Billing is one of the most important parts of running a successful business and allows businesses to accept payment from customers. A good billing system is the one that is working correctly without you ever noticing it exists. Faults can start growing to a massive scale pretty quickly when your billing system is not working properly and can result in frustrated customers, lost income and negatively affect business reputation.
Building a custom billing system is costly, time consuming and involves a lot of complexity. SaaS billing solutions make the process easier by automating the billing processes. This allows businesses to focus more on delivering great products/services and customer services instead of spending a lot of time on administration tasks.
Components of Billing Management Solutions
Different components of billing systems can overlap in functionality, which makes it important to understand the key differences between these components. The major components of a billing management system include:
It is the customer-facing component that is linked internally to other components and connects the billing system with online payment systems. It allows businesses to accept payments through different channels, including credit cards. Billing systems from reputable providers are PCI (Payment Card Industry) compliant, which saves businesses from a lot of hassle associated with complying to different standards.
Many providers offer behind-the-scenes merchant accounts that the businesses might not even be aware of. These are like virtual bank accounts that can accept online payments from customers, which can then be transferred to a business account.
Subscription/Recurring Billing System
This is an important component of the billing system that ensures that the right amount is charged to the right customers at the right time. It’s like the brain of the billing system responsible for generating invoices, collecting CC information, pricing and managing other aspects of subscriptions.
Analytics, Dunning and Revenue Recognition
The analytics system provides businesses with actionable insights into sales and customers. The information helps the management make informed decisions and optimize things such as customer retention, marketing policies and pricing. Dunning tools keep customers’ credit card information up to date and are designed to mitigate the negative impact of failed payments.
These tools keep track of credit cards that are about to expire and remind customers through follow ups to update the CC information. Some dunning tools follow up with customers only when a charge bounces, while others are proactive and take action in advance. Revenue recognition systems are designed to ensure that revenue is booked only for delivered products/services.
The User Interface and User Experience
The UI/UX is sometimes not given the importance it deserves as it defines the overall user experience. A complex and difficult-to-learn billing system can negatively impact the adoption rate and make it difficult for users and customers to navigate the UI. An intuitive and easy-to-use billing system increases adoption rate and decreases the costs related to training.
SaaS/3rd-party vs. In-house Billing Systems
The pros and cons of in-house and 3rd-party systems are almost the same as benefits and challenges of SaaS solutions, which we have already covered in a dedicated post. On-premises or in-house systems have higher upfront and maintenance costs, but they provide businesses with more control over their data and are highly customizable. Businesses still have to interact with a third-party solution for things like card authorization.
Building a billing solution is a time consuming process, which makes it suitable for large businesses that have the financial and human resources to get it right. Once fully developed, the per-transaction and recurring costs of in-house systems is lower, while businesses can also give immediate attention to issues as they are the only customer of their billing solution.
3rd-party and SaaS solutions might be less customizable, but they work great for businesses (especially SMBs) that want to get started quickly and don’t have the resources to handle complexities associated with manually running a billing system. However, transaction-based fees mean businesses will end up paying more in the long run.
Things to Consider When Buying a SaaS Billing Solution
In the past, businesses had to choose between different billing components and combine these components to create a complete billing stack. Functionality of billing systems has increased significantly in recent years, thanks to advancements in technology and more players entering the market/more competition. Many providers now offer hybrid billing solutions that include two or more components, including the subscription layer and payment gateway.
Billing systems are no longer limited to finance and sales and are also being used by other departments, including operations, marketing and customer services. A billing solution can not only impact sales and finance, but other areas as well.
Large or fast growing businesses need more complex and customizable solutions. Extra functionality and customizability means higher costs, but not all businesses need these, so there is no point in spending money on features you’d never use. The billing system should fit business requirements and cover the required parts of the billing system. Some key questions businesses need to ask when choosing a system include:
- Which parts of the billing system are needed and which parts does the billing system cover?
- Do you want a comprehensive AIO system or are willing to mix-and-match different services to cover your process needs?
- Is the solution scalable, flexible and able to meet future needs?
- What is the total cost of the solution including monthly, setup, training, deployment and transaction fees? Most providers don’t charge a recurring monthly fee and only charge on per-transaction basis
- What is your transaction volume? Compare different billing solutions based on the monthly average of transactions. Businesses with a large transaction volume are in a better position to negotiate prices.
