SaaS Billing Best Practices

Handling money is always a sensitive practice, and the SaaS niche is no exception. There is also no right or wrong solution—it’s up to you to figure out what works for your business.

In the most general terms, we can advise you to be optimistic, look at what others did first, and avoid their mistakes.

We’ve already covered what not to do when it comes to SaaS billing, and now we’re here to help you do the right thing. 

Let’s dive in!

Have a Simple Pricing Model

Choose the best pricing model for your business. 

Pricing and billing go hand in hand in SaaS finances. 

Choosing the right pricing model and setting the right prices have the most significant impact on your revenue, so you should consider all your options carefully. 

Your core goal should be to match the price to the perceived value of your product. 

Undercharging or overcharging can harm your customers and diminish their willingness to pay. 

Moreover, customers need to know precisely what services they are getting for the price they pay. A simple and easy-to-understand pricing model is crucial in this process. 

Your pricing model should be logical and based on the type of product you have. 

Different customers also have different needs, which could later complicate matters, especially later on as your company grows. 

That’s why your primary goal should be to set up a simple pricing model which you can adapt as your business grows. 

When choosing a pricing model, make sure that you clearly outline your product features and the matching prices for the number of features customers can get. 

Keep this information straightforward, too. 

We’ve already covered some of the most common pricing models, but here’s a quick rundown of your options: 

  • Flat Rate Pricing
  • Usage-Based Pricing
  • Tiered Pricing
  • Per-Feature Pricing
  • Freemium
  • Per-User Pricing

To give you more options, here’s another one that’s growing in popularity. 

It’s called A La Carte Pricing. The main benefit of this pricing model is that customers are offered to choose whichever features they want from the company’s offering, almost like online shopping for SaaS. 

They choose individually priced features and then get unique recurring pricing. 

The great thing about this model is that there’s no frustration on the customer’s part, because they use everything they need, and SaaS companies can track which features are the most popular. 

The main drawback is that it’s pretty challenging to manage. 

While simple and easy to understand for the customer, SaaS companies could find themselves struggling to maintain this system as the company grows. 

Start with simple subscription plans with adequate pricing to attract customers and customize them as your business grows. 

Simplify Your Billing Processes

Save yourself the hassle and invest in a good billing management system. 

One of the biggest decisions you make when you start a business is choosing between creating an in-house billing software or opting for a third-party billing solution. 

Before you even begin, let’s make one thing clear. 

You probably don’t have the time or the money to make a good system that will take care of all your billing needs. 

Some of the biggest challenges in SaaS billing are due to inefficient billing systems, which are developed in-house.

The best solution is to implement an automated third-party software that will help you build your business and grow as your needs change. 

Your billing system should make it easy for your customers to pay as quickly as possible, while having an understandable format to avoid added friction that causes churn. 

It should also have the necessary features to enable efficient payment management (invoicing, dunning, payment notifications, etc.). 

A good billing management system should do all the hard work for you and reduce potential errors. There is no need to rely on manual payment processing or using Excel sheets. 

With so many great options available, you have to switch to a cloud-based system. 

When you simplify your billing process, you can expedite your business operations, have a real-time overview of your financial situation, and eliminate outdated information. 

Now you have to consider what features to look for in an automated system. 

Automate Your Billing Process

Choose a solution that will accommodate your customer’s payment preferences and comply with international laws and regulations. 

The best billing software for your business can process different payment methods and adjust billing dates, among other things. 

When you give customers options, you can bank on improving your relationship with them and enhancing their experience with your product. 

Furthermore, in some regions, such as the EU, you’re obligated to issue e-invoices. Complying with international laws should be easier to handle with a good billing management system. 

Your billing management system is the central location for collecting and sorting data relevant to your customers’ accounts. 

All of that information should be available to your customer success teams and your customers. 

Here are some key features your billing system should have:

  • Recurring invoicing (may include additional charges based on customer’s usage data and changing subscription plans)
  • Automated payment reminders and dunning notifications
  • The ability to process invoices online with different payment methods
  • Creating invoices based on your pricing models and offers

Some additional benefits to having an automated billing system include stronger customer relationships and faster returns on CAC. 

It’s also essential to find a solution that can grow as your subscription plans get more complicated to ensure a regular cash flow. 

It’s the first step towards managing the healthy financial state of your business. Save time and money by investing in an automated billing solution. 

See how Regpack can help you with integrating a billing software that makes sense for your business. 

Align Payment Terms 

Make sure every detail is agreed upon with the customer upfront. 

Do you want to have a good relationship with your customers? 

Then you have to be completely transparent about everything related to your payment process and terms. It can help you avoid surprises or, in the worst-case scenario, lawsuits. 

