6 Best Practices for SaaS Billing

Daniella Ingrao

As more software as a service (SaaS) businesses switch to pay-per-use and an assortment of other variable pricing business models, automated billing software is becoming an increasingly important fintech tool. This is especially true for the growing number of subscription-based SaaS businesses that manage recurring billing.

RELATED7 SaaS Billing Processes

SaaS Subscription Billing Revolution

In the past, the approach to software delivery was through a one-time purchase. But businesses are now adopting a subscription pricing strategy for their software services. This means rather than selling a single unit—which would have been a package of floppy disks or CD-ROMs back in the day—they now sell centrally hosted software licenses.

These licenses or subscriptions are sold on a recurring billing basis, which can undoubtedly be great for the bottom line.

However, this model can also become quite complex as businesses acquire more customers and serve up more offerings.

This pricing model shift opened a large window of opportunity, especially for companies with scalable business models. Moreover, the rapid growth of businesses shifting toward subscription-based pricing models has created greater demand for billing automation and subscription management.

Today, there are solutions to manage your subscription billing automatically. These solutions help reduce billing errors and revenue leakage, accurately track and predict revenue, and much more!

How Does SaaS Subscription Billing Automation Help?

Subscription billing automation helps SaaS businesses that are struggling to efficiently invoice customers while managing their billing processes with manual and legacy systems. Manual billing costs businesses thousands of dollars in revenue every month due to billing errors, inefficient resource allocation, payment failures, and late collections.

Here are a few of the ways digitally transforming your SaaS fintech stack with subscription billing automation can help.

Refer to this article to differentiate between rating and billing.

1. Efficient Time Management

Many people believe time is the most valuable commodity. Manual and inefficient recurring billing processes require hours of work and the task is often complex and understandably subject to human error.

With subscription billing automation, manual processes related to subscription activations, invoicing, renewals, payment processing, dunning management, and more are dramatically reduced.

Your SaaS business will see a return on its investment instantly from time savings alone, enabling the redeployment of resources spent on billing to other strategic focus areas.

2. Prevent Revenue Leakage

Many companies using manual billing processes experience revenue leakage. This means they’re providing a service but aren’t being compensated for it in full. Reasons for this can include:

  • delaying payment requests to customers
  • an inefficient system for retrying failed payments
  • failing to remind customers about upcoming credit card expiries, and
  • failing to send notifications and follow up on declined credit cards.

An efficient, automated dunning management system that involves automated emails and payment collection retries can recover 1 to 4% of leaked revenue.

From a SaaS billing perspective, it’s also important to recognize that services offered by your company can include ongoing technical support and continuous access to web interfaces, API integrations, third-party vendors, and data reporting.

It’s easy to see how without automation these services become impossible to track and collect on effectively.

For example, CoConstruct—one of the most highly rated custom builder and remodeler SaaS solutions on the market—was experiencing its own revenue leakage challenges. As the business scaled, its old billing system was inefficient in terms of ensuring revenue collections as well as applying proper taxation.

By digitally transforming its processes with subscription billing automation, the business has been able to recover about $2,000 a month in revenue. Additionally, it now reallocates around 40 work hours a month from billing-related tasks to new growth initiatives.

3. Gain Insight

High-level reporting and quick insights are important for every SaaS executive. With an adaptive subscription management system, a business is able to review and compare its financial performance (week to week, month to month, year to year), access monthly recurring revenue (MRR) analyses and cash-flow trends, monitor customer activity, and track lost payments and deferred revenue.

Aside from subscription metrics, there are other SaaS metrics you should understand as they might be helpful to automate your reporting. A modern subscription billing and management platform helps you by tracking all the relevant data and enables you to make better business decisions in real-time.

Finally, these platforms can also consolidate and safely manage all the data from your recurring revenue business in one place, acting as a financial system of record. This means every member of your team will always be performing their duties and making business decisions based on the most accurate, up-to-date financial information available.

4. Churn Rate Reduction

It’s a well-known fact that it costs more to acquire a new customer than to retain a current customer. Unlike manual billing methods, an automated billing platform provides ongoing customer payment and renewal notifications to recover revenue when payments fail and identify churn risk in a timely manner.

These regular, automated communications enable SaaS businesses to keep in touch with their customers, maintain active customer payment methods for successful collections, and avoid preventable customer churn.