- Does the billing system support integration with other solutions you are using or plan on using in the future?
- Do you process one-time (setup, training etc.) or recurring payments (e.g. monthly fees) or both and does the solution support it?
- Does the billing system work in countries and currencies a business operates? Majority of billing solutions support major currencies, but country support is limited.
- Does it come with all the features you need, including integration support, analytics and mobile support?
Key Features to Consider
Billing management systems have come a long way from just being limited to a few processes and vary in terms of functionality and features. Not all businesses need a comprehensive set of features and functionality, so in addition to the core functionality, they also need to consider other key features including:
Discounts, Coupons, Subscription Tiers
Subscription management tools enable businesses to manage pricing tiers if they don’t already have a model in place. This functionality works especially well for businesses that have a complex pricing model and/or frequently offer discounts, coupons etc.
Billing systems can be integrated with a variety of other solutions such as communication and customer services. The billing system should support all the systems currently in use as well as systems you plan on implementing in the future.
Built-in analytics tools allow businesses to understand the information associated with billing. Some billing solutions just provide basic information, while other systems provide in-depth information, which helps decision makers better understand key performance indicators such as customer churn and enable them to optimize MRR and make more informed decisions.
Tax Handling and Invoicing
Many billing systems allow you to invoice directly to customers without having to use another platform. Automatic tax handling makes the process easier and minimizes chances or error usually associated with manual work.
Mobile payments might not be a requirement of all businesses, but a large number of customers prefer contactless payment methods such as Apple and Google Pay. Businesses need to ensure that the platform supports mobile payments as required and provides a seamless mobile payment experience.
Card Failure Handling
Credit card failure can lead to churn, which in some cases can be up to 50%. The billing system should be able to address this issue in some way such as proactively sending notifications that a card is about to expire.
Top 5 SaaS Billing Management Solutions
Businesses that want a lean billing solution only need a merchant account and a payment gateway, while some only need subscription management platforms, which are not part of all solutions. Solutions such as Stripe and Braintree work well for startups and small businesses with simple billing needs. However, more complex billing processes means more sophisticated and hybrid solutions.
Stripe is a straightforward and easy to use payment gateway with a subscription layer (hybrid) as well as a subscription management platform. However, businesses might want to consider integrating it to another subscription management platform if they need advanced functionality. It can be set up in just a few minutes, thanks to the built-in APIs and flexible integrations.
It simplifies the billing process by eliminating the usual pain points associated with setting up a billing system. Small businesses can start with minimal upfront costs, but the ‘per card charge’ can cost more in the long run if a business generates a large volume of transactions. This makes Stripe suitable for businesses that don’t deal with a large volume of transactions and want to get started quickly. The provider does offer volume discounts, but the ceiling to avail such discounts is pretty high.
- Volume discounts
- Country-specific rates
- Multi-product discounts
- Deployment services and technical account management
- Card holder support for 135+ countries
- Credit cards, mobile wallets, direct debit/credit and checkout, local payment methods
- In-person payments through Stripe terminals
- Subscription management
- Intelligent revenue optimization
- Dynamic 3D secure
- ML Fraud Protection
- Smart dunning
- Mobile SDKs
- Local routing
- Dispute remediation
- PCI compliance, PSD2/SCA ready
- Reporting and business analytics
- Custom reports and insights
- Financial, accounting and tax reporting
- Accounting/ERP/CRM integrations
Baintree is similar to Stripe as it charges on a per-transaction basis, but it also allows using any gateway. Consolidation of multiple payment methods under a single platform and cross-platform compatibility including websites and mobile apps helps businesses save time. However, it can get expensive if the transaction volume is medium-high, while you also have to be ‘big enough’ to qualify for volume discounts. Standard per transaction pricing starts from 2.9%+$0.3 (no monthly fees, minimums or hidden fees).
The solution comes with a payment gateway, a merchant account (can also be integrated with another merchant account) and subscription management. The solution is either suitable for small businesses or businesses that are big enough for volume discounts or have a global presence. It is also claims to be the only platform that supports PayPal, credit/debit cards, Venmo (US), e-wallets, buy-now-pay-later and local payment methods, all using a single integration.
