How to overcome the challenges involved in recurring billing

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Billing software

Do you find it becoming more challenging to manage your growing subscriber base?

Are you having trouble retaining your subscribers or losing revenue opportunities such as upselling?

These are all signs that your billing system has a problem.

This is not a problem that you’re alone in. SaaS companies are often faced with the complexity of recurring billing. This can lead to high churn rates and low acquisition rates that will hinder your growth.

Some common recurring billing issues companies may face and how you can overcome them:

Scalable Billing Infrastructure

Many subscription billing companies are complicit in building their own billing system or choosing one of the many solutions available in the market. Although building your own billing system may make it seem cost-effective. But, it is not a cost-effective solution in the long term due to the following reasons.

Managing Growing Customers

It will increase the complexity of your business as the adoption increases. With each additional customer, price changes, support for different payment methods, and upgrade and downgrade requests, as well as flexible billing and proration, all add up to complexity exponentially.

Time Sensitivity

SaaS businesses that are on the fast track to scaling should be able quickly to test pricing, discount coupons, or trial management. It can take several months to set up a billing system at home. While it is not as powerful as third-party recurring billing solutions span, it will be easier than with a homegrown one.

Compliance

Security is an essential aspect of operations. Compliance with PCI-DSS is essential if your billing system collects sensitive payment information and personal data. These are the reasons why it’s more cost-effective to use existing recurring billing systems rather than build your own.

RetailGraph billing solutions can simplify your recurring billing and plug revenue leaks. They also make subscription management easy with features such as:

  • customizable billing logic,
  • automated business handling,
  • grandfathering,
  • usage-based billing,
  • consolidated invoicing, and more.

The same holds if you’re deciding to go for a payment gateway rather than a billing software for two main reasons:

A growing business will soon outgrow the modest billing capabilities of a gateway.

Another fundamental advantage that a free billing software for pc has over a gateway is that it is designed to be integrated with multiple payment gateways and payment methods, which helps in; market expansion through multiple payment methods and minimizing the risk of high payment failures that come with being locked in with one payment gateway.

For more details on the product-level (and service-level) capabilities, you should look for in a recurring billing system, check out our guide on getting started with subscription billing software.

Loss of Revenue Due to Failed Payments

It’s one thing for customers to choose not to pay, but it’s much more difficult to lose revenue because they don’t want to stop paying. This is called involuntary or voluntary churn. This could be due to insufficient funds, maxed credit cards or, connectivity problems.

Involuntary churn accounts for between 20-40% of all churn. The good news is that most of it can be avoided. Whiteboard, for example, reduced involuntary and increased MRR by 35 %.

Superior dunning management can help reduce churn. When a transaction is declined, dunning refers to sending reminders and retrying payments to customers.

Here are a few methods that you can use to avoid loss of revenue due to involuntary churn:

  • Pre-dunning emails – send out an email reminding them that their card details are about to expire.
  • Backup payment methods – set up backup payment methods for each customer to immediately fall back on when the first payment method fails.
  • Dunning personas are created – groups your customers based on ticket size, geo-location and the type of payment you have in place (invoice-based payments or automated card or online wallet payments). These personas can be used to customize retry cycles.

It’s also more efficient to view the entire payment failure lifecycle as a whole and implement strategies that complement each other at every stage. Here are 23 ways to reduce voluntary churn in six payment failure lifecycle stages.

Growing Complexity of the Invoicing Process

If you’re spending weeks creating invoices and chasing payments, it’s high time you choose to automate the process efficiently.

Here are a few steps to ensure you improve your invoicing process:

Say No to Cookie-Cutter Invoices

Branding opportunities are often overlooked in invoices. You can customize invoices, and even your dunning emails. You can customize your invoices to fit your brand and customer with a robust tool, including the color scheme, address format and payment details.

Ensure Transparency

You should charge exactly what your customers pay and how much they use it. All information should be clearly and easily understood.

Consolidate Invoicing

When you have a customer with multiple subscriptions incurring multiple charges for the subscription, instead of sending one invoice every time such a change occurs, it is more efficient to send a consolidated invoice.

Here’s a sample of an invoice that consolidates charges for a customer:

Don’t Invoice for Every New Charge.

You should keep the creation of subscription-related fees separate from the actual invoice. You can, for example, add them to the unbilled fees. Businesses can use this to allow customers to change their subscriptions during the billing cycle.

