The phrase ‘digital transformation’ has been around since the late ’90s, but it was only in 2013 that the concept began to take on the concrete meaning and importance it has today.
Across industries and across the world, businesses have been digitally transforming their processes and technology systems for decades, making them more modern and more efficient in an effort to stay ahead of the curve—and the competition.
And it’s a strategy that’s having a big impact—digital transformation is expected to add $100 trillion to the world economy by 2025.
Interestingly, the importance of maturing back-office functions like billing and collecting on accounts receivables is often an underemphasized or completely ignored facet of the digital transformation journey.
For subscription-based businesses specifically, which bill customers with recurring invoices, optimizing the billing process is exponentially more important than it may be for other types of businesses.
The reality is no matter how much your business makes in sales, if you aren’t invoicing and collecting payments on those sales efficiently, you’ll struggle to get paid and maintain a healthy cash flow. And if you’re doing this process manually or using a patchwork of software solutions, you probably aren’t as efficient in this department as you should be.
Enter: subscription billing and invoicing software.
What is billing software?
The definition from Techopedia is: “billing software refers to programs that handle the tracking of billable products and services delivered to a customer or set of customers”.
Billing software can also house your business’s product catalog, manage your customer’s subscription and billing data, track your important revenue metrics, and of course, facilitate easy and automated recurring customer invoicing and collections.
But all of these high-level definitions don’t do it justice.
You know how you’re not just your job title? You might also be a spouse, a parent, a friend, a sibling, and so much more.
Well, modern billing and invoicing software for subscription businesses is kind of similar.
Sure, it facilitates the end-to-end billing process for your business. But when you break it down, it’s much more than just that.
Okay, this comparison might be just a liiiiittle more emotional than necessary, but it gets the point across, right?
Here are nine more things a billing management software is for your subscription business.
1. A recurring billing optimizer.
Any repetitive process is less efficient when done manually—like when you have to send invoices again, and again, and again…
You get the point.
Lots of subscription-based businesses handle recurring billing and invoicing this way during their start-up days. When you’re dealing with only a handful of customers, the process might only take a couple of hours each week, which is probably manageable.
But once your business begins to scale—and at break-neck speed, if you’re lucky—the amount of time and effort required to get through your recurring billing scales right along with it. Manually sending invoices to ten customers every month might not be a big deal; but a hundred? A thousand?
You can imagine how quickly this becomes unwieldly for your poor finance team.
Subscription billing software takes over this process and optimizes it by invoicing customers automatically at any interval you set. The best invoicing software solutions cut down your time spent billing by 40 to 80 hours a month.
2. A go-to-market competitive advantage.
Every business knows having the ability to be quick to market with a new product or feature is an advantage against the competition.
And when you bring something to the market, you need to be able to add it to your business’s catalog of offerings. You might also need to run some A/B testing before you settle on a pricing strategy.
If you’re working with a homegrown billing system or an older legacy software, you probably don’t have the flexibility to quickly and easily add and price new offerings. You might even have to pull in a developer to help make those changes.
Not only is this a headache for everyone involved, but it can put a drag on your go-to-market speed.
Modern billing software eliminates this pain point. New products can be added in just a few of clicks, so it won’t slow you down in getting those offerings out there.
And after the launch, if you need to make any pricing updates or create special offers such as product bundles or a sale, it’s just as simple.
3. A growth enabler.
An inflexible catalog doesn’t only slow down your speed to market with new products offerings. If it prevents you from easily making updates to existing products, it’s also holding your business back from growth.
What happens when your marketing team wants to get creative with a promotion or a sales rep needs to offer a discount to close a potentially lucrative deal? What if a particularly important customer needs to customize one of your plans to fit a niche need?
With a manual-heavy software solution that doesn’t easily facilitate deviations from your standard offerings:
- the answer is a flat-out ‘no’, or
- some sort of a workaround is required—often this is a duplicate product being created at a new price point, which can clog up your catalog and mess with your reporting.
To successfully scale your business through acquiring new customers, these on-the-fly pricing changes need to happen easily. As an enabler of growth, automated billing and invoicing software facilitates just that with coupons and discounts.
This is one of the benefits HR software solution JustLogin experienced with its billing digital transformation. With the amount of time it saved in the actual execution of billing plus the catalog flexibility the billing software afforded, the business was able to grow by 3X with the same number of employees.
4. A churn preventer.
Expired credit cards are the leading cause of involuntary churn. You’ve probably seen it before—a customer’s payment fails, and you just…never hear from them again.
If you’re working manually, it might feel like there’s nothing that can be done about it. Or maybe it feels like there’s no time to do anything about it.
Modern billing software comes equipped with a few different tools to help you prevent involuntary churn with minimal effort from your team.
- Automated payment method retries: Up to 75% of revenue lost from failed credit card payments can be recovered simply by retrying the card. At Stax Bill, we helped one customer recover over $364,000 of failed payments in less than a year by implementing an automated retry schedule.
- Credit card auto-updating: Sometimes, the issue that leads a customer to involuntarily churn out is as simple as an expired payment card. The major credit card brands work directly with merchants to keep any on-file credit cards up to date. Most billing systems offer this feature as standard to reduce the number of failed payments you experience and to make sure you get paid.
- Accounts receivables aging report: If the methods above don’t work and some invoices hit ‘overdue’ status, they need to be kept track of. A robust accounts receivable aging report provides a visual of how much money is outstanding and allows your team to add notes on each delinquent customer so everyone knows which actions have been taken and when to follow up.
5. A recurring revenue growth booster.
We’ve already spoken about some of the drawbacks of handling recurring invoicing and billing manually. But there’s one we haven’t touched on yet, and that’s the effect of human limitation and human error.
