Best practices for SaaS billing
What your business needs to know
Technology is constantly evolving. Many companies are growing because of this technological advancement, and the landscape for how many software as a service (SaaS) businesses operate is also changing. Instead of the old, more traditional SaaS billing models, businesses are shifting to more flexible, consumption-based subscription billing models. Therefore, to take advantage of this shift away from manual billing processes in your own company, you’ll need to know some of the best practices for automating SaaS billing. In this article, we’ll discuss some of the top considerations for SaaS billing to help keep your business at the forefront of technology. To start, let’s briefly describe SaaS.
What is SaaS?
The software as a service business model is a software licensing and delivery model. Essentially, companies or individuals pay a software company to license a subscription of the software they need. No longer does this software need to be installed on the customer’s computer, as SaaS businesses host the software in the cloud. Then, customers can access and use these cloud-based services in real-time, no matter where they are, even across devices. SaaS providers are responsible for many of the components of operating the system, including the hardware, software, infrastructure and app data. SaaS providers allow customers to access much-needed solutions quickly and efficiently. Now that you know the basics of SaaS let’s check out the best practices for SaaS billing.
SaaS billing best practices
These best practices will help ensure success at your SaaS company. Here are some of the top ways to make sure you’re setting your business up to succeed:
Choose a simple pricing strategy
When it comes to SaaS pricing models, there are many different options. These can include usage-based pricing, per-feature pricing, freemium pricing and tiered pricing. No matter the pricing model you choose for your SaaS company, you’ll want to make sure that how you price is clearly communicated to your customers. Setting the appropriate pricing can impact your revenue, so it’s important to consider all of the pricing options.
No matter your pricing strategy, it should be easy for your customers to connect the dots between the prices they pay to the value they receive from your product. That’s why your pricing model should be inherently tied to your value metric. If it’s difficult for customers to understand your pricing model, they may get frustrated, which can increase demands on your customer service team and ultimately lead to high customer and employee churn rates. However, if they understand how you came to price your service, they’re likely to see the value and pay for it on time. That’s good for keeping your customers and your whole team happy.
Automate your billing process
Streamlining your billing process through automation is one of the biggest keys to success in SaaS. The more streamlined your billing process is, the more likely your customers will pay invoices quickly, which means better cash flow for your business. While you can handle sending invoices and collecting payments on your own, there are subscription management systems that can automate this process even further. Depending on your software of choice, a SaaS billing software can help you simplify billing, including ways for customers to pay quickly and automated follow up messages. These software programs can make it easy for your company to offer a broad range of payment methods or even allow customers to change their billing dates to accommodate your customer’s payment preferences.
Automating your billing process can improve the customers' entire experience, from signing up to paying. And a good customer is a happy customer. But it can also have a big impact on your employees, especially those members of your team who handle finances. It can simplify their jobs and make it easier for your business to collect payments.
Test pricing with automated billing
One key to growth in your business is adjusting your pricing as your solutions become more valuable to consumers. As you grow, you may need to adjust your pricing to accommodate that business growth. Some of the most profitable SaaS companies revisit their pricing regularly because they know the value of charging what their solution is worth. To gauge interest in price changes, try raising your prices by 5%. With an automated billing system, these pricing adjustments are easy to make. They can be applied to only part of your customer base, letting you test drive your pricing increase before applying it to all of your customers.
Upgrade your billing platform
Technology moves quickly, and that includes billing software. If you haven’t updated your software in a few years, chances are there’s a better solution out there for you. Choosing the right billing platform is about finding the right fit for your business’s particular needs. Some key features to explore in a billing platform include:
- Mobile optimization: As more users are on the go and like to pay with their mobile devices, you’ll need to make sure your interface can support invoicing on smartphones.
- Better navigation: Review the interface to make sure it’s consumer friendly, as a bad design can hinder customer review and payments.
- Global currency support: If your SaaS solution is active in multiple countries, you’ll want to ensure your billing platform has support for the different currencies.
- User platform: Make sure the user experience to view their subscription data, usage and payment history is intuitive to help minimize customer support needs.
- Monitoring functions: Some billing platforms contain the ability to track user behavior. You’ll want to ensure the solution you use can help you send triggered emails and notifications to customers.
Use customer data to improve your revenue stream
One of the greatest benefits of a SaaS model is the customer data you receive. You can see trends in their usage, including the most and least popular months for the use of your product. These key insights can help your business pivot or evolve to better support your customers' needs. In fact, these insights could even inform your pricing strategy. Therefore, these key insights are incredibly valuable to your business.
You can also use these customer data points to provide reports and recommendations about how they can get the most out of your product offerings, including onboarding and other training materials. You can even offer complementary services, discounts based on their usage, or suggest add-ons or integrations that can improve their business and more. Using this data can also help your sales or account management teams know which clients need the most support or who to reach out to upsell products that can help them meet their business goals and needs.
Leverage data usage to anticipate change
Again, one of the most important pieces of data is from your customers and how they’re using your services. Therefore, you can put this data to work when adjusting your billing and pricing. With a good billing management system, you can forecast the impact any billing model changes or price increases will have on your customers' demand for your services. By using data to anticipate change, your business can make better decisions for the future.
Focus on reducing customer churn
Like anticipating change, you’ll want to reduce customer churn wherever possible. From automating payment collection to using customer data to predict unengaged customers, you want to do everything in your power for customer retention. With wavering customers, you can use this data to offer discounts or other incentives for them to renew their SaaS subscription. Your billing user interface should also connect to your billing API to give customers access to pricing pages to subscribe or resubscribe, update their credit card information and review payment history. You’ll also want to focus on correcting unnecessary mistakes on your billing documents. From misspelled words to incorrect charges, sloppy billing can turn off a customer to your service, and they may see your business as incompetent. That can cause self-inflicted customer churn. By focusing on meeting customer needs, you’ll be able to reduce churn at your business.
Proactively prevent revenue leakage
As a business owner, you never want to miss out on revenue. Therefore it’s important to monitor any potential revenue leakage at your business. One key step that you can take is to switch to automated billing. While this is a big step, it’s not the only step you can take to minimize the effects of revenue leakage. In addition to switching to automated billing, you’ll also want to enforce proper billing and communicate effectively with your customers about billing. This should be a proactive process, and communication must occur before customer churn.
One of the great things about utilizing a software solution is that much of this communication to your customers can happen without you actively managing it. Setting up automated processes that help take care of communications with customers can be invaluable to your business. You’ll want to make sure that you’re communicating to customers in the following ways:
- Reminder communications for upcoming payments
- Communications that include invoices and also help facilitate payment collection
- Alert communications when a customer’s credit card may soon expire
- Communications for overdue payments
There are a few ways to send these customer communications, and choosing the method can be up to your customer. Whether email notifications or notifications in their SaaS inbox or dashboard, the best response will come from customers whose communication preferences you meet.
Optimize automated billing timing
Another way to ensure proper billing and payment is to optimize when you send customers their automated billing. There’s an art to choosing when to send customers a new invoice and setting up recurring billing. By creating a consistent billing schedule, your customers will know when to expect their invoices and can better prepare to review and approve them. When you create consistent communication from your brand, your customers won’t be as surprised to receive more frequent emails. This can help them view these communications as reminders instead of nuisances.
As you can see, many of the best practices for SaaS billing center around automation and data. By working with the right SaaS billing solution for your business, you can focus less on the billing process and more on creating value for your customers. The right software can also help your company grow and adjust to market and customer needs to help position your SaaS business for success.
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