6 Best Practices for SaaS Billing

Some SaaS companies, like Box, even create a very highly-priced ultra-premium tier simply to make their other plan options feel less expensive. For example, many SaaS executives think requiring a credit card number upfront will decrease the conversion rate. However, if you do ask for a credit card number, those who provide one are more qualified prospects. The person using your SaaS product may not have access to the credit card used to sign up. In addition to compliance concerns, earned and deferred revenue are important measurements of business performance and therefore are critical metrics to report on accurately and in real-time. It’s easy to see how without automation these services become impossible to track and collect on effectively.

• Accommodating your customers’ payment preferences can help to bolster their positive experience with your platform.
• Additionally, you can also summarize all unbilled charges that we previously mentioned into a single consolidated invoice rather than spamming your customer with an individual invoice for every purchase.
• A grace period of hours will act as a safety net to lower your churn from those who simply got too busy, forgot their payment info, or were unaware that their card expired.
• When you generate an invoice, you want the customer to pay as quickly as they are able to.
• BillingPlatform’s cloud-based software removes the complexity, simplifying the entire billing process.
• If you don’t bill your customers correctly, you’ll leak revenue that should be in your bank account.

SaaS companies using a simple payment processing service sometimes see very high decline rates on purchases from certain areas of the world. Take advantage of the merchant of record business model — a unique option available only to SaaS and software companies like yours. Strategies to optimize your subscription plans vary by pricing model. In this section, we offer conversion-optimizing tips specific to the most common SaaS pricing strategies.

Have Controls to Limit Revenue Leakage

When your customer adds a payment method on checkout or updates their payment details, a gateway account must be linked to it. All the customer’s future payments made using this payment method are processed through this gateway account. With Chargebee’s Dunning process, you can send email reminders to your customers asking them to update payment details and schedule payment retries at intervals to ensure revenue can be recovered. After the final payment retry attempt, you can configure outcome i.e. the status of the subscription.

Other successful businesses that have grown to a substantial sized and proved they’ve reached product-market fit clearly have a price point that customers are willing to pay. As you see patterns emerge in these comments around what people like and don’t like, adjust your pricing and activation models as needed. A money-back guarantee simply means you have a time period during which you’ll refund 100% of the initial payment if a customer isn’t satisfied with your product or service. Free trials means allowing users to start using a premium product or service but try it free of charge for a certain time period. Feature-based pricing means offering multiple tiers, each one getting progressively more expensive as customers unlock more features. Often SaaS businesses want to offer a monthly and annual recurring payment option.

Simplify Your Billing Process

In the past, the approach to software delivery was through a one-time purchase. But businesses are now adopting a subscription pricing strategy for their software services. This means rather than selling a single unit—which would have been a package of floppy disks or CD-ROMs back in the day—they now sell centrally hosted software licenses.

Mailchimp became a well-known brand through its freemium model in which companies scale up to higher plans with increased usage. On their pricing page, their calculators give prospects more confidence about which pricing plan will best suit their needs. If you’re using a tiered subscription model, do you have a premium tier? The premium tier serves as a pricing anchor, making your medium-tier more attractive to the average user. This is a psychological strategy called “anchoring,” and it can be extremely effective.

Just getting started in SaaS? How to find out which SaaS billing solution is right for you

Craig Hewitt, founder and CEO of Castos, has a different approach to upsells and cross-sells. His podcast hosting company uses data analytics that looks at which users are most likely to grow out of their current subscriptions. He also looks for users whose plans might be too large for their current needs. For example, CoConstruct—one of the most highly rated custom builder and remodeler SaaS solutions on the market—was experiencing its own revenue leakage challenges. As the business scaled, its old billing system was inefficient in terms of ensuring revenue collections as well as applying proper taxation.

• Aligning all subscriptions to a new fixed billing date which helps set up a single payday for the businesses enabling them to better predict, track and monitor their revenue.
• It’s not always a bad thing to be priced higher than your competitors — it can signal to prospects that yours is a premium service.
• You’ll find examples of SaaS companies that only offer monthly or annual pricing for a variety or reasons, but most start offering both options and make changes once you have enough customer data to do so.
• There are a few factors to consider that will help you pick the right platform for your SaaS billing needs.
• This helps customers know your company and how much they were billed when looking at things like credit card statements.
• The more payment methods you offer, the more complex your billing and accounting becomes!
• Now let’s look at why billing ops is still a huge problem in the SaaS model.

These licenses or subscriptions are sold on a recurring billing basis, which can certainly be great for the bottom line. —from initial sign up to payment collection—putting both your customer at ease. And they help you hit two birds with one stone — improve customer satisfaction and reduce your support team’s workload. So, UNLESS your product’s core value is security (i.e., you’re a Fintech startup that handles sensitive data), the answer is always a multi-tenant architectural approach.