You’ll see it in their eyes first: rubbed red with dark circles underneath after another billing cycle from hell. Such is the fate of an Accounts Receivable (AR) Specialist working within a broken system. And of course, this is subscription billing we’re talking about here—the billing cycle is constant.
Something has to change, right?
When the solution requires a major process change or large software purchase, it becomes a bigger-picture business decision. Of course, you can’t make business decisions based solely on the fact your AR team seems tired. But there are other pain points that tell the story of an invoicing process that has outlived its usefulness.
Being able to recognize them is a critical component of keeping your business efficient and effective.
1. You consider spreadsheets to be part of your tech stack
There are a lot of easy jokes to make here. “The 90s called. They want their spreadsheets back.” But I’m here to speak to you as a friend.
Not only are there better ways to track and manage billing, but many of the later pain points in this article flow directly from things like this: antiquated technology that punches the momentum out of your process by opening the door to errors, leaks, and non-compliance.
Plus, it’s just not time-efficient. While you’re poking through your Excel sheet, trying to figure out why the numbers aren’t quite right, businesses with an automated recurring billing system are coasting along, scaling with ease.
2. Errors are common
According to Microsoft, backspace is the third most frequently used button on the keyboard. It’s easy for mistakes to happen. Even professional typists are only accurate 92% of the time—an impressive number until you realize it means eight out of every one hundred keystrokes are wrong—a figure that will add up quickly on your, ahem, spreadsheets.
To error is human, right? Well, maybe. But who’s getting the raw end of the deal with these mistakes? Maybe it’s the customer, receiving invoices requesting a higher sum than they expected. If that’s the case, your churn rate is or probably will be much higher than average.
A recent consumer survey found that 86% of people will leave a brand they like after two or three bad experiences.
Or maybe your business is suffering because it’s accidentally undercharging on invoices. Then comes an uncomfortable choice:
- eat the loss or
- ask the customer to backpay for your mistake.
It’s not a fun situation to be in either way.
3. Revenue leakage is out of control
Oh, the bitter irony! Your recurring billing model is supposed to collect payments, not flush them down the toilet. Experts suggest that up to 5% of revenue can slip through the cracks without a business even noticing it.
That means if you’re noticing a revenue leak, the problem might be even more serious than you think.
Human error, improper taxation, and involuntary churn are three major sources of revenue leakage, and they can all spring out of a broken collections process.
4. Creativity is a common occurrence in your AR department
But who doesn’t like a little creativity?
On an invoice? I’m willing to bet your customers could do without it. They want a bill, not a mystery novel.
So—you are in the 21st century and use software to handle the recurring billing process. It’s just not the most flexible: it only allows for recurring charges. It doesn’t accommodate one-time charges—such as an implementation or customer service fee.
When one-time charges do crop up, AR needs to get inventive. Maybe they add an additional “subscription” to the invoice for the owed amount. A little clunkier than you’d probably want your payment process to be, but no harm no foul, right?
Well. It’s not the best. On the customer end, it just looks weird. People want transparency with their recurring payments. They might not leave over the occasional confusing line item, but they will remember them, and not favorably.
Especially not if billing forgets to cancel the subscription. Which happens because, as mentioned earlier, people make lots of mistakes.
The end result? Confused customers. Billing staff working harder than they need to. And artificially inflated churn numbers that can falsely play into your decision-making process. That’s a big deal. As a subscription business, you work hard to manage churn. You need the numbers to be accurate.
5. Your billing process takes more than a few hours
JustLogin is like you. Great product. Fast growing. Maybe growing too fast? That’s what it felt like over in billing, at any rate, as its team tried to manually handle the invoicing for 800 customers. It took two or three people weeks of overtime just to get the invoices out on time every single month.
Something had to give. JustLogin switched to automated billing and instantly reduced their time on invoicing by 90%.
Take a look at your AR department. No, not for too long. Goodness, look away.
Sharp minds lurk behind the bright eyes and uncomfortable smiles you just witnessed. When you automate your recurring billing process, those minds can spend much more time on big-picture stuff.
It’s good for them, it’s good for you. Or, as Haresh Sippy of LinkedIn put it, “Automation is cost-cutting by tightening the corners and not cutting them.”
6. Compliance isn’t up to par
Most people don’t go into SaaS because they like living on the edge, but that’s what they get with non-compliance. Subscription billing businesses have plenty of legal hoops they need to jump through. ASC 606 is probably the most dreaded, with violations punished through hefty fees and the possibility of jail time.
But there are also taxes, data protection compliance, and other hurdles you need to navigate if you want to stay in business.
No matter which regulation we’re talking about, manual-heavy billing practices make compliance extremely difficult.
With the right subscription management technology, it’s so much easier. Revenue is automatically recorded in compliance with ASC-606 and your records are neat and accessible if the very fine people at the IRS ever decide to stop by.
7. Your data is siloed
Legacy systems treat data kind of like a princess in one of those old (and perhaps not incredibly feminist) Disney princess movies. Stick those numbers up in a tower. Maybe throw in a dragon just to make sure no one ever sees them again.
Data siloes aren’t quite so exciting as that, but the effect is the same. Information gets holed up in places where it’s difficult for other teams to access.
Subscription management technology provides your AR department with a single source of truth (SSOT): a place where accurate data can easily be viewed by anyone who needs it.
The solution is so simple
If there’s any good thing about a broken billing system, it’s that the fix is clear. Automate!
As Slack CEO Stewart Butterfield once said, “There’s a lot of automation that can happen that isn’t a replacement of humans, but of mind-numbing behavior.”
A good subscription management system gracefully absorbs all the pain points described in this article, providing benefits that will be felt well beyond AR. Customers need consistency. Your business needs data, compliance, and efficiency. And for the love of god, your AR department needs to put their spreadsheet days behind them.
The right subscription management platform can make this all happen.