Billing takes Center Stage in the Middle Office
Traditionally billing systems have been thought of as back office applications that are an endpoint for downstream data flows. However, modern billing systems are taking center stage in the middle office, processing upgrades, orchestrating workflows, and triggering alerts. As a result, billing systems are getting inter-connected with more and more enterprise applications. Many SaaS and cloud providers are connecting their billing systems directly to their product. There are three primary use cases:
- New Subscriptions and Upgrades – Enable new customers to purchase subscriptions online and existing customers to process upgrades, renewals, and cancellations. In some cases, the billing system triggers the provisioning of the product upon receipt of the initial payment.
- Account Balance and Payments – Customers want easy access to download invoices, check account balances, and make payments online within the product experience. SaaS providers want to alert customers of overdue account balances and, if necessary, suspend access for non-payment.
- Usage-Based Billing – To compute the charges, metered consumption data must be uploaded from the product into the billing system. Between invoices, customers want real-time visibility to consumption, spending, and prepaid credit balances.
Below we share the nine most popular scenarios for integrating your billing system with your SaaS product:
Capture billing and payment details directly within the product for new subscribers
SaaS and cloud providers increasingly offer customers a self-service experience to sign up for new subscriptions directly on their websites. Self-service not only reduces the SaaS provider’s acquisition costs but improves the customer experience as well. Some SaaS and cloud providers will use specialized e-commerce or subscription management applications to register new customers. Others will build their own custom-developed functionality. In these scenarios, the details about new customer contracts, such as account name, billing address, product configuration, pricing model, and payment method, will need to be fed to the billing system to generate invoices on a recurring basis.
2) Self-Service Upgrades
Enable customers to upgrade tiers, purchase more seats, or usage credits directly within the product
Many SaaS and cloud providers not only allow customers to purchase new subscriptions online but also to make upgrades. Users with admin permissions should be able to go to the account profile section of the product to view their current subscriptions, contract term, and pricing model. Within the same account profile section of the product, the customer should also be able to process upgrades such as purchasing more seats, pre-paying for usage credits, or switching from one feature tier to another. In some cases, the customer might have the option to downgrade, renew, or cancel the contract as well. As the customer changes their account, the details about updated product configurations, pricing tiers, and payment methods must be propagated to the billing application.
3) New Account Provisioning
Limit access to product functionality until the customer makes the first payment
The billing system can be inserted into new account provisioning workflows. For example, if a customer is not paying via credit card but instead by traditional invoice, you may want to limit access to functionality until the first payment is received. Of course, such a workflow requires the billing system to be integrated directly with your SaaS or a cloud product. As receivables come in from credit card gateways, bank statement downloads, or manual entry by accounting personnel, the balances of new accounts could be monitored for an initial payment. Once the confirmation is received, the billing system could notify the product triggering the activation of the user’s account.
4) Account Balance
Enable customers to check account balance, download invoices, and update payment details within your product
An important part of the customer experience is ensuring that administrators and budget holders can quickly understand what they are paying for and what they owe. Some SaaS and cloud providers offer a separate subscription management and billing portal that accounts payable, procurement, and business owners can access. Others enable users to view their subscription and billing details directly within the product. In either case, customers should have the ability to check the current account balance, download historical invoices, and view payment transactions. If auto-pay is enabled for recurring billing, customers should have the ability to update the credit card or bank account on file. If there is an outstanding balance, users should be able to make payments on-demand.
5) Suspensions and Reactivations
Notify or suspend past due accounts then automatically reactivate once payment is received
Integrating the billing system with the product can also help with collections. For example, if the customer is 30 days past due on their invoices, a notification could be sent to the product. For days 30-45, all end-users might be notified that their account is past due upon login. Once the account reaches 45 days past due, a notification from the billing system might trigger a workflow that restricts the user’s access to a limited set of functionality. If the account reaches 60 days past due, a billing system notification might trigger an account suspension.
6) Usage-Based Billing
Calculate charges based on the customer’s actual usage of the product
Many SaaS and cloud providers are adopting a usage-based pricing model. The charges the customer pays monthly are based on the consumption activity during the billing period. Metering of consumption typically occurs within the product itself. For security and data privacy reasons, the SaaS or cloud provider typically will not want a third-party billing application tracking all the activity within the product. Prior to the monthly billing run, the metered consumption data will need to be uploaded to the billing application for rating and invoice generation. Some SaaS and cloud providers will upload the usage data in batches at the end of the month. Others will stream the data in real time to the billing application.
7) Usage Spike Notifications
Alert customers in real-time of above average consumption patterns
SaaS and cloud providers with usage-based pricing models often want customers to see consumption data throughout the billing period. A customer surprised by an unexpectedly high invoice is more likely to dispute the charges or express frustration with a lower satisfaction rating. Some SaaS and cloud providers offer visibility to usage patterns within the product experience. Others offer the ability for proactive notifications and alerts once certain thresholds are achieved.
One common set of notifications is related to spikes in consumption. For example, one customer may want to be notified if their actual usage during a billing period exceeds 10,000 units. Another customer may want to be notified if forecasted consumption is expected to be 10% higher than in prior periods. If the product is configured to continuously meter consumption, then alerts can be triggered automatically as thresholds are met.
8) Spending Threshold Alerts
Notify customers throughout the billing cycle when spend exceeds certain thresholds
For products with usage-based billing, some customers may want to be alerted when a certain dollar amount of spend is reached. For example, a SaaS provider may want to alert customers if the charges accrued month-to-date exceed $2,000. Another cloud provider may want to notify administrators if an invoice is forecasted to be 20% higher than the trailing twelve-month average. Gaining real-time visibility into accrued charges requires a real-time rating process. A continuous stream of metered usage data is fed from the product into the rating engine of the billing system. A running balance of the current period charges is maintained in real-time and regularly polled. Once a spend threshold is reached, the billing system triggers a customer notification, which could be displayed in the product’s alert center or sent via email/text to the administrator.
9) Low Prepaid Usage Balance Notifications
Ping customers when prepaid credit balances are almost depleted so they can quickly replenish
Many SaaS and cloud providers with usage-based pricing models offer customers the option to purchase prepaid credits for a discounted price. For example, a customer may purchase 5M words for a cloud translation service for a 25% discount off the $0.01 per word list price. Each month the customer can draw down against the 5M word balance until it is depleted. Some providers will want to proactively alert the customer if their prepaid balance has fallen below a certain minimum threshold to provide them time to purchase additional units.
Accounting for prepaid units is typically performed in the billing system rather than the product itself. To provide a low balance alert, the billing system must collect a continuous stream of metered usage data from the product and keep a running balance of prepaid credits for each account. Once a low balance threshold is reached, a notification can then be generated to display in the product’s alert center or distributed via email/text to end-users.