Running a software as a service (SaaS) company is a unique challenge. Because the business model is unique, so is the billing model. This makes selecting a billing solution even more consequential for SaaS companies than for many other kinds of technology providers. There are different requirements and business considerations that must be addressed, making their decision on a billing solution more difficult.
Small startups to Fortune 50 behemoths have made subscriptions a key part of their strategy. Now, some software solutions may elect to use a single-payment option, but by and large, subscriptions are the favored option. Be it annually, quarterly or monthly, growing the business through customer acquisition and reducing churn are high on the priority list.
Unlike more traditional payment methods, subscription SaaS products have more touch points with their customers. The regular payment alone is a new and unique opportunity for interaction. This makes the invoicing process not just about accounts receivable, but also relationship management
Here are five key considerations SaaS companies need to take into account when procuring a billing solution:
SaaS billing must be flexible
The billing solution must be meet several needs for several audiences.
There needs to be flexibility in pricing as recurring revenue can take on many forms. The billing period could be a few days, a week, a month or more. There could be one-time, recurring or usage-based options. There could be free trials, short-term discounts or unique promotions. It should be able to accept any currency and be able to operate in any country.
Not all customers should be treated the same
The billing platform should also be able to treat subsets of customers differently. SaaS companies will routinely use free versions with reduced features to entice users to become premium subscribers after using the product. Your billing platform must be flexible enough to handle multiple customer types, i.e. free, mid-tier and premium. From there, they will be treated differently.
Free users will be encouraged to be paid users and may receive regular messaging pushing them to do so. Mid-tier users may be shown the features they’re missing with premium. Premium subscribers will receive the retention treatment, as well as thanks for being the most valuable customer.
Churn is challenging
Of course, any subscription business comes with churn. It’s the nature of the business. An invoicing platform must be able to handle frequent changes and easily implement autopay. Those changes must be handled frequently and accurately. The failure to stop charging a customer after they’ve requested to downgrade or cancel a subscription makes it far more unlikely that they’ll ever be a customer again.
On the other side, a platform that can reduce involuntary churn becomes a revenue generator and directly impacts the bottom line. This should be a major consideration.
The billing relationship is part of the customer relationship
With more frequent customer interactions comes the need for integration with your customer relationship management (CRM) platform. As discussed above, there’s a good chance that a SaaS provider has different customer types. A CRM is the best way to manage these customer relationships, such as unique messaging for each customer at each part of the product journey.
What other considerations are there?
Having so much customer interaction means a significant amount of customer data, which can be used to shape your acquisition, upselling and retention strategies. So, robust reporting functionality is a requirement.
Your billing platform should be able to do a deep dive into your data and determine what’s working and what isn’t. How effective are your communications? Does changing the billing date impact retention rates? A good analysis of current and former customer can answer many questions, some of which you may not have thought of yet.
SaaS providers differ from many traditional business models and have unique concerns that a billing software must assuage. Ensuring a platform remains flexible enough to handle a multitude of functions can make the business run smoother and make gaining and keeping customers easier.