Top 5 billing challenges for SaaS vendors
Software as a Service (SaaS) is a software licensing model whereby a company hosts its application in the cloud and customers make use of it via the internet from a web browser.
A SaaS offering doesn’t generally provide access via a one-time payment, rather charges customers either through subscription licenses or API request volumes. This means that subscription management and billing can be challenging, especially if the business is growing. Some of the questions arising are:
How do you meter and bill the usage of your SaaS app?
How do you create a selling strategy that matches the different types of metering and charging units?
In this article, we will address the most common SaaS billing challenges.
Here are 5 recommended practices to adopt when aiming to find the best strategy for charging SaaS products:
1. Reward your customers with bulk discounts
Each one of your customers may have unique use cases and scenarios, therefore they need flexible and diverse pricing plans when subscribing to your SaaS solution.
A good way to provide these is through the use of tiered prices and volume-based rating plans. Consider a scenario whereby customers pay per gigabyte of disk storage, resulting in a charge calculated as the number of gigabytes consumed multiplied by the unit rate. This is a somewhat restrictive model and it may be preferable to automatically apply a series of discounts that kick in as the number of gigabytes consumed increases. In such cases, a tiered service provides just such capability.
One sales strategy, therefore, is using a tiered charging model that sets the price in a manner inversely proportional to the volume consumed: the more of a service you buy, the less you pay per unit of consumption. This can appeal to a wider base of customers.
With an advanced tiered pricing engine that allows you to aggregate multiple levels of attributes you are not limited to offering discounts only on one single metric. You can get creative and apply discounts per number of users + per number of units of bandwidth utilised for example.
2. Utilise charging intervals to best suit different scenarios
Services provided by a SaaS platform can be charged in different ways. In some cases you may want to charge your customers individually, every time a unit of the service is consumed but it may be more appropriate to charge for use by the day or month. Having a powerful charging engine takes away the struggle of finding the perfect solution for pricing your SaaS services. For example, monthly service charges can be calculated by one of the following models:
- Peak: The monthly charge will reflect the day of the month which resulted in the highest charge.
- Average: The monthly charge is calculated based on the average consumption of each day and quantity.
- Specific day: The charge is based on the quantity consumed on a specific day of the month.
- Last day of the month: The charge is based on the quantity consumed on the last day of the month.
3. Incorporate seasonal discounts
Sales programs such as discounts and promotions (for example providing the first month of use for free) can help grow your customer base and boost loyalty. Manual invoicing for these types of discounts, and keeping track of them, can quickly become costly and time-consuming.
A centrally managed and automated billing platform radically reduces the manual effort involved in any sales strategy, enabling you to quickly and easily add seasonal discounts, promotions, free trials, etc. to your SaaS offering.
4. Opt for granular reporting to predict change
From a commercial enterprise perspective, SaaS businesses get predictable sales streams when they implement practices for monetary monitoring and forecasting. However, when dealing with recurring billing, sales recognition and subscription renewals businesses running SaaS billing face hurdles when it comes to fully realising their potential revenue. The right billing management system can provide granular reporting on your resources consumption. The ability to drill down into multiple levels of attributes associated with a resource (for example Customer > Service ID > Instance of that service), filter that data on each level and view it visually in graphical form should be a must-have in your automated billing software in order to anticipate change.
5. Simplify the billing process
Finally, it's important to keep the billing process as simple as possible. This gives your customers a positive experience of your brand while paying invoices quickly. You may opt to offer your customers the ability to customise billing details, add additional data to their invoices, or automate the process of generating and sending invoices. These are some of the practices to take into account when aiming to build a long-term strategy for your business and your customers.
SaaS companies are transforming their billing processes to automated ones that facilitate growth, and save time and resources. With Exivity you can enhance your SaaS business with a vast array of features, including those discussed in this article. If you are ready to exceed your customer’s expectations, contact us now for a free-of-charge demo.
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