- Payment gateway
- Merchant account
- Basic fraud tools
- Data encryption
- Digital migration assistance
- Recurring billing
- 3rd-party integrations
- Advanced fraud tools
- Interchange+ pricing options
- Additional features include
- Account updater
- 3D Secure
- Kount Custom
- Single integration for all payment methods
- Web and mobile optimized
- Supports CC/DC, e-wallets, buy-now-pay-later and local payment methods
- Integration with shopping cards, recurring billing, accounting, card swipe, analytics, CRMs, Zapier and other systems
- Integration with enterprise plugins including Demandware, IBM Sterling Commerce, Magento, NetSuite, Oracle, Salesforce and SAP
The full-stack solution goes well beyond payments and subscription management and also covers customization of payment pages, storefront optimization as well as back-office services. This makes it a one-stop shop for businesses that want a cohesive experience for their customers. Automatic cosmetic pricing localization means customers see prices in their local language and currency. The solution enables businesses to design their billing system from scratch while maintaining a consistent user experience.
The premium features come at a price, which is higher than the competition. It’s not among the most affordable options, which makes it more suitable for medium to large businesses. It might not be the best option cost wise for businesses in their early stages or small/local businesses. But on the other hand it allows small businesses to start from scratch and start building customized payment pages. Features like built-in payment routing minimize failed payments and help track payment activity.
Although FastSpring offers its solution for both retail/physical goods and software/SaaS/digital downlolads businesses, it is better known for its digital product solutions. Pricing is available through an online quote and varies on selected features and sales volume.
- Global online payments
- Risk management and compliance
- 15-factor algorithm for detecting fraud, PCI DSS, GDPR and more
- Subscription management
- Recurring billing
- Customizable payment pages and checkout
- Global financial services
- Built-in payment routing
- 15+ payment methods including Visa, MasterCard, Amex, PayPal and Alipay
- Third-party integrations including Google Analytics, Adroll, WordPress and Impact
The WordPress plugin works well for businesses that run on WordPress. It allows them to sell and manage subscriptions, products and curate memberships. It is suitable for businesses that want to get started within minutes by simply plugging in the solution to their WordPress site. However, users looking for deeper customization might have to spend some time getting around the solution.
The hybrid solution includes a subscription management system, merchant account, dunning and analytics and can be integrated with a variety of billing solutions. Billing profiles and flexible payment options allow businesses to sell any type of product/service/subscription, while businesses can also integrate and build their own developer tools using built-in integrations.
- Fast and easy installation
- Dynamic checkout page
- Simple member import
- One-click upsells
- Recurring subscriptions
- Billing integrations
- One-time purchases
- Prorated upgrades
- Coupon codes and gifts
- Access controls
- Members management
- Overdue payment notification
- Reporting and analytics
Chargebee (Subscription Management)
The API layer allows businesses to handle a wide range of their billing processes, including recurring payments, subscription management and analytics. Ability to customize subscriptions makes the solution highly scalable and more suitable for companies that have moderately complex pricing models in place. Businesses can quickly get started for free for the first $50K in revenue, which makes Chargebee a great option for companies that want to get the real-world feel of the solution before going all in.
Chargebee does not allow handling of multiple currencies using a single dashboard, which means the analytics and information will be fragmented for global companies with presence in many countries. Making sense out of all this fragmented data can be a lot of work and not something most global businesses would be willing to spend time and money on.
- Billing automation
- Recurring payments
- Subscription management and invoicing
- Reporting and analytics
- Accounting and taxes
- Customer portal
- Coupons and discounts
- Full-API checkout
- White labeling and custom domain
- Fraud management
- Tax profiles
- Lifecycle emails
- Accounting, tax, sales, marketing, data collaboration, service, affiliate marketing and analytics integrations
With so many systems to choose from, it can become difficult to pick the right one. Many of these solutions overlap in functionality, but understanding your own requirements and identifying the functionality you need makes the task easier. Businesses also need to consider their future needs and expected growth, and choose a system that is in tune with their pricing model. That’s why they should take time and compare different solutions with their own requirements and carefully evaluate if an all-in-one solution would serve better or using multiple services together is the right fit.