Use Cases
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Subscriptions have slowly become a significant part of our lives.
We all signed up for streaming services. We have food boxes delivered to our doors on demand. And our favorite apps are paid for at the same time every month automatically.
So, just how does all of this magic happen?
It’s called automated billing, and it’s changing the way we do business. Not only are subscriptions and automated billing services more convenient for our customers, but it also gives our businesses stability through recurring revenue.
With research showing that 70% of businesses see membership and subscription models as the future to further commercial growth, it’s essential that companies looking to get a piece of the subscription pie know exactly what automated billing is and why it’s so crucial for growth.
In this piece, we’re going to look at what automated billing is, why it’s essential for online businesses, and four benefits it brings for companies that implement it.
Let’s dive in.
What is automated billing, and why is it essential for online businesses?
Automated billing is a system that allows businesses to automate routine elements of business like subscription billing, invoice payments, and repeating failed payments.
In other words, technology takes over the mundane task of collecting payments from your customers.
But automated billing does more than just make sure your customers are paying for your service. It can also automatically distribute invoices and receipts, chase up overdue accounts, and maintain an accurate ledger when tax time comes.
Swapping out a manual billing system to an automated one not only saves you money on unpaid accounts and labor, but it’ll also save you time by:
- Eliminating spreadsheets: Without automated billing, you’re probably tracking payments, managing invoices, and keeping track of important tax information in a spreadsheet. Spreadsheets aren’t just time-consuming, but they’re also prone to error. Automated billing does all of this messy work for you.
- Automatically chasing payments: It happens: sometimes customers don’t pay their invoices. Automated billing tracks late payments automatically by trying and retrying your customer’s payment card when a payment fails as well as sending out reminders. If a customer fails to pay after repeated alerts, an automated billing can cancel their subscription without you ever getting involved.
- Making it easier to offer your customers discounts: Offering up a product discount or seasonal coupon code is easy with an automated billing platform. All you have to do is tell the platform what you want to offer your customers, and it can automatically deduct the offer from your customer’s future subscription payments. Easy!
It’s easy to see how—once implemented—automated billing systems can become a crucial part of how you conduct business. As a business grows, the need for automating payments, billing, and invoicing almost becomes a necessity. Founder and CEO of Gotransverse, James Messer, tells Forbes that automated billing is now a key part of any tech toolkit for businesses wishing to grow and prosper.
“A combination of one-time purchases, subscriptions, and usage-based consumption pricing is critical to driving digital growth,” he says.
“You cannot support that combination of pricing models and maintain a positive customer experience without accurate and timely automated billing in a timely and consistent way that makes the cash influx more predictable.
“With the right automated systems in place, it’s relatively easy to change service models and pricing to fine-tune and test new business ideas that drive growth.”
Yet it’s also important to note that, just as not every business is the same, neither is every automated billing solution. If you choose to switch to an automated billing system, you must select one that fits your business goals, customer expectations, and accounting processes.
If you choose the right automated billing service, you’ll be rewarded with these four benefits.
4 Ways SaaS Companies Can Benefit From Automated Billing
1. It Simplifies and Automates Subscription Billing
Think about how much time you currently spend compiling invoices, chasing payments, and sending out payment receipts.
We bet it takes up a lot of your day. Automated billing can put these repetitive (but super important) tasks on autopilot.
Here’s an example. Let’s say you have a customer who has a software subscription with your company and pays on the last day of every month. So, when the end of the month gets near, you compile an invoice, send it out to them, wait for their payment, send them a payment receipt, and then balance your books.
That’s… a lot of manual work.
With automated billing, all you have to do is tell your chosen tool what kind of subscription plan your customer is on, such as:
- Pay-per-user
- Freemium/Free-trial
- Tiered User
- Usage-based/Metered Pricing
- Fixed Price
- Prorations
The tool will automatically collect payment from the customer each month, send them a receipt, and reconcile your ledger. Think of it as a way to “set and forget” your subscription payments. Everything from invoice creation to reconciliation is put on autopilot.
2. Dunning Management
Are your customers keeping up with their monthly, quarterly, or annual payments? And how long do you spend trawling through spreadsheets to keep tabs on them?
Manually checking whether or not customer accounts are in the red isn’t just a time suck. It’s prone to human error. If you’ve ever been chasing up an overdue account and wished there was an easier way, there is—without any effort from you.
An automated billing system can automate this entire process—which is referred to as dunning. Now, if you look up dunning in the dictionary, you’ll find this scary definition: “to make persistent demands on (someone), especially for the payment of a debt.” Although it sounds harsh, if a customer doesn’t pay their bills, you need to recoup it so your business survives.
