Recurring Payments Challenges for SaaS Companies
“One of the most important processes in a SaaS business, or any business for that matter, is the order to cash process, where you’re taking customer invoices and converting those into payments, cash that comes into your bank account to fund your day to day operations.
Now, people often think that in the SaaS world that this is simple and straightforward because there’s so many customers on autopay with credit cards. But credit cards aren’t perfect in any given billing cycle. One to maybe even as much as 3% of your card transactions are going to fail. Cards might be lost or stolen. They might be temporarily suspended because of suspicion of fraud. And when you get to business customers, you have to worry about corporate cards, which have all kinds of controls and lockdowns on them.
So there might be a daily spending limit, or charges might only be authorized with a very short list of vendors. Another challenge is when your business sponsor leaves the company, their card account is shut down, and you’ve got to find someone else to put their card details into autopay.
Business customers also don’t necessarily want to be on autopay, particularly for larger expenses. They want to be invoiced, and they want their accounts payable team to compare the invoice to the purchase order and the corresponding contract to make sure that everything aligns, and then they sit on the invoice until it’s due, when they decide to make a payment using the channel that they want to use. Now some will pay with cards, but most will want to transfer funds directly from their bank account and you’ll have some that even want to pay via paper check, because they know it’s going to take 4 or 5 six days to clear and settle.
So if you’re a SaaS company and you’ve got payments coming in from all these different channels, checks, ACH, wire, credit card transactions, you’ve got to map all these payments into the corresponding invoices, which sounds straightforward enough, except that some customers might take multiple invoices and consolidate them into one payment. Or they might take an invoice and only pay 50% of it, because the dispute in the other half of the charges. And if you’re doing business internationally, you have to worry about this happening in different currencies with banks all over the world.
But if you can master this order to cash, process and accelerate your collections even by just a few days, it can have a huge impact on the amount of outside capital that you need to fund and grow the business.”
Learn more about Ordway’s Recurring Payments Software.
