The Trinity of Billing Perfection: Complexity, Agility, Scalability

Businesses in all industries have discovered the value of adopting subscription and usage-based business models. Subscription billing promotes a more stable cash flow, gives customers more perceived value for their money, and can reduce churn and increase customer loyalty. Developing a billing strategy to deliver recurring revenue is complicated. It requires complex business rules and accurate consumption data to generate accurate invoices. It also requires automated billing workflows that can scale to accommodate the growing business. And it requires agility to accommodate new products and new pricing to address changing market conditions.

Your billing platform must be able to handle complex, agile billing at the right volume to take full advantage of the subscription economy.

The challenge for B2B and B2C companies is finding the right billing platform for their needs.

Small, medium-sized, and enterprise operations have different billing requirements. Some will have extremely complex billing requirements depending on their business model and rules. Others will need more flexible, scalable billing solutions.

When shopping for a subscription- or consumption-based billing system, it pays to evaluate the risks and rewards of choosing a system with the right features and capabilities that can grow with your business needs.

The Risk of Buying the Wrong Billing System

Choosing the wrong billing system can be disastrous for any organization. Smaller companies tend to choose less expensive billing solutions that can’t adapt to their needs. Mid-size companies may choose billing platforms with limited capacity and can’t handle increases in billing volume. Often companies will try a system and continue to re-evaluate platforms, looking for the right one. Large organizations tend to be trapped using enterprise-grade platforms that can’t adapt to changing business needs. These big firms spend millions of dollars customizing billing platforms to meet their needs,

Partial or failed billing implementations cost businesses millions of dollars. Revenue leakage from inaccurate or incomplete billing is an ongoing problem. Invoices are also a consistent touchpoint with customers, so ensuring accurate and timely bills is essential to customer satisfaction. Precise and predictable invoices reduce customer churn.

An independent study by Accuity estimates that failed payments resulted in $118.5 billion in losses in 2020. The same study reveals that 60% of organizations report losing customers due to failed payments. More than one-third of companies surveyed also said they manually validate billing and payments, leading to billing errors.

To reduce revenue leakage, minimize customer churn, and maximize billing accuracy, organizations need to choose a billing solution with the versatility and scalability to meet their needs. Choosing the ideal billing solution requires assessing three variables:

1. Billing transaction complexity
2. Adaptability and agility of the billing system.
3. Volume of invoices

The Benefits of Complex Billing

A complex billing platform must power rapid business growth, promote flexibility, and delight customers. The foundation of complex billing is the system’s ability to normalize consumption and usage data and convert units consumed into dollars billed. Whether the billing model is to invoice at the end of the month, offer prepaid tiers and tapers, time-based billing, or any other subscription model, the amount billed is based on consumption.

Invoice complexity includes being able to accommodate a flexible product catalog, including a variety of billing configurations. It also should include automated product recommendations and pricing variations with tiers, discounts, and variables for complex orders.

There are various considerations when assessing complex billing platforms:

• Invoice complexity – Review the available formats for invoice delivery, e.g., paper, digital, EDI, etc. What is the level of detail available, including suppressed information used for tracking and analytics? Ask about rules dictated by attributes such as region, product type, customer, invoice amount, and other factors. Also, consider internationalization, including currency conversion, local taxes, languages, etc.

• Payment complexity – The billing system should accommodate various payment methods, including credit cards, ACH and bank transfers, purchase orders, e-wallets, etc. Consider whether the system should handle pay-in as well as payout, accounts receivable, and general ledger support.

• Product complexity – Based on the nature of your offering, can the billing system accommodate different models, special features, special offers, interdependent components, support options, value-added features, etc.?

• Pricing complexity – One of the advantages of subscription and usage-based pricing is the opportunity to offer tiers and bundles. The billing platform must support features such as business rules, multi-tier discounts, and the ability to mix and match subscription, volume, and usage fees. Pricing is an area where you can experiment to increase your competitive advantage, so the billing platform should be highly configurable and easy to change.

