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Aug 07, 2018“Usage and rating” is a phrase that gets thrown around a lot in the world of billing, but for folks who aren’t quite as intimately familiar with billing models and processes as we are here in the Gotransverse office (and that’s most people — why would anyone be intimately familiar with billing models and processes unless they had to be?), we know some of the jargon can get a little confusing.
So what are we talking about when we talk about usage and rating? Let’s start with some basic definitions:
Usage is simply the frequency with which a customer has used a product or service within a given period. This could include a variety of measures, including minutes, data units, individual sessions, add-on purchases, discounts, shipping fees, commissions, etc. See more examples of pricing models.
Rating is the process of converting usage data (or “normalizing” it) into invoice items with monetary values for the customer.
Together, “usage and rating” is the process of calculating how much a customer owes for a given period of time based on their interactions with the product or service during that period.
Let’s take a cell phone bill, for example. Assume your base subscription costs $50 per month and includes 10gb of data and unlimited local text and talk. If, in your last billing period, you used 12 gigs of data and made an international call that lasted 30 minutes, your cell phone provider will rate all that data and include it in your bill. So your invoice will show you something like this:
- Monthly subscription: $50
- Data overage: $20 (2gb at $10/gb)
- International calling: $35 ($5 per call plus $1 per minute)
- Total due: $105
It sounds fairly simple, and in theory, it is. But what happens when businesses with multiple revenue streams and consumption-based billing models start putting together invoices or account statements for hundreds or thousands of users on customized plans? That’s when things get complicated.
How Do Companies Handle Complex Rating?
Today, many businesses normalize usage data using DIY management systems they’ve appended to their legacy billing platforms or, even scarier, they normalize manually in excel spreadsheets. While both methods may work for small companies with low client volume and simple billing models, growing businesses will quickly outgrow either option. These old-school normalization and rating methods don’t scale for several reasons:
1. Inefficiency
The more complex and varied the usage data, the more difficult and time-consuming normalization becomes. And since time is a precious resource for any business, manual rating quickly becomes a drain on manpower resources.
Further, every change, update or addition to a spreadsheet-based rating system introduces more opportunities for human error leading to incorrect invoices and unhappy customers.
2. Lack of Real-Time Visibility
Today’s consumers want total transparency in their relationships with the companies they’re loyal to. Part of this means access to up-to-the-minute reports on their usage for the current billing cycle. Have you ever logged in to see how much cell phone data you’ve got left for the month or checked in on your toll tag account to make sure it’s still funded before a road trip?
With manual or patchwork rating systems, it’s all but impossible to provide accurate, up-to-date account statements at the drop of a hat.
3. Inflexibility
Speed and agility are two key characteristics of a successful business in today’s fast-paced landscape, and billing systems have to support quick pivots and innovations. But an old-school rating system is likely to balk at the addition of new product, service or billing model demands, and the required system updates will not only slow the time to market but they’ll redirect valuable time and resources from core growth initiatives.
The Better Option: Intelligent Billing
What these businesses really need is a billing platform designed specifically to handle high client volume and complex, variable billing models. Automated data normalization and rating streamlines the billing process and enables the flexibility to update products and services. And, most importantly, it improves the customer experience, ensuring account statements are updated in real time and invoices are clear and correct. The result? On-time revenue recognition, accelerated growth and a healthy bottom line.
At Gotransverse, we have the preeminent intelligent billing platform with a powerful, built-in rating engine designed to support complex, high-volume billing. Take a tour of our platform to see for yourself. Interested in learning more about how intelligent billing can give your business a powerful competitive advantage? Schedule your complimentary, personalized demo today.
Clare Corriveau is the Director of Marketing at Gotransverse. An award winning marketer, Clare has built her career in SaaS and demand generation. Prior to joining Gotransverse, Clare oversaw North American prospect demand generation at Blackbaud. When she’s not kicking SaaS in marketer-mode, you can find her spending time with her husband and kids, hiking with her pup Pippa and cheering on Michigan State.
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