5 Billing and Pricing Challenges Facing Today's SaaS Companies

Driving a car-share home from work and finding a meal prep box at the door that you cook while watching a movie on Netflix is becoming a typical evening for more and more working adults, but this was much less ordinary about five years ago. Subscription-based services are rapidly growing in different industries every day, and with them, companies are facing billing and pricing challenges that they had never faced before. Setting the pricing for a new product and ensuring that it both maximizes profit and retains customers is no small feat for traditional offerings, and it is even harder for subscription-based ones. 

 

1. Creating overly complicated pricing models

Price segmentation is one of the best tools to match your customers' interest in your product offering. A simple example of this is movie theatres that offer both regular pricing and matinee pricing - each of these having their own ideal customer and market. While tiered pricing similar to that of movie theatres can be easily understood by most customers, it is still not supported by most out-of-the-box accounting systems. For SaaS companies, segmentation techniques tend to be much more complicated and involve completely different pricing models to accommodate as many customers as possible. This becomes problematic when the pricing structure is too complex for your accounting system to manage, too difficult for your customer base to understand, and results in more time spent managing overhead than the added revenue it might bring in. Having a powerful system that can support different pricing models in each contract is one way to streamline your pricing and find a balance between pricing flexibility and operational simplicity. 

 

2. Automating invoicing and renewals

With two or three contracts, renewals are tedious, but not impossible to manage manually. Each renewal requires the same process to be done and this time-consuming and repetitive task takes accounting departments many hours that could be better spent otherwise. These manual processes are also error-prone and can result in even more time spent fixing mistakes and trying to re-win customer trust, and the problems only grow as the number of contracts to be renewed grows. This is why having a system capable of managing automated renewals with the intelligence needed to adjust their respective contracts and customer records is so beneficial, and for most SaaS companies, a necessity more than a luxury.

 

3. Measuring customer consumption and activity

Usage or consumption-based billing is the pillar of many SaaS companies' pricing models.It appeals to customers because they only pay for the quantity of data storage, internet minutes, or whatever good they are using; and allows companies to be flexible. However, it requires the ability to measure customer consumption and activity accurately and in a timely manner, and have the data flow from end-to-end without errors or discrepancy between different systems. 

 

4. Unifying data across all systems involved in the quote-to-cash process

For many companies, each step of their sales process is locked in a static file or spreadsheet that can be inconsistent with a different one, and that leads to a loss of data integrity and an inability to reliably use their records. The likelihood of disaster is exponentially higher for SaaS companies who have even more variables that can be changed, and so, a higher likelihood of these mistakes. This lack of unification is not fully resolved by using an ERP; however. For salespeople, ERPs are secondary systems, and they are much more likely to be operating from a CRM system. Similarly, management teams are not likely to explore their company's ERP to create annual forecasts and make their business decisions unless they can rely on easy-to-read reports with accurate data. This is why a solution capable of integrating the data from a CRM system and process it within the company's ERP, and then produce the results and reports that the company needs to make business decisions is so critical.

 

5. Revenue reporting and forecasting

Recurring revenue is the lifeblood of every SaaS company. Reporting on it can show the company what its future outlook is and help improve its strategy and ability to adapt to changes. One of the key reports that can inform a SaaS company about its performance is the Monthly Recurring Revenue (MRR) report. In an MRR, companies can report on their churn rates, their expected revenue for future months, and what the sources of their revenues and expenses are. Without this, they are not capable of making truly informed decisions for the company's future. 

 

The Subscription Billing Suite (SBS) by Binary Stream is a comprehensive solution to quote-to-cash challenges with flexible solutions to complex problems. SBS provides consistent and reliable invoicing for a wide range of pricing models, and allows you to take control of your deferrals process and recognition schedules at the line item level. Contact one of our solutions experts to learn more about Subscription Billing Suite for Microsoft Dynamics GP, Microsoft Dynamics 365 Business Central and Microsoft Dynamics 365 for Finance and Operations.