SaaS billing best practices
SaaS (Software as a Service) companies operate through recurring revenue. Most use subscriptions, licensing services, and pay-on-demand schemes. But how do you ensure people pay every time a bill is delivered? Ill-conceived billing plans are some of the reasons why most SaaS companies fail.
10 May, 2022
SaaS (Software as a Service) companies operate through recurring revenue. Most use subscriptions, licensing services, and pay-on-demand schemes.
But how do you ensure people pay every time a bill is delivered? Ill-conceived billing plans are some of the reasons why most SaaS companies fail.
SaaS customer success strategies must include a game plan that employs best practices about billing. Some examples include proper bill delivery, revenue leakage prevention, and reduced churn, which must be integrated into SaaS design and development to guarantee success.
What Is the SaaS Billing Model?
There are generally four types of billing models that SaaS companies can choose from:
Pay-Per-User
The pay-per-user method follows the pay-per-license billing model of traditional software, based on the number of copies of the software installed on a workstation. The pay-per-user idea counts the number of users (i.e., accounts) registered to use the platform to determine the price.
Pay-As-You-Go
The pay-as-you-go model charges users for the volume of resources they consume using the SaaS. If they want more features, they may pay for them in advance as another transaction. For example, the company may bill them for storage space.
Freemium
The freemium model allows users to access the basic version of the software with limited but functional features. They can upgrade to a paid option that has more at any time. Some SaaS companies only offer the free version for a limited time as a preview to guarantee eventual revenue.
Tiered Pricing
The tiered pricing model is like the pay-per-user model, which charges users based on the number of accounts, though this time, it combines features exclusive to more premium plans.
SaaS Billing Best Practices
To take advantage of the SaaS business model to its fullest, you need to know your way around its revenue channels. Here are some best practices for SaaS billing to follow.
Use a Simple Billing Method
Make your billing method as simple as possible, removing barriers that might push consumers to abandon the process. Present your options in clear, easy-to-understand language while communicating the value that each can offer your customers.
Use automated features such as invoicing, billing reminders, and various payment methods to facilitate the process.
Prevent Revenue Leakage
Revenue leakage refers to gaps in your billing method where customer payments might slip. Prevent these by having a process to send reminders about upcoming bills, notifying customers about their payment methods (e.g., when a card is declined or about to expire), automating invoicing and payment collection, and having proper billing from your vendors.
Focus On Churn Reduction
Retaining customers is just as important as acquiring them. Creating strategies focused on reducing churn, either by providing extra features or offering discounts, is an effective way to inject it into your billing practices.
Get Insights from Billing Data
Your billing data can tell you about your customers and your financial prospects. Use it to get insights about what else you can provide customers and how you can improve their experience and derive your revenue projections from them.
Upsell and Cross-Sell
If you’ve already proved yourself as an exceptional SaaS business, your existing customers will likely re-purchase from you. Study their usage data to gather insights about what other products you can upsell and cross-sell to them, like other features, discounted upgrades, complimentary gifts, etc.
Be a SaaS Company That Wins
To be a great SaaS company, you must put user experience (UX) at the forefront. Integrate value for your customers into the interface of your products, from setup to use to billing. Reach out to a professional from Merge, a user interface and design (UI/UX) development agency that can help you turn your ideas into SaaS products that win.