  • upgrades or downgrades,
  • switching to a different plan,
  • attaching add-on in the middle of the subscription term, and
  • adding a one-time charge or any other additions or changes to the subscription.

Invoice in Advance

Customers may request an invoice to be sent before the subscription starts or renews. It is possible to plan and invoice your billing in advance to allow you to budget for shipping on time or to accommodate an unexpected increase in subscription demand.

Send Out Reminders

Finally, remind your customers a particular number of days before the invoice is due.

Insufficient Operational Rigidity

Business metrics are just as important as having the right weapons for war. There are many shiny metrics in SaaS. The most important metrics in SaaS include MRR, Churn and Recurring Profit Margins (ARR less the number cancelled subscriptions) and Growth Efficiency (the cost to obtain $1 annually in contract value).

Beyond looking at these metrics individually, a combination of various metrics can give you way more actionable insights to be able to answer critical questions like:

  • Are you making more money than you’re losing?
  • Which feature is attracting the most revenue?
  • Is your free plan attracting the right customers?
  • How long should your trial period be?
  • How are your new pricing plan changes impacting your business?
  • Is your customer churn a sales problem or a value problem?

It is difficult to answer these questions. It would be helpful to have dashboards and reports that provide actionable insight on what worked and didn’t.

And for this, you need an analytics tool that gives you a 360 degree view of your business growth on one dashboard and lets you go deeper into analyzing your metrics to identify your best revenue maximization opportunities.

Quickly diagnose your recurring revenue problems. Revenue MD allows you to pinpoint the issues that are affecting your revenue and provide solutions.

Increasing Difficulty in Recognizing Revenue

When you start a new company, revenue recognition may seem simple. As your company grows, reconciliation and recognition can become more complicated due to the time and effort required.

Here are two key points to note:

  • Full-scale automation is a necessity for large-scale reconciliation.
  • Similarly, to efficiently recognize revenue – even without including other complex factors like pro ration – you need the help of built-in reports.

Hence, it is critical for your SaaS subscription management platform to scale with your business – automate reconciliation and have built-in reports to recognize revenue.

Lack of Third-Party Integrations

In the past, billing was a separate process that was only accessible to finance professionals. In reality, billing covers many business functions such as sales, marketing and reporting, as well as customer support. Each vertical communicates with the other and requires subscription information to fulfill their respective roles. To streamline the entire subscription billing process across your business functions, you will need complete billing software. Integrations are a proven, efficient method of accomplishing this.

Inability to Global Support Expansion

Any recurring billing Software that is worth its salt must be able to accept multiple payment methods and currencies as well as different tax rules. What is the reason?

To penetrate global markets successfully, you need to overcome the challenges that come with international transactions.

You must comply with local tax regulations and accounting standards when you venture into new markets. Your billing architecture should support not only multi-currency pricing but also global payment gateways and localization.

Your payment system should be flexible. This will prevent you from growing the business that is most important to your company. A tech stack that allows you to experiment with pricing quickly is essential.

Best Practices for SaaS Billing

We have found many effective ways to overcome the common recurring billing problems. Here’s a quick recap of the best practices in SaaS billing.

Increase Reliability with Billing Automation

Reduce your response time – remove developer dependencies, handle complex recurring billing scenarios, eliminate manual errors, and accommodate unique buying cycles – with the help of automation for streamlined billing.

Enhance Visibility with Analytics

Take decisive actions with comprehensive subscription analytics – find blind spots (revenue leakages) like churn and hidden gold mines (revenue opportunities) like up sell and cross-sell avenues.

Proactively Reduce Churn

A robust subscription management platform can reduce churn and improve customer experience. This will lead to higher retention.

Drive Efficiency with Revenue Operations

To drive unhindered growth, achieve strategic alignment across all revenue-driving functions (marketing, sales, finance, operations, customer success)

For detailed information on enabling hyper-growth with revenue operations, visit our Guide to Revenue Operations for a High-Growth SaaS.

In Conclusion

Recurring billing can be complicated. Many billing errors can occur. These billing errors can be avoided and be fixed.

You can go beyond billing when you partner with a provider that is focused on your growth. A robust billing system can improve customer retention by providing excellent billing experiences and increasing ARPU with upsell options or coupons. You can keep track of your sales cycle with metrics at your fingertips.

RetailGraph ERP can help you solve your problems today and plan for tomorrow. Learn more by clicking here

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