SaaS billing platforms

Understanding negative churn in the subscription industry

Does your company sell a SaaS subscription tool? If so, you’re probably on a growth trajectory. To fully cash in on the opportunity in front of your company, you need to optimize your billing.

Below, you’ll learn:

  • What a SaaS billing platform is

  • Why companies use billing platforms

  • Benefits of using Recurly SaaS billing software

What is a SaaS billing platform?

A SaaS billing platform allows subscription businesses to automatically bill their clients at predefined intervals, and has features that maximize revenue in the short- and long-term.

Why do companies use billing platforms?

Here are seven reasons why companies use billing platforms. 

1. Streamline your recurring billing

Without a SaaS billing platform, the quote-to-cash process can be tedious and inefficient. A salesperson has to hand off a signed contract to the finance or accounting department, and an invoice is manually generated. To make matters worse, there is an elevated risk of errors.

By automating the quote-to-cash process, however, you increase efficiency and reduce errors.

2. Give your customers a seamless payment experience

In the past, you may have been able to get away with only accepting credit cards, but those days are long gone. If you don’t allow a customer to pay via their preferred payment method, there’s a high chance they’ll take their business elsewhere. In addition to accepting credit cards, you should accept alternative payment options, such as PayPal, Apple Pay, and Venmo.

There are seven steps involved in processing a payment, so you need to optimize each step to deliver a seamless payment experience to your customers. You should give special attention to your payment gateways, however.

The best gateway depends on your geolocation and product type, so it may vary from transaction-to-transaction; by making the right choice, you can increase acceptance rates, lower processing costs, simplify reconciliation, and mitigate risk. And don’t overlook the possibility of a gateway outage—Recurly, for example, has gateway failover, allowing you to use a backup during outages.

3. Reduce involuntary churn

Involuntary churn accounts for 53% of churn, on average, so you’re probably losing a lot of customers who would prefer to continue using your SaaS subscription. 

A top-notch SaaS billing platform reduces involuntary churn by proactively updating card details, retrying transactions with a data-driven approach, and systematically reaching out to customers. 

4. Support a global expansion

As a SaaS company, you can create a global operation—if you haven’t already—as you don’t need a physical presence in every country you sell your subscription. But this brings new challenges, such as different currencies, languages, payment scenarios, and tax scenarios. You could try to manage all of this with an in-house solution, but you’re likely to end up with overwhelmed accounting and finance teams and countless errors.

A better option is to find a billing platform for SaaS that allows you to expand into your countries of choice. Recurly, for example, supports over 140 currencies and 18 different languages, and can help you handle a variety of payment and tax scenarios.

5. Recognize revenue

As a SaaS subscription business, you probably offer monthly and annual subscription options. 

Say your monthly option is $100, and your annual option is $960, with an upfront payment required for each option. On January 1, 2022, you have one customer buy a monthly subscription and another buy an annual subscription, giving your company $1,060 in payments. You wouldn’t record all $1,060 as January revenue, however, as the $960 was paid for a subscription to be provided through all of 2022. So, the January revenue would be $100 + ($960/12) = $180. And you would record $80 a month in revenue for the rest of the year, assuming the subscription isn’t canceled.

The above example seems simple and straightforward, but imagine calculating this manually for dozens or hundreds of subscriptions. On top of that, the start-date is not always going to be the first of the month. With all that in mind, it’s important to get a SaaS billing platform with a revenue recognition tool.

6. Run promotions

The marginal cost of “producing” a SaaS subscription is usually low; you may have higher customer service costs, but likely not much else. So, you should do everything in your power to acquire new customers, as a high percentage of the revenue is going to make it to your bottom line.

The quality of your subscription and marketing are key factors in customer acquisition, but there is usually a lot of competition in SaaS niches, and you may need to provide incentives, such as free trials, gift cards, and coupon codes, to get some customers to purchase your SaaS subscription. Look for SaaS billing software that not only allows you to offer incentives, but also provides flexibility in how you offer incentives.

7. Integrate billing with your entire tech stack

You’ve probably realized that a quality SaaS billing platform saves time and reduces errors. Here’s another way it does that: by integrating seamlessly with your existing tech stack—particularly with your sales, accounting, and payments systems. Let’s look at these one-by-one:

  • Sales: without a billing platform for SaaS, your sales team is forced to spend time manually creating new accounts in your subscription billing platform. This pulls your sales team away from higher-value activities and increases the risk of errors.

  • Accounting: it’s important that your billing software transmits properly formatted data to your accounting system, so you don’t have to institute manual workarounds.

  • Payments: we touched on the importance of payment gateways earlier, so you probably won’t be surprised to hear about the need to find subscription billing software that integrates with your gateways.

You should review your tech stack and see what else needs to integrate with your SaaS billing platform—the answer varies depending on your company. The next step is to see whether prospective vendors can accommodate your company. Here is a list of Recurly’s integrations.

Benefits of using Recurly SaaS billing software

By finding the best billing service for SaaS business, you set your company up for sustainable, long-term growth. Here are a few more benefits of using Recurly SaaS billing software:

  • Get value from the platform in weeks, not months. The typical time to launch for our customers is 46 days. Recurly’s Learning Paths onboarding series expedites the learning process for different types of end users.

  • Reduce involuntary churn. It’s all well-and-good if a SaaS billing platform has a fancy revenue recovery process, but what really matters is results. With Recurly, merchants have seen average involuntary churn go from 6% to 1%. 

Use the leading SaaS billing platform. As a SaaS company, you encounter industry-specific challenges and opportunities, so it’s important to use a vendor that has experience helping others in similar situations. Recurly helps thousands of SaaS businesses improve performance.

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