So, you’re looking into billing services for your SaaS business, but you’re not sure how to pick the best billing service. This is a huge decision for your business, as a subpar SaaS billing solution could leave you with headaches. The best SaaS billing service allows you to optimize your SaaS billing, clearing the way for future growth.
Below, you’ll learn
Types of SaaS billing systems
Best practices for SaaS billing
Characteristics of the best SaaS billing service
The best SaaS billing service for your SaaS business
Without further ado, let’s get started.
To create a smooth SaaS billing process, you need three types of SaaS billing systems: payment gateway, merchant account, and subscription management platform.
Let’s look at these systems one-by-one.
A payment gateway is like a digital version of a physical point-of-sale (POS) system, allowing you to securely complete transactions without a physical presence. PayPal, Adyen, and Stripe are a few examples of payment gateways.
A merchant account is an account that can be used to receive customer payments. Some payment gateways, such as Stripe, also provide merchant accounts.
Are you offering a subscription product or service? If so, you need to charge your customer at predefined intervals (e.g., weekly, monthly, annually). To automatically manage this process, you need a subscription management platform, like Recurly.
Your company is likely facing a lot of competition. By using best practices for SaaS billing, you can positively differentiate your offerings.
Here are three best practices for SaaS billing:
Countless SaaS solutions have unnecessarily complicated pricing strategies. Even if they are ultimately cheaper than the competition, customers are likely to get frustrated and go to the company with the simpler pricing model.
A complicated pricing strategy also puts a strain on customer service because prospects are more likely to need help figuring out how much it costs for them.
You should use a simple and straightforward pricing strategy that emphasizes the value of your product and service and makes it easy for customers to grasp that value. Clearly showing value has another benefit: reducing churn from customers who can’t justify the value after purchasing the subscription.
Your plans and pricing aren’t “set-it-and-forget it”—you need to constantly be reevaluating them because what works for your company today might not work tomorrow.
By sifting through your billing data, you can see what is resonating with your target audience.
Are they gravitating towards your highest-priced offering? This could mean there’s demand for extra features, and they might be willing to spend more if you provide those features.
What if you have three options and 80% of your customers are buying the lowest-priced offering? In this case, you might not be offering enough value at the higher price points.
Whatever the case may be, your billing data can help you figure out what’s going on to take the right action.
If you had a company that only sold one-off products, you might be able to get away with a clunky billing process. But with a SaaS solution that is billed on a recurring basis, your customers aren’t likely to tolerate anything less than a streamlined billing experience.
Your invoices should clearly present what your customers used and what it costs. This is particularly important if you don’t have a fixed recurring model but instead have a quantity-based or usage-based model.
You should also have an automated system that follows up with customers who are late on their payments. This has the added benefit of reducing involuntary churn—more on that in a bit.
With so many SaaS billing services out there, how do you determine which one is best for your SaaS business?
You find the best one by learning what you need from a SaaS billing service and then seeing what service checks the boxes.
A SaaS company faces challenges that are a lot different than a restaurant—there’s nothing groundbreaking about that statement. But here’s what’s not quite as apparent: the best billing service for SaaS businesses has extensive experience working with SaaS businesses.
Look for a billing service that can point to several satisfied clients in the SaaS industry—preferably with proof of success. At Recurly, we have case studies that show what’s possible with our SaaS billing software.
According to a study done by Recurly, the average SaaS business has a churn rate of 4.79%. Involuntary churn typically accounts for 53% of churn. This means that your SaaS company could have thousands of dollars in preventable lost sales per month.
The best SaaS billing software slashes involuntary churn rates with revenue recovery capabilities, though. Here’s what happens:
Through account updater and expiration date forwarding functionality, SaaS billing software updates card details as they change.
Instead of retrying transactions at random times, the solution uses a dynamicalgorithm to retry a transaction how and when it is most likely to succeed.
The service individually reaches out to subscribers with overdue invoices through a process known as dunning.
You want to find a vendor that not only has a “good-looking” revenue recovery process but also one that produces results. Recurly, for example, recovered $610 million in revenue for its merchants in 2020.
Your SaaS billing service not only needs to work well on its own, but it also needs to integrate well with your existing tech stack.
It’s particularly important that your SaaS billing service integrates with the following:
Sales: You want your sales team to be out building relationships with new customers, not manually migrating data from your CRM to your billing platform. A SaaS subscription billing solution that can integrate with your CRM lets them focus on the former instead of bogging them down with the latter.
Accounting: With a SaaS business, accounting can get complicated. You may have free trials, paused and postponed subscriptions, and different plans—all of which can make the month-end close a time-consuming process for your accounting team. The best SaaS billing solution syncs with your accounting system, reducing the burden on your team.
Payments: Earlier, we touched on payment gateways, one of the integral parts of SaaS billing. Insist on SaaS billing software that integrates with your payment gateways. If it doesn’t, you could have a lot of difficulty receiving payments.
Recurly has a long list of integration partners, so it is likely to “play nicely” with your current and future tech stack.
By now, you’ve probably realized the importance of payment gateways.
The thing is, the best gateway is different for each transaction—it depends on geolocation and product type. The upside of using the best gateway is higher acceptance rates, lower processing costs, simplified reconciliation, and mitigated risk. A SaaS subscription billing solution with gateway routing selects the best gateway for each transaction.
Unfortunately, gateways don’t always work—they have outages sometimes. Gateway failover routes the payment to a backup gateway in the event of an outage. This can save you a lot of revenue that would have otherwise been lost.
Recurly has gateway routing and gateway failover. The software also integrates with over a dozen payment gateways, so you are likely to find ones that work well for your company.
If you want to scale your company, the best SaaS billing service is one (big) piece of the puzzle.
As you’ve seen, Recurly checks all of the boxes for a SaaS billing service. When paired with payment gateways and a merchant account, you have the entire billing process covered.
Want to appeal to new customers at home and abroad? With Recurly, you can iterate as much as you want, leveraging subscriber data to find the right plans and pricing. The software supports over 140 currencies and 18 different languages, making it easier to expand internationally.
You don’t have to wait long to get all of the value of Recurly’s software, either. The time to launch is typically 46 days, and our Learning Paths onboarding series shows different audiences (roles) at your company how to use the software.