4 Things Every CFO & CIO Must Know About Usage-Based Billing

There's a lot for CFOs and CIOs to consider when examining the effectiveness of an organization's usage-based billing. The potential advantages are significant on both the customer and the business side. Specifically, the heightened customer base and lifetime value, improved product, service development capabilities, increased revenue, etc. However, when implementing a new usage-based billing system, several questions come to mind, making the challenge seem quite daunting. Which models are best for your organization? What kind of vendor do I need to look for? How can I be sure these new models drive growth?

Yes, it can be overwhelming, but it doesn't have to be. To get started, here are four things every leader needs to keep in mind as they search for the right usage-based billing partner.

Plan for the Future

When evaluating potential billing solutions, remember that simply optimizing existing processes isn't enough. It’s tempting to focus on your current needs, but if you want a solution for the long term, you have to consider what your customers will want—and what the market will demand—in the coming years. The goal is to ensure the solution you’re looking at will enable rather than hinder your growth.

Are you planning to…

• Increase your customer volume?
• Move into a new geographical market?
• Adopt more complex billing models?
• Expand your offerings?

If so, a billing solution that meets your present-day needs won't be enough. You're likely to outgrow it in a year, at which point you'll find yourself limping along with an ineffective platform, or you'll have to start the search and implementation process over from scratch. So instead, search for a solution that meets your needs now and will grow and evolve with your organization.

Look for Agility

As you plan for the future, it’s not just the intended roadmap you have to consider — it's also all the unexpected changes that will hit the market and demand quick pivots. If there's one thing 2020 taught us, the most resilient businesses are often the most agile ones. When "business as usual" is no longer possible, the ones that survive (or even thrive) are the ones that are prepared to turn on a dime.

So, consider the agility of each platform you're evaluating. Will it enable you to experiment with new pricing, new models, and different bundles as customer needs and desires shift? Will it allow you to quickly bring new offerings to market in the face of disruption?

Many billing platforms — even those that purport to handle complex, usage-based billing models effectively — require significant time, effort, and expertise to implement even the most minor changes. In fact, MGI research found that only 29 percent of companies can implement new services and pricing plans in less than four weeks. On the other hand, a truly agile platform is easily adaptable and can handle both scale (up or down) and drastic change without batting an eye.

Not all Vendors Are the Same

As you're vetting vendors, you're likely to come across many companies who say they can handle complex monetization needs, including usage-based models, when all they can really manage are the basics. We went into detail on the key strategies to identify whether a vendor you're vetting can support your usage-based billing needs in this blog post, but here are the key questions to ask:

• What types of usage models do they support? If a potential vendor says they’re savvy with usage-based billing, but they can’t give you details on any of these, that’s a red flag.
• How robust is their mediation engine? One of the biggest challenges of usage-based models is that usage data comes in many formats that must be normalized, aggregated, and standardized before it can be converted into charges on an invoice. The key to efficient, accurate data conversion is a powerful mediation engine that automates the process.
• What revenue recognition capabilities does the platform offer? Look for a rules-based revenue recognition engine that will ensure standardization and traceability of all revenue entries and set you up for success during audits.
• Is the vendor looking for one-off sales or true partnerships? Finally, because of usage-based billing models' complex and evolving nature, a quality provider is both a vendor and a partner, working hand-in-hand with businesses to implement and configure the new system and offering ongoing, expert support.

Customer Experience Is Key

Believe it or not, billing is a vital part of the customer experience, and some vendors have a better handle on those customer-facing aspects than others. Take invoices, for example. Usage- and consumption-based billing models can often be challenging to explain to customers. Hence, it's essential to be sure your chosen platform can produce clear and transparent invoices to ensure customers are confident and comfortable with what they're paying for. Receiving and paying an invoice may seem like a purely transactional experience. Still, as the last impression a brand leaves with a customer, it has the power to turn a one-time buyer loyal evangelist (or vice-versa).

And that’s just one piece of the customer experience puzzle (also known in billing as the quote-to-cash process). From providing the initial quote to ensuring the contract includes correct terms and pricing, keeping usage data visible and up-to-date, and accepting payment, every step impacts a customer's experience with your business. The correct billing partner can ensure that experience is frictionless from beginning to end.

Keeping these four things in mind as you start down the usage-based billing path will help you find a billing vendor that can help you achieve your most complex monetization needs — both now and in the future. To learn more about whether Gotransverse could be the right partner for your organization. We invite you to tour our platform today. If you like what you see, request a demo to speak with one of our experts.