When it comes to modern billing processes and platforms, there’s a lot of lingo floating around. With so much specific terminology, it can be difficult to know what to look for or ask about. But the billing experience, from beginning to end, is critical to ensure timely cashflow, foster customer loyalty, and ensure regulatory compliance — and that’s just for starters. That means understanding the terminology is an important first step for businesses looking to enhance their billing process to meet today’s market demands.

To help, we’ve put together a glossary of key billing terms leaders need to know.

Agile Billing

Let’s get started with a big one. What is agile billing? In short, it’s a cloud-based billing solution that’s flexible enough to meet users’ real-time needs. While traditional billing platforms tend to get stuck when volumes increase, markets expand or billing models change, agile billing provides agility, speed, and frictionless freedom to businesses and their clients. These flexible, native cloud billing systems are designed to support sophisticated billing models, provide smooth customer experiences, and integrate seamlessly with existing solutions.

Quote to Cash

“Quote to cash” refers to the entire billing process — from the moment the sales team provides a quote for the product or service a customer is interested in to the moment the revenue from the sale is recognized in the company ledgers. We tend to think about billing strictly as the moment when the money changes hands, but it’s a much bigger process than that, and every touchpoint in the quote-to-cash process is critical for keeping data straight, keeping customers happy and maximizing revenue. But there are a lot of cooks in the kitchen, and without the right systems in place, things could get messy. Learn more about the quote-to-cash process here.

Simple Subscription

An upgrade from one-off transactions, in which a customer purchases an item or a service one time and then (usually) disappears, simple subscription billing models are an initial way for businesses to develop long-term relationships with customers. The model first took off in the software industry where, rather than selling programs to customers, companies began essentially renting them out, allowing customers to buy subscriptions to license the product for a certain amount of time. The subscription is cheaper than the one-time purchase, lowering the barrier to entry, but the regular renewals lead to long-term customer relationships and more revenue in the long run. Now, subscriptions are ubiquitous across B2B and B2C industries — from software to pet supplies to cosmetics to clothes.

Usage-Based Models

Also known as consumption-based models, these offerings take the simple subscription to the next level by adjusting the price based on how much of the offering is utilized. Typically usage-based models are used in conjunction with basic subscription models, which means customers pay a recurring subscription fee for basic services (or products) and add on what they need, when they need it. For customers, this provides transparency into what they’re paying for versus what they’re getting, allows them to buy based on their actual needs and lowers the barrier of entry even further for untested products and services.

And it’s equally advantageous for businesses, allowing them to track product or service usage data and update offerings accordingly to stay on top of the market. It also helps drive revenue by pairing the predictability of the simple subscription with add-on revenue from additional products, services and features.

Of course, usage-based billing includes a variety of different models and methods, with a vocabulary all their own. You can dive deeper in our free infographic, but here’s a quick primer to get you started.

  1. Allowances: The customer pays a recurring fee that covers up to a certain amount of product or services, and the fee is the same whether the customer uses the allowance or not. Think of it like a retainer for your business’ products and services.
  2. Tiers: Think of tiered pricing as bulk discounts. The more a customer buys, the lower the cost per unit.
  3. Tapers: Tapers are similar to tiers, but think of them more like tax brackets than bulk discounts. The tapered pricing only applies to the units purchased within each quantity threshold, not every unit.
  4. Multidimensional: This model takes a variety of conditions or attributes into account, so customers will see a variety of charges. Uber and Lyft receipts are a great everyday example: you’ll see variable charges for time, miles, and demand along with flat fees for things like “safety.”
  5. Sharing: Sharing models allow multiple parties to draw from the same pool of resources. Costs can be allocated to each user based on how much of the pool they consumed, or companies can charge a one-time fee (like an allowance) that each user can draw from as needed so long as the total usage doesn’t exceed the cap.
  6. Unit of Measure Based: Unit of Measure (UOM) based billing charges each event at the rate that corresponds with the UOM (for example time) the service was consumed or purchased. Think about hotel rooms or plane tickets, whose prices fluctuate daily.
  7. Stored Value: Under a stored value or prepaid model, customers pay upfront to “load” their accounts like they would load a subway pass, and they draw down from the loaded value as they consume products and services.
  8. Threshold Notification: These are preset alerts that let customers know when they’ve reached or exceeded a percentage of their allowance or stored value, helping users stay on top of their budgets.
  9. Pass-Through: Pass-through pricing allows businesses to take in a pre-rated event and apply it to customers’ allowances without changing the charge of the event.

Mediation and Rating

Finally, mediation and rating are the processes by which usage events are converted from raw data — recorded based on all these different billing models — into the charges to populate an easy-to-read, easy-to-pay invoice. While these processes are simple enough for small businesses with few users and basic models, they can become complex and unwieldy as a business’ client base and billing needs grow, leading to errors, delays, and revenue leakage.

Learn more about mediation and rating in our recent blog post.

There’s a lot to know about agile billing and all it entails, but these terms should get you started asking the right questions. When your organization is ready to learn more about upgrading to an agile billing platform that powers growth, we’d love to talk about how Gotransverse can help. We invite you to take a tour of the Gotransverse platform and its capabilities, then schedule your complimentary, personalized demo to find out whether Gotransverse is the right choice for your business.