On the other hand, you increase your chances of getting paid because you’re binding your customer with a set of terms. 

Things you should put in your terms statement include:

  • Standard and additional fees
  • Types of payments available 
  • Billing frequency
  • The timeframe in which you expect payment 
  • Penalties for overdue bills

Having a clear outline of your and your customer’s expectations can set the right tone for future business relationships. 

You can quickly resolve any disputes by showing them the terms they agreed on. 

If they can’t abide by them, then you’ve saved yourself the trouble of handling a bad-fit customer. 

Also, make your terms visible for any future customer who might want to do business with you. 

In that way, they can make informed decisions, and you won’t catch them off guard with any hidden charges. 

When you clearly communicate your offer, your customers can easily understand the value you’re providing them and pay accordingly. 

Use Customer Data to Upsell

Your billing system should provide insight into the right upselling opportunities. 

Customers provide you with invaluable data you can use to find different ways to increase your revenue. 

By looking at their usage behavior and payment patterns, you can change your product and offerings to create a more enticing proposition. 

You can make changes in pricing or product bundles on time because you track real-time usage and demands for your service. In that way, you can target your highest paying customer or those with higher conversion potential. 

Once you do that, don’t forget to make personalized offers that can cover their unique needs.

Focusing on the right customers with the most considerable upselling potential can save you time and resources. Those who have already seen the value in your product and now want more will be your best source of revenue. 

Even if you have customers who are happy with your product as-is and might not need an upgrade, you can still strategize with increased engagement campaigns to convince them about the additional benefits of your product. 

Eventually, they might be persuaded and upgrade their plans. 

Still, you can’t know any of that if you don’t leverage the data your billing system collects about your customers, so it’s important to track it. 

Find the perfect balance between price and upselling offers to avoid customer dissatisfaction. 

Change Your Prices

Adjust your pricing as your product gets more valuable, and your business will grow. 

The pricing of your service should change over time because it is necessary to accommodate your increased costs and business expenses. 

You might want to resort to simply acquiring more customers, but that is not an option these days. 

Most of your revenue will come from a small section of your existing customers, so you must put your efforts into maximizing the revenue you receive from them. 

One way to do that is to increase your prices. 

Not only that, price changes can be affected by the market and seasonality. Either way, your pricing will not remain the same. 

The most profitable SaaS companies frequently adjust their pricing to accommodate for any changes. 

With an automated billing system, you can easily experiment to see how your customers will respond to different pricing. 

One of the most common practices is raising prices by 5% to gauge the customers’ willingness to pay for a service. 

Another way to entice more sales that will affect your pricing is to use coupons. Your automated system should accommodate those changes as well. 

In a nutshell, whatever changes you apply to your pricing, your billing software must reflect that in the customer’s invoicing and payment process. 

When you change your prices, you can expect to lose some of your customers, especially those who took advantage of your freemium plans (if you had one). 

The upside to that is you’re actively removing unsuitable customers and focusing on loyal ones, which will ultimately improve your income. 

As your business grows, you should make necessary changes in your pricing that reflect the new value of your product. 

Upgrade Your Billing Platform

Once you change your prices, consider upgrading your billing software as well. 

If you have to change prices to accommodate the new value of your product, the chances are that you’ve outgrown your existing billing software. 

You have more subscription plans, more customized plans, and more add-on features. 

All of that needs to grow with your billing software so you can track each payment for efficient accounting. 

If you started with an in-house system that suited your simple needs, now is the time to invest in a more integrated solution—or spend time and money upgrading your existing system. 

On the other hand, if you made the sensible choice and started with a third-party billing system, you must consider how that solution fits your current needs. 

Most billing software is upgraded over time to give you more flexibility and options to manage your billing process. 

However, if you find yourself wanting more than your solution offers, there are other things you have to consider to optimize your billing process.

Improve your existing billing platform with these features: 

  • Mobile optimization. With a growing number of users who pay with their mobile devices, you need to optimize your interface and manage invoices for smartphones.
  • Better navigation. Make view history faster and reduce the number of clicks for customers to get where they need 
  • Adjustable currencies. For global companies, you should enable different values and currencies.
  • Client platform. Customers should be able to access their subscription data and payment history to minimize the need for customer support.
  • Monitoring functions. Track user behavior and payment patterns to use triggered notifications and email. 

Upgrading your billing platform should offer you more options for an integrated and seamless billing process. 

Reduce the Churn Rate

Utilize your customer’s data to reduce churn. 

When you effectively analyze data your billing system provides, you can anticipate trends and make the necessary changes to improve customer experience. 

Apart from anticipating the effects of pricing changes and following their payment patterns, you should also consider how your billing UI affects customers. 

