Why These Features Matter
Finance and billing teams in SaaS companies spend hours each month reconciling invoices, collecting payments, and applying credits. Automation features such as Auto-Pay and Auto-Apply simplify that work by reducing manual tasks and keeping cash flow predictable.
Modern billing platforms, including Ordway, include both capabilities natively. Here’s how they work, why they matter, and how finance teams use them to streamline payment operations.
Summary
SaaS finance and billing teams frequently dedicate extensive hours to manual invoice reconciliation, payment collection, and credit application. Auto-Pay and Auto-Apply are powerful automation features designed to streamline these critical operations. These modern capabilities, often native to advanced billing platforms, significantly reduce manual tasks, ensure predictable cash flow, and ultimately optimize payment processing for recurring revenue businesses. Understanding their functionality and strategic implementation is crucial for enhancing your financial workflows.
Key Takeaways
- Auto-Pay automates customer payment collection, processing payments automatically based on schedules and stored payment methods, which is ideal for recurring revenue models.
- Auto-Apply automates the matching of collected payments or credits to open invoices, eliminating the need for manual allocation by finance teams.
- Implementing both Auto-Pay and Auto-Apply drastically reduces manual accounts receivable (AR) and collections steps, improving overall operational efficiency.
- These automation features contribute to a significant reduction in Days Sales Outstanding (DSO) and support faster, cleaner month-end closing processes.
- Successful deployment of Auto-Pay and Auto-Apply requires careful configuration and empowering customers with self-service options to manage their payment preferences.
What Is Auto-Pay?
Auto-Pay automates when customer payments are collected. It is most commonly used in recurring revenue models where customers are billed at a regular frequency for a fixed amount. When enabled, the system automatically processes payments during scheduled payment runs based on each customer’s payment method and payment terms.
Most platforms allow you to define Auto-Pay defaults at the organization level, so new customers automatically inherit the setting. Existing accounts can be updated individually without affecting historical data.
How Auto-Pay Works
- If Auto-Pay is ON, the customer has a valid electronic payment method, and payment terms such as Due on Receipt, their payment is automatically processed in the next payment run.
- If the customer’s payment term is Net 15 or Net 30, Auto-Pay waits until the invoice due date before processing.
- If Auto-Pay is OFF, no payments are processed automatically, regardless of payment method on file. Instead, the customer’s accounts payable team is sent an invoice and they initiate payment on or before the due date.
When Auto-Pay is enabled for an existing customer with an outstanding balance, the next payment run will collect the open amount automatically. The platform also applies any available credits or negative invoices.
One of the keys to success with Auto-Pay is empowering customers to be in control. Ensure that customers can easily turn off Auto-Pay online through a self-service billing portal or in the admin section of your online product. Additionally, allow customers to easily change payment method and set up backup payment methods.
What Is Auto-Apply?
While Auto-Pay controls when funds are collected, Auto-Apply determines how collected payments or credits are matched to open invoices.
When Auto-Apply is turned ON:
- Payments or credits are automatically applied to any open invoices.
- If no open invoices exist when a payment is received, the funds remain unapplied until the next invoice is generated—then the system applies them automatically.
When Auto-Apply is OFF, payments and credits stay unapplied until a finance user manually allocates them. This is helpful when you need more control over reconciliation or complex billing logic.
Auto-Apply is typically configured in billing systems at an organization level. However, there should be an option to override it at an individual payment level.
The Operational Payoff
Together, Auto-Pay and Auto-Apply close the loop between invoice generation, payment collection, and revenue recognition.
For SaaS finance and RevOps teams, these features deliver:
- Fewer manual AR and collections steps
- Reduced Days Sales Outstanding (DSO)
- Faster month-end close and cleaner subledger syncs
- Improved visibility into credits and unapplied payments
Incorrect setup can cause timing or reconciliation mismatches—like payments processed too early or credits left unapplied—so test settings carefully before enabling them across all accounts.
Best-Practice Checklist
- Set a global Auto-Pay default for new customers and adjust for exceptions.
- Confirm every Auto-Pay customer has a valid payment method and correct terms.
- Use Due on Receipt for fully automated workflows; reserve Net 30 for manual oversight.
- Enable Auto-Apply to reduce open-invoice backlogs.
- Review the first few payment and billing runs to verify expected behavior.
One-Sentence SaaS Takeaway
Auto-Pay and Auto-Apply automate key steps in the billing cycle—helping finance teams collect cash faster, reduce manual reconciliations, and shorten the quote-to-cash cycle.
Conclusion
Embracing Auto-Pay and Auto-Apply is a pivotal strategy for SaaS companies aiming to optimize their billing and revenue operations. By automating the critical processes of payment collection and reconciliation, businesses can achieve quicker cash cycles, drastically minimize manual errors, and enable their finance teams to shift focus from administrative burdens to strategic growth initiatives. Prioritizing correct setup and ensuring customer empowerment are essential to unlock the full operational and financial advantages of these powerful automation tools, paving the way for a more efficient and predictable future.
Frequently Asked Questions
What is Auto-Pay in a billing system?
Auto-Pay automates when customer payments are collected, primarily used in recurring revenue models where the system automatically processes payments during scheduled runs based on each customer’s payment method and terms. This means payments are processed without manual intervention from the customer or finance team.
How does Auto-Apply function within a billing platform?
Auto-Apply determines how collected payments or credits are matched to open invoices, automatically allocating funds to outstanding balances or holding them as unapplied until new invoices are generated. When this feature is off, finance users must manually assign payments to specific invoices or credits.
What are the combined benefits of using Auto-Pay and Auto-Apply?
Using Auto-Pay and Auto-Apply together significantly streamlines the entire billing cycle by reducing manual accounts receivable tasks, decreasing Days Sales Outstanding (DSO), and facilitating faster, more accurate month-end closes. These features close the loop between invoice generation, payment collection, and revenue recognition for greater efficiency.
Is it possible for customers to manage their Auto-Pay settings?
Yes, successful Auto-Pay implementation requires empowering customers to easily turn off Auto-Pay, change their primary payment method, and set up backup payment methods through a self-service billing portal or within an online product’s admin section. Providing this control enhances customer experience and reduces support inquiries.
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