5. Quick Pricing Changes

Product and service pricing can change for a variety of reasons, from market fluctuations to periodic sales or discounting and evolving customer demand. Growing businesses tend to modify their pricing strategies more frequently, and the process of price changing can be long and frustrating, especially if you’re dealing with multiple currencies.

Modern automated billing platforms enable you to build a new pricing catalog in one to two minutes, without breaking the backs of your finance team members. These platforms also offer the flexibility to make pricing changes at the plan and even customer level for further pricing customization.

Want to offer coupons or discounts? The catalog flexibility of a robust automated billing platform makes this simple on both a large and small scale. Discounts can be immediately applied across your entire catalog for any length of time you choose. Alternatively, your team can offer specific coupons or discounts on select plans or even customers. These capabilities create tons of opportunities for both your marketing and sales teams.

Being nimble enough to adapt to market changes and customer preference changes makes for a strong competitive advantage.

6. Accurate Revenue Recognition

Another important benefit of employing an automated billing system is it will handle your revenue recognition all on its own. Revenue recognition becomes much more complex and difficult to manage for a recurring billing business. But to remain in compliance with Generally Accepted Accounting Principles (GAAP) and the ASC 606 revenue recognition standard, businesses need to make this a priority.

In addition to compliance concerns, earned and deferred revenue are important measurements of business performance and therefore are critical metrics to report on accurately and in real time.

To learn more about revenue recognition, refer to the revenue recognition datasheet.

Examples of SaaS Billing Driving Growth

Adaptive subscription billing platforms can be a huge advantage in the SaaS business. The following of some successful SaaS billing case studies:

  • Uberflip implemented a scalable SaaS billing solution to accommodate growth.
  • CoConstruct digitally transformed its SaaS billing process with thousands in recovered revenue each month.
  • bitHeads recovers 5-10% of its monthly revenue with agile SaaS billing.

Click for more SaaS billing case studies.

Do SaaS Billing Right

Subscription billing management and automation are essential capabilities for SaaS businesses. A digital transformation to the right SaaS billing and subscription management platform will enable you to focus on growing your business and bottom line rather than struggling with spreadsheets and manual processes.

Stax Bill simplifies subscription and billing management by automating many manual accounting and financial processes and workflows. It also integrates seamlessly with some of the most popular CRM and accounting software to provide businesses with enhanced operational ability. And furthermore, it ensures the safety of your customers’ information with PCI Level 1 certification.

Our cloud-based platform gives companies the freedom to grow their businesses, the flexibility to capitalize on new product opportunities, and the agility to maintain a competitive edge.

Quick FAQs about SaaS Billing

Q: What is the purpose of subscription billing automation in SaaS businesses?

Subscription billing automation helps SaaS businesses efficiently invoice customers and manage their billing processes by reducing billing errors, revenue leakage, inefficient resource allocation, payment failures, and late collections.

Q: How does subscription billing automation contribute to time savings and resource allocation in SaaS companies?

By automating processes related to subscription activations, invoicing, renewals, payment processing, and dunning management, subscription billing automation saves time and allows SaaS businesses to redeploy resources on other strategic focus areas.

Q: How does automated dunning management help recover revenue leakage?

An efficient, automated dunning management system, which involves sending automated emails and retries for payment collection, can help SaaS businesses recover 1 to 4% of leaked revenue.

Q: What are the advantages of implementing a robust automated billing platform for pricing management?

Modern automated billing platforms enable quick creation of new pricing catalogs and flexibility in making price changes on a plan-by-plan or customer-by-customer basis. They also make it easy to offer coupons or discounts on both a large and small scale, providing more opportunities for marketing and sales teams.

Q: How does employing an automated billing system help with revenue recognition in SaaS businesses?

An automated billing system handles revenue recognition independently, which is important to remain in compliance with Generally Accepted Accounting Principles (GAAP) and the ASC 606 revenue recognition standard. This ensures accurate and real-time reporting of earned and deferred revenue as critical metrics of business performance.

Written by:

Daniella Ingrao
Daniella Ingrao
Content Marketing Lead, Stax Bill

Daniella is the former Content Marketing Lead at Stax Bill. She is a former journalist with a specialized background in the topics of business and finance. She also has nearly a decade of experience crafting and sharing stories that matter for both B2B and B2C companies. Daniella worked closely with Stax Bill’s subject matter experts to impart knowledge and best practices for competing and succeeding in both the SaaS and subscription business spaces. She is passionate about equipping businesses with the information they need to reach their full potential.