you’d end up paying your in-house developers somewhere in the neighborhood of $200k-$250k in salary…and that’s not even counting ongoing development costs.

Plus, this type of project could take several months to a year or more–that’s time your dev team could’ve otherwise spent on improving or expanding your business’s product.

And, unless your developers are ex-accountants or willing to take accounting courses on the side, there’s a high chance the resulting software they come up with will not be compliant with the generally accepted accounting principles (GAAP). Failure to comply can get you in some pretty deep trouble with the SEC.

So, then you’ve not only paid a quarter of a million dollars for a tool that doesn’t actually meet all your needs, but you also have to pay the piper for those failures and then invest in a recurring billing solution that actually does work.

3. Opting for a legacy billing solution.

Now, I’m not going to name names here, but there are certain mature billing solutions that may seem like an unbelievable bargain.

Believe this: you’ll likely be whisked back in time to the early 2000s in terms of functionality, efficiency, and security if you take this route.

Oh, and since many legacy billing software are no longer updated by their developers, you probably won’t be able to get support if you need it. But hey, what’s that classic IT line? “Try turning it off and back on again.” That oughta work.

4. Finding a solution to automate invoicing only instead of full-scale subscription management software.

We’ve all seen movies where the AI robots get too smart and take over the world, so it’s better to play it safe with your recurring billing solution–only automate functions if you absolutely need to.

*Removes tin foil hat*

Admittedly, the chances of a full-scale subscription management software staging a coup is pretty slim. Plus, in the time you’ve saved by automating all your billing functions, you can get so much other stuff done!

For example, let’s look at what a full-scale solution did for Annie Lin, founder and chief executive of B2C subscription company, A Little Bundle. She created her own website in 2013 and spent hours implementing a recurring billing solution that only handled invoicing. This was a huge step for her, but the only way customers could update their preferences or information was by emailing her directly. Then Lin would have to go in and manually update this information.

She was spending an unsustainable amount of time handling these changes especially as her business grew, so she finally invested in a full-scale billing software that not only handles recurring payments but also allows her subscribers to manage their accounts, update information, and submit customer service issues.

At the time of this posting, she has not fallen victim to rogue AI forces and is likely able to spend the time she saved with automation on other, more strategic tasks.

5. Signing up for a modern subscription management solution that charges overage fees.

If you’re a glutton for punishment but understand the importance of modern subscription billing functionality, go ahead and sign up for a recurring billing platform that charges overage fees. That way, when your subscription business does well and you pull in more recurring revenue than you planned, you can pay a fun little fee!

The fee is usually less than a percentage point of your overage revenue. In the grand scheme of things, it’s not a lot, but take a moment to consider the irony.

Billing automation has two main jobs:

  1. To reduce the amount of time your finance team spends billing, so you can reallocate those hours to more strategic projects that help your business scale.
  2. Create new processes that minimize revenue leakage and ensure you’re able to collect all the revenue you’re owed.

But if automation helps you scale so effectively that you bring in more revenue than expected and then have to pay overage fees…you’ve just created a new revenue leak. Talk about shooting yourself in the foot.

Or you can just choose a recurring billing system that doesn’t charge overage fees. (Stax Bill is one of them. I’m free for a demo this afternoon, if you’d like.)

6. Splitting that budget between recurring billing software and revenue recognition software.

Some recurring billing software providers don’t want to make things too easy for subscription businesses, so they don’t include revenue recognition functionality in their platforms. Instead, you get to handle that manually, or spend extra money on separate software or additional modules. Or you can live on the edge and just not worry about ASC 606 compliance!

(I don’t recommend this. Non-compliance may not be a big deal if your business is small, but as you grow–and especially if you want to go public someday–the SEC won’t be pleased when they find out.)

Plus, manual revenue recognition can quickly become completely unmanageable as your subscription business scales.

Messer goes on to say, “When you choose to adopt recurring and usage-based pricing, some problems only can be solved using automation. For example, automating revenue recognition is the only way to effectively handle multiple billing models, such as subscriptions, usage-based billing and bundles.”

But, if you feel like paying extra for this essential service, knock yourself out.

So many ways to waste money, so little time!

If you love burning money or simply want to add some spice to your recurring billing process, get started with these six mismanagement techniques right away.

Who doesn’t need a little more adversity in their life? After all, no good success story starts with ease and efficiency!

Written by:

Adolphus McKoy
Adolphus McKoy
Account Executive, Stax Bill