• Billing attributes – What specific billing attributes need to be considered, such as metered pricing, volume purchasing and discounts, pre-paid, peak consumption times, etc.?

• Regulatory compliance – Whatever invoice platform you choose should be able to accommodate sales taxes, privacy regulations, and security mandates such as PCI and GDPR.

• Channel complexity – Pricing and billing should be extensible through channel partners, including accommodations for partnership agreements, commissions, fees, discounts, etc.

The Need for Billing Agility

Customers’ needs and budgets change, so business models need to change as well. The COVID-19 pandemic changed all the business rules overnight, and companies found themselves scrambling for survival, let alone trying to develop growth strategies. As companies adapt to changing market conditions, their billing systems must keep pace with new demands.

As more companies adopt subscription and usage-based pricing, they find themselves hampered by legacy billing systems. Consumers are anxious to adopt subscription pricing for everything from streaming entertainment to razor blades. Legacy ERP systems and accounting software can handle simple billing and revenue recognition. When billing becomes too complex, these systems start to fail. For example, companies tend to create new SKUs for every new bundle or pricing variation without the ability to add new products and services. Soon the number of SKUs is out of control.

Agile billing allows organizations to accommodate changing product and pricing demands quickly. Agile billing also readily integrates with other business systems and workflows to make the end-to-end operation more efficient.

Automation is part of agile billing. Business leaders should be able to make strategic pricing and billing decisions using automated tools so they don’t have to rely on IT for modifications. Part of being agile is being able to make changes on demand and being able to use the system to test new business and pricing models.

Three components demonstrate billing agility:

• Product agility – Can the billing platform respond to rapid technology changes? Can billing deal with changes to user experience, mobile billing, quick and easy upgrades, and protection from unexpected costs? Take a look at the frequency of new product and feature releases, the number of customers using the latest product, the scope of the product catalog, the need for pricing customization, integration tools, etc.

• Business agility – Can the billing platform address changing factors that impact the business? For example, can the system abstract business models and business rules? Can it handle tiered pricing and discounts? What about the ability to mix and match subscription, volume, and usage pricing? Billing needs to drive business, so the billing system UI should be accessible to business decision-makers, making it easy to make changes and perform what-if scenarios without IT assistance.

• IT agility – Ideally, you want to enable subject-matter experts to make changes to billing, but IT will still need to handle installation, integration, and customization. How difficult is the platform to install and maintain? Can the IT department handle upgrades, testing, monitoring, and maintenance? What about new products or pricing rollouts?

Volume Billing Sets the Stage for Business Growth

For small businesses, the emphasis is typically on making a lower investment to support rapid deployment without extensive IT support. Medium-sized or mid-market customers want greater agility with out-of-the-box support for ERP, financial planning, and analysis.

As you move into higher billing volumes, businesses start looking for support for growing billing complexity combined with increased volumes. Billing systems need to deliver "quick time" rather than real-time processing. At hyper-scale, companies want agility, complexity, unlimited volume, and real-time (or near real-time) processing.

Choose a billing platform your company can grow with the organization. Adopting a software-as-a-service (SaaS) solution will give you a short ramp-up time and should be readily scalable. Ensure the SaaS platform has sufficient billing capacity and the features you need for billing complexity.

There is no one-size-fits-all approach to agile billing. Subscription and usage-based businesses have different needs at different scales, so it pays to take the time to assess your specific billing requirements and shop for the best billing platform. Choosing the wrong solution can be extremely costly, not only in terms of retooling and trying to scale but also because of lost customers and revenue leakage.

Since there is no one approach to subscription billing, don’t assume the best market seller has the best solution. Match the billing solution to your business, including the degree of complexity, agility, and volume that is right for your business today and that allows your operation to grow in the future.

To learn more, we invite you to take a virtual tour of our platform today. Then, when you're ready, request a complimentary demo to talk with one of our experts about whether Gotransverse is the right billing partner for your organization.