Choosing the right billing system for your SaaS business

Choosing the right billing system for your SaaS business is arguably one of the most important parts of the business model. Unfortunately for many first-time entrepreneurs, choosing the right billing infrastructure can be overwhelming and confusing.

A subscription product isn’t a one-time transaction, so the billing system has a huge impact on the customer experience, far beyond the initial payment. Because of that, your billing system has a strong influence on the bottom line.

SasS startups fall into two camps: those who build their own billing system and those who integrate an existing third-party SaaS billing software into their current setup. Let’s take a look at how to choose one over the other:

Third party vs in-house billing systems

Some SaaS businesses choose to build their billing system on the front end, and hire (expensive) software engineers or use their own developers to build the entire billing system in-house.

But is opting for ‘ready to go’ third party software a smarter option?

3rd party vs in-house billing systems-B-01

What features will you need?

Consider all the different features your ideal billing system would have:

  •     Various pricing models
  •     Upgrades
  •     Coupon creation
  •     Cancellations
  •     Different billing cycles
  •     Security
  •     Rich data reporting
  •     Individualized customer offers
  •     Multiple currencies

Many of the SaaS billing software already on the market already have these features. Unless there’s something additional you need, it’s worth asking yourself — why reinvent the wheel?

Time and effort needed

Do you need a billing system ready to go yesterday? Or is there some development time up your sleeve? Building an in-house system takes time, and setbacks can postpone a launch, while rushing development means you’re risking rolling out a buggy system.

If your own developers will be building the billing system, consider their focus will be pulled away from your core product. Not just in dev stage, but also once the system is live.

Choosing a SaaS billing software already available means you can be up and running quickly. The software’s customer support team can handle any issues, leaving your developers to focus on what they do best.

Why it’s important to have a billing system in place

Why it's important to have a billing system in place-A.b-01

SaaS businesses need to get their billing system right, and they need to get it right from the beginning. Making the wrong decision can cost you a ton of money and time down the line. Worse, a poor billing system can sink the boat entirely.

Once the customer enters their credit card details into the front end to sign up for the subscription, the easy part is done. A robust billing system needs to be in place behind the initial payment gateway to process payments. It will also automate behaviour for cancellations, upgrades, credit card failure, different invoice requirements, and more, throughout the customer lifecycle.

These are some of the key reasons a billing system is crucial for your SaaS business:

Reduce involuntary churn

Involuntary churn is the enemy of subscription-based businesses. It’s when a subscriber is lost, not because they voluntarily cancelled their subscription, but due to an expired credit card or declined transaction. This is one of the most costly problems subscription-based businesses face.

Prevention is the best cure for involuntary churn, and an effective billing system includes tools like automatic prompts for the customer to enter new card details before they expire.

Time

A billing system will give you back essential mental space to work on your core product, rather than managing a convoluted or hacked together manual billing process.

Research on how entrepreneurs can most wisely use their time reveals entrepreneurs, “should invest more time in process improvement early on — that is, when the opportunity cost of doing so is relatively low.”

Get billing right from the get-go and save valuable time down the road.

Fight chargebacks and fraud

Research shows that almost 40% of small businesses fall victim to fraud at some point in their life cycle.

While payment gateways offer preliminary detection fraudulent activity, every SaaS business should have robust security measures built into their billing system. These include tools to detect online fraud and flags for activity in high risk countries.

If you accept a fraudulent transaction, not only can you be held financially responsible for the loss, the chargeback process and dent in your company’s reputation won’t be fun to deal with.

How to evaluate SaaS billing software

Decided to run with an existing option? You won’t be short for choice, but not all billing software is created equal.

Let’s take a look at some of the key points to consider during your evaluation. We’ll use SaaS billing software Rebilly as an example.

Payment gateway integration

Can the software integrate with your existing payment gateway? For example, Rebilly is capable of integrating with a range of payment gateways, which means that you aren’t putting all of your eggs in one basket. If one payment gateway goes down, you can seamlessly switch to another.

Analytics

Billing software should provide insights into how your recurring models are performing, so you can act quickly on revenue generating opportunities. Rebilly offers reports on customer, transaction, and payment gateway data, and helps you use that data to target more profitable segments.

Dunning tools

Dunning is the process of how you communicate with your subscribers to collect on failed credit card transactions. Effective billing software will include tools to help you manage this process, including tools to automatically (and intelligently) retry failed payments.

One example of how this typically works with many billing systems: you’d set simple retry schedules for one week after a failed payment, two weeks after, and so on, until the payment was successful. One of Rebilly’s dunning tools allows you to set intelligent schedules for retrying billing failures based on the transaction response code and other data collected from the failed transaction, ensuring a higher likelihood of a successful payment.

Currencies supported

A startup with a vision to seriously scale needs billing software that supports multiple currencies. The likelihood of conversion increases if a customer is presented with their preferred payment option and currency.

Rebilly supports 140 free-traded currencies and payment methods, including check, wire, bitcoin and barter.

Increase revenue with individualized offers

Many SaaS billing softwares offer tools to customize instant individualized offers from your suite of products to help boost customer retention and maximize profits.

Bottom line

The best billing software goes beyond the basics of processing straightforward recurring payments. It will support complex transactions, integrate seamlessly with existing systems, offer robust security and mitigate revenue loss. In most cases, leaving subscription billing to the experts and purchasing existing software reduces headaches, time and cost of building your own.

Rebilly is a great option for Saas companies, find out more information about Rebilly features below:

 

References:

Optimal Time Allocation for Process Improvement for Growth-Focused Entrepreneurs

Onesun Steve Yoo, Charles J. Corbett, Guillaume Roels

Fraud In Small Business –  ACFE

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