This can unfortunately lead to billing mistakes that can cause revenue leakage. Businesses can lose up to 5% or more of their earnings on mismanaged delinquent payments alone.
Some of the most common avenues of revenue leakage stem from human imperfections, whether it’s error or simple time limitation, and include the following.
- Pricing errors: Performing pricing updates manually, unsurprisingly, leaves room for mistakes. All it takes is one typo and you could end up undercharging your customers for years without realizing it. Alternately, you could overcharge and end up with angry customers. Automated billing software prevents this by making pricing updates a one-and-done event across your customer base—when you update the pricing in your catalog, it automatically reflects in all applicable customer invoices. And any unique custom pricing can be handled as needed.
- Poor dunning management: It’s a big job to manually and individually contact customers that have missed and overdue credit card payments. With a modern subscription billing software solution, if those collection reattempts fail, you can set up automatic email notifications prompting your customer to take action and complete the payment. Successful credit card processing means you get paid.
- Lack of proration: If a customer signs up partway through a billing period, manually prorating their first invoice can be so time-consuming that many businesses end up simply giving away the product or service for free for that first billing period. Billing and invoicing software automatically calculates proration for you and applies it to the invoice.
Construction software provider CoConstruct was previously using an ecommerce feature in its CRM to handle its recurring invoicing and billing. However, this solution left the company struggling with an inflexible catalog, difficulties with proper taxation, and a lack of collections assurance.
When it modernized its process and switched to a more adaptive subscription billing solution, the business was able to put $2,000 a month back on its bottom line simply by plugging those revenue leaks.
6. A reporting superpower.
According to a PwC study, businesses that are driven by data tend to make 3X better decisions.
Wouldn’t it be nice if your business had the tools available to improve your decision-making quality like that?
You might be surprised at how much cloud-based data billing and invoice software records just from your business’s billing activities and distills it into easy-to-read, actionable formats. And this info is valuable to so many departments across your entire organization.
- Marketing can gain insights on your ideal customer profile (ICP) by digging into the data around your top customers’ industries and business sizes. They can also review your business’s sales, revenue, and MRR by product and plan to help identify top-sellers.
- Customer support can review the historical data of a customer that calls in so they can minimize back and forth and focus on effective problem solving.
- The executive team can use it to gain a real-time line of sight into the growth and overall health of the business. They can have summaries on all the important metrics like churn, customer growth, revenue, and MRR emailed to them automatically as often as needed.
7. A customer experience enhancer.
Imagine you need to make a minor update to a subscription service you’re signed up for. Maybe your billing address has changed, or you want to upgrade or downgrade your plan.
Would you prefer to sit on hold for half an hour before getting a service rep to make that change for you? Or would you rather jump into your online portal and update it yourself?
I’m going to go ahead and guess you opted for the latter.
And you wouldn’t be alone—73% of consumers would rather be able to solve product and service issues on their own, without needing to speak with customer service.
So when customers need to make similar changes to their subscriptions with your business, you can bet their feelings are similar.
Most automated subscription billing software solutions offer features like hosted registration pages and self-service portals. While a self-service portal enables existing customers to easily make updates to their information, registration pages make it easy for new customers to sign up on their own, eliminating a barrier to customer acquisition.
Empowering your customers to become more self-sufficient means they only need to get in touch with support if they run into a big issue. And that’s a big plus for efficiency in your customer support department.
8. A subscription accounting advantage.
It’s no secret: accounting for a subscription business can get pretty complicated. You’re dealing with complex regulations around revenue recognition.
Manually staying on top of this when dealing with hundreds or even thousands of monthly recurring transactions can be an insurmountable task from a to-do list perspective—not to mention the fact that there can be consequences to messing up.
At one point or another, your business could be audited. And if your accounting team doesn’t have the ability to back up the numbers that are being reported, you might end up facing fines or other penalties from the IRS.
In fact, 66% of businesses are at risk due to the mismanagement of accounting paperwork.
Adaptive subscription billing software tracks everything, meaning no more sweating if the IRS comes knocking on your door. If your auditor wants to see how one specific invoice from one client in one month contributed to your overall revenue, you can access that information.
As a bonus, billing and invoicing software integrates with your accounting software to automatically feed data into your month-end closing reports.
The bottom line when it comes to billing software as an accounting advantage?
Accurate numbers all around with much less stress.
9. A data security enhancer.
It’s all too common to stumble across news stories about big companies experiencing cyberattacks and data breaches.
If your business is keeping customer information in Excel spreadsheets or an out-of-date legacy software, I’ve got bad news for you: your organization is pretty vulnerable if it ever does experience a cyberattack.
Modern billing software, on the other hand, is designed to securely house all your sensitive customer data in a way that makes it more difficult for a hacker to obtain. It has measures like:
- data encryption, so not even your internal staff is able to see or export credit card numbers,
- PCI Level 1 certification, showing that it’s following the security best practices set out by the Payment Card Industry, and
- strong password requirements for users.
No business can be completely impenetrable, but the additional security offered by a billing software?
It makes a big difference.
Billing software is a must-have for subscription business digital transformation
As your business’s digital transformation continues to evolve and adapt, it’s easy to overlook the importance of billing software if you’re looking only at a high level or technical definition. After all, Excel could fall under that definition.
But once you look a bit deeper at what today’s modern automated subscription billing software really is, it’s impossible to deny the ways it makes not only your accounts receivable but also your whole business more efficient.
The larger conversations on digital transformation tend to underemphasize this concept, but I’ll emphasize it here: if you’re running a subscription business and aren’t making use of an adaptive billing software solution, you haven’t yet digitally transformed.