This is the part of your billing process that your users will interact with the most. 

Simplifying the process doesn’t stop with integrating different payment methods and multiple currencies. It should also be easy to navigate. 

For this, you have to regard it as a part of your onboarding flow. 

We’ve covered why onboarding is crucial for customer retention and acquisitions, and the payment process is an extension of that. 

Your billing UI should be connected to your subscription billing API, so your customers have access to the following:

 Pricing page

  • Option to subscribe
  • Update credit cards
  • Review and download payment history

The great news is that many readily available types of billing software have no-code solutions to optimize your billing UI. 

You can also make improvements by avoiding unnecessary mistakes in your billing documents. 

If customers frequently notice incorrect charges or misspelled words, you can be sure they’re going to view you as sloppy or incompetent, which can damage your business in the long run. 

When you clearly explain all the charges and pay close attention to sending correct invoices, you reduce the chances of customers dropping you because of easily avoidable mistakes. 

Enhance your customer experience and prevent any involuntary churn by keeping in mind your billing UI. 

Limit Revenue Leakage

Prevent any situations where you don’t get paid for your service. 

Not getting paid for provided services is the most frustrating situation you can find yourself in. Dealing with a few canceled credit cards is no big deal, but when you face a customer who’s gone bankrupt and can’t pay you, then you’ve got some big hurdles to jump over. 

In any situation, you should proactively prevent any unintentional revenue leakage that can devastate your business. 

Luckily, if you’ve invested in the best billing management system, you will have no problem enforcing your customers’ payments. Additionally, you can prevent any involuntary churn due to customers having issues with their payment process. 

Features that are necessary to ensure proper payments are: 

  • Automated payment reminders
  • Notifications about upcoming credit card expirations
  • Automated dunning process
  • Facilitate payment collection

You can choose whether you want to communicate via email or in-app based on your customer’s preferences. 

Collect payments with an excellent automated billing system that will proactively communicate with your customers. 

Optimize the Timing of Your Billing

If you want to get paid, consider your payment timing. 

Optimizing your billing timing has enormous benefits in nurturing a good customer relationship. 

If you set your terms correctly, your customer will not be surprised by the frequency they’re receiving their bills. 

But before you offer them anything, you must adjust that frequency for optimal customer experience. 

Recurring billing is what your customers expect, and it includes monthly or annual invoices and receipts. You have to set this based on your subscription plan and the service you provide. 

Choose whichever frequency makes sense for your business. 

The average timeframe for invoices is 22 days, based on Due’s survey. If you’re not paid within 90 days, you have an 18% chance of ever getting your money. 

Your next problem is when to send recurring bills.

The obvious answer might be when the customer signed up for the service, but some believe that you should send invoices at weekends and on the first day of the new month to get paid faster. 

As you set up timing for your recurring billing, consider including timely notifications with similar timing frequency. 

They should be sent during times when customers can easily rectify unfortunate situations, as well as at those times when you’re sending simple reminders about upcoming invoices. 

That way, users can mark the date in their calendars and pay you on time. 

Knowing when to send your invoices ensures you get paid. 

Use Billing Data to Forecast Revenue

Identify additional untapped opportunities to increase your revenue. 

With large amounts of data, you have many things to analyze and use to your advantage. 

Customer behavior can uncover buying patterns and trends, which in turn offer possibilities for cross-selling and upselling. 

In short, tracking user behavior helps you predict optimal moments for revenue increase. 

A billing management system shouldn’t just handle your financial records. 

It should also be a helping hand in analyzing customer demands and reviewing your financial performance, as well as projecting revenue with real-time reporting. 

Having all this information at your disposal enables you to create effective strategies in other aspects of your business, like marketing, sales, and investing. 

Properly monitoring your cash-flow trends also allows you to control deferred revenue. 

Your business growth largely depends on having accurate data to predict financial performance and the changes that can affect your business decisions. 

Once you handle the math, any new process you implement can only benefit your business performance. 

Conclusion 

Implementing a good billing process starts with knowing the most efficient ways to maximize available solutions. 

Your first steps should be to choose a simple pricing model and invest in the best billing management software. 

If you do that, you’re halfway to success. Your billing system should handle the rest and offer you valuable information about your customers. 

Then, you can time your invoices, collect payments and find opportunities to increase revenue. 

The best practice when it comes to billing is to make it simple and automatic. 

About The Author
Asaf Darash
Asaf Darash
CEO and founder of Regpack

Asaf, Founder and CEO of Regpack, has extensive experience as an entrepreneur and investor. Asaf has built 3 successful companies to date, all with an exit plan or that have stayed in profitability and are still functional. Asaf specializes in product development for the web, team building and in bringing a company from concept to an actualized unit that is profitable.

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