An automated billing tool with dunning management takes over this revenue recovery process, so you don’t have to. Instead of emailing customers and asking when you should expect payment for an overdue invoice, the system will automatically:
- Retry failed payments through the customer’s preferred payment option.
- Remind customers if the card you have on file for them is about to expire so they can replace it before a payment fails.
- Switch customers from a free trial onto a paid plan.
Let’s look at that second benefit: reminding customers about upcoming payments. This is a preemptive approach dunning management uses to reduce churn among customers by simply being helpful. You see, some customers may not even realize their card on file is about to go out of date and would’ve accidentally missed a payment they had every intention of making. By reminding them of this and being helpful, they can change their payment options ahead of time without feeling like you have to chase them for payment.
Of course, once your business starts growing, dunning management becomes even more critical. You can’t manually chase payments forever, and the more customers you get, the list of those missing their payments is sure to grow.
Dunning management aims to stop this from happening. It can:
- Send out a reminder to your customers that a payment is coming.
- Alert them if a payment fails and give them time to rectify it.
- Automatically email a customer if payment continues to fail.
Here’s how dunning works with FastSpring’s built-in dunning features. You can set flexible email reminder notifications at two, five, seven, 14, and 21 days after a customer’s payment method fails, so they have a chance to fix it.
Suppose the customer fails to pay after the final reminder. In that case, FastSpring automatically cancels their account, they’ll no longer have access to your product, and they’ll receive an email alerting them that looks something like this:
Subject: Subscription Canceled
Content:
Hi #{firstName},
Your subscription has been canceled. It ends on #{endDate}, and you won’t be charged anymore.
For more information, please see your subscription details:
#{url}
The best part? All of the payment chasing, emails, and eventual cancellation is made automatically by FastSpring. The time spent by your team trying to resolve the issue? Zilch!
3. Automate Your Revenue Ledger
Ugh, accounting. Every business has to do it, and it takes up a lot of our bandwidth when tax time rolls around.
For companies with subscription-based products, compiling with the standards of ASC 606 of the Generally Accepted Accounting Principles (GAAP)—is essential. The new standards were rolled out in 2014 and require companies with subscription revenues to keep detailed records of every contract and transaction through a 5 step process.
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For businesses that are growing quickly, this becomes more time-consuming and complicated with every new customer that’s onboarded without automated billing.
Let’s take a look at how automated billing can handle these complex ledger needs. A platform like FastSpring acts as your company’s Merchant of Record, meaning it automatically complies with major guidelines and regulations, including the GDPR, PSD2, CCPA, and PCI DSS. It also automatically calculates, collects, and remits taxes under all local and global tax laws, meaning that you’ll always be legally compliant no matter where your products are selling around the globe.
An automated billing tool that acts as a Record of Merchant also takes care of the day-to-day aspects of refunds and chargebacks. With FastSpring, the responsibility of managing refunds and reducing chargebacks is taken on by the software and is resolved no matter if it was a clerical error or the result of a fraudulent transaction.
4. You Can Use Coupons or Discount Codes to Boost Sales
Last but not least, automating your billing gives you another perk—it’s easier to delight your customers with discounts and coupons.
Offering promotional discounts and coupons has become commonplace for software and online vendors. You can now offer seasonal discounts or product promo codes that customers can use when they’re checking out.
If you choose the right automated billing tool, this feature will be included and will allow you to automatically add product discounts anytime you want or issue them out using one-time codes. For example, FastSpring’s automated billing tool has built-in product discounts and coupon codes which customers can use before they purchase a product:
With FastSpring’s product discounts, the discount is automatically added to any purchase so every customer gets it. Coupon codes work a little differently, as you have to choose a start and end date for them. The good news is that if you offer these with FastSpring’s tool, it will then apply the coupon or discount to future subscription charges automatically.
Let’s say you are running a seasonal offer where if a customer signs up for a year, their first six months will be discounted by 30 percent. Instead of manually working out how much the customer owes every month, FastSpring automatically charges the customer the discounted rate until the six months are up and will continue to collect payments based on the full rate.
All you have to do is set the discounted price inside your FastSpring dashboard, and your work is done:
Automated Billing is the Key to Growing Your Online Business
There comes a time in every business when reality hits: we only have so many hours every day, and the more a business grows—the harder it is to get everything done.
For businesses who rely on subscription revenue and online sales, automated has become more than a “nice to have.” It is now the key for businesses to grow comfortably at scale. Managing customer payments manually may be doable if you only have a handful. Still, if you need to invoice and reconcile every payment while keeping detailed records and managing the rest of your business… it becomes an impossible task.
That’s why automated billing is now used by not only the world’s largest companies but also many small businesses, contractors, and freelancers. It’s an easy and risk-free way to optimize your revenue operations and free up your calendar to do what you do best—run your business and keep your customers happy.
