Difficulties of Recurring Billing Software for Sustainable Growth and Solutions
Because subscription-based billing is a volume-driven business model, revenue growth is possible if the company can expand. It is possible to maintain consistent development, retain revenue, and stop revenue leakage by partnering with the appropriate vendor to automate the revenue collection process.
By partnering with the appropriate recurring billing provider today, SaaS recurring billing firms can quickly scale-up.
The challenge of selecting the finest recurring billing pricing methods and the appropriate recurring billing software can be extremely challenging for SaaS organization that rely on subscription billing.
Six typical issues that SaaS companies face
SaaS companies are experiencing the fastest growth rates in the sector, and the necessity to scale up operations has prompted the adoption of technology that helps the company face obstacles.
The following are some typical issues that SaaS billing companies encounter:
- Various price structures – When a firm grows, it may need to adapt several pricing structures to better suit broader client needs or preferences. Companies give clients customizable plans, and a lot of their pricing techniques are hybrid and complex in nature.
- Conformity to revenue recognition standards – For subscription billing, revenue recognition should follow IFRS 15 and ASC 606 respectively. According to the new legislation, revenue recognition must occur when an obligation (for a service or a product) has been fulfilled. To comply with the new revenue recognition rules, SaaS businesses must modify and update their pricing models, forecasting procedures, and contract structures.
- Data management – The amount of data grows significantly as the business expands. Also, a lot of enterprises cross international borders, and managing taxes and many currencies is necessary. To maintain effective business processes and stop revenue leaks, the data flow between the accounting and sales divisions must be frictionless.
- Sales tax compliance – The capacity to calculate and pay sales tax in accordance with legislative standards presents another difficulty for SaaS enterprises. Sales tax must be paid in accordance with the rate that the State from which the transaction originated deemed appropriate for that transaction. This might be quite difficult for a company that is expanding internationally.
- Control Churn Rate – As SaaS businesses grow, the churn rate has also significantly risen; for SaaS companies, the typical churn rate ranges from 8.5% to 2.9%. Increasing customer retention is the biggest obstacle to long-term, sustained growth.
- Growing Current Applications – While most SaaS companies currently have an ERP or CRM solution, many of them are only intended to offer generalized billing support. Applications that develop complicated pricing and invoicing methods for subscription businesses are necessary for growing businesses.
How to Get Over These Obstacles
For SaaS businesses, recurring billing software facilitates efficient management and streamlines the billing process. To ensure smooth operation with no interference from manual labor, the operational process flow of subscription management may be automated. The majority of SaaS subscription billing systems are often set up to handle trial usage, trial to paid upgrades, pricing model changes, downgrades, or cancellations, etc.
Software for recurring billing has developed to address the main problems faced by SaaS companies. The following are the main advantages that SaaS organizations gain from using the finest recurring billing software:
- More certainty of revenue Software for subscription-based billing provides ongoing monitoring of impending payments. To guarantee notifications and reminders are issued on time, the customer communication is automated. They also possess particular financial reporting capabilities, such as the capacity to estimate future revenue. Making strategic decisions and lowering the churn rate are made easier with the use of metrics like average recurring revenue (ARR) and marginal recurring revenue (MRR).
- Adoption of new pricing strategies is simple – An advanced recurring billing system will make this simple without requiring IT staff, whether it’s adding fees for overages, offering annual plans, allowing mid-term prorating, or allowing clients to upgrade/downgrade plans.
- Integration with current business applications – Recurring billing software easily interfaces with current CRM, ERP, accounting systems, and other business applications. The solutions from BluSynergy, for instance, allow for thorough connection with Salesforce CRM, SAP, or QuickBooks, and they have sophisticated APIs for interacting with in-house systems as well.
- Advanced analytics – Connectivity with other enterprise applications enables the building of strong dashboards that can spot areas of revenue leakage or mismanagement and take corrective action. Work-flow management that is automated should be adaptable and automate all routine tasks, with exceptions requiring human intervention. Most of the billing software has auto-triggers that cause the subsequent set of operations to be completed without the need for human participation, allowing for hands-off operation of everything from invoice generation to dunning emails to payment retries.
- Compliance with US GAAP’s revenue recognition standards – Compliance with US GAAP’s revenue recognition standards is a major advantage. DSO (Days Sales Outstanding) is reduced by effective dunning management, which lowers revenue leakage. Without having to contact the customer, billing programs with auto-updater automatically retrieve replacements for expired credit cards from Visa, Mastercard, Amex, etc. They maintain contact to handle the whole life cycle, from the creation of invoices to the payment of bills. Customer retention and client lifetime value are improved by methodical and relevant communication with customers through automated notifications and follow-ups.
- Versatile payment options — Wallets, ACH transfers, digital cards, eChecks, etc. are just a few of the models that can be used to make payments. Your consumers will appreciate the ease of using a customer self-service portal to make payments whenever it’s most convenient for them.
- The ability to design a compensation model that appeals to internal sales people as well as resellers, etc., is crucial given the variety of plans and recurring payments. With a recurring billing model, advanced billing solutions allow commission management.
- Enhanced compliance with sales taxes and accounting – Improved accounting procedures are made possible by the increased transparency and the ability to interact with other apps. For instance, connection with sales tax service providers (like Avalara) enables the company to establish a correct rate for each transaction, validates the location of the transaction’s origin and adherence, creates tax forms, and reports, and assures compliance.
- Improved transparency and security – The PCI/DSS (Payment Card Industry/Data Security Standard) is complied with by using encrypted storage and credit card tokenization.
How do you pick the best match for your SaaS billing company?
There may be a wide variety of applications for recurring billing in the market, thus it’s critical to assess the best processor for recurring billers.
The following advice can be used to find the best fit:
- The program should smoothly interface with your current apps. Integration with existing enterprise software. This gives you the ability to automate workflows and minimize manual labor and errors. As a result, the investment will be more worthwhile because human labor costs will be much decreased.
- Statutory compliance – Recurrent billing programs should adhere to all applicable accounting rules and laws.
- Being adaptable to meet business needs is the most important prerequisite for any expanding firm. The use of recurring billing software should help the company grow. They ought to offer plenty of room for managing different subscriptions and payments.
- Align with long-term business objectives – While accommodating current business requirements, the application should also be in line with the company’s long-term ambitions.
It is clear why using the proper subscription billing software is beneficial for SaaS billing. It is essential for the company to evaluate how well the product fits in order to make sure that it is in line with the objectives of the organization. This might support long-term, sustained business growth and improved client acquisition and retention.
Work 365 offers solution on Azure CSP Subscription and Microsoft csp tier 1 requirements for Microsoft partners to streamline recurring revenue.