7 Common Billing Issues and How To Solve Them Like a Pro
The debate on whether to switch to the subscription model or not is long over. What started as a way for newspapers and magazines to attract readers is now widely preferred among eCommerce companies, a market predicted to reach $2419.69 billion by 2028.
Furthermore, Gartner reports that in 2023, 75% of the businesses that are still selling directly to users will be switching to a subscription model.
However, it is estimated that only 20% of those new players will succeed in achieving customer retention.
One of the reasons for this is because of the many common recurring billing issues subscription businesses face.
If you’re already selling subscriptions, you know that without the right tools, recurring billing is no walk in the park. Here’s a rundown of everything we’ll be discussing in this article:
What is Recurring Billing?
As a subscription business, your goal is for customers to keep coming back for your services, which means you must continue sending invoices.
This is referred to as recurring billing, a payment strategy employed by subscription companies, where users are charged regularly, typically monthly or yearly. Simple, right? Though in theory, you would think so, but in execution, it’s more complicated than imagined.
This process, although highly rewarding for SaaS developers when done right, as it creates predictable revenue streams, allowing them to better forecast and budgeting, can reveal several billing issues that could easily take a toll on the overall health of your business if not thoroughly contemplated.
Benefits of Automated Invoicing
Before we get into the challenges SaaS businesses face, let’s consider all the advantages of recurring billing.
1. Reduced Workload
Once you employ a robust automation tool to streamline invoicing, the administrative overhead is significantly reduced, and your team can focus on other aspects of growing your Saas business. You can save time and money without giving up on scaling your business.
2. Predictable Revenue
This is probably the biggest advantage recurring billing offers software and SaaS businesses. Automated invoicing offers product developers predictable revenue streams, making it so much simpler to forecast revenue and build future growth strategies.
3. Improved Cash Flow
Because automated invoicing reduces the risk of failed payments, it can significantly improve cash flow. Having everything streamlined and being able to predict and rely on your company’s available funds gives you great freedom and flexibility.
4. Increased Customer Loyalty
Billing is a sensitive issue in your relationship with your customers, especially when it comes to high international transactions. The more transparent and streamlined the process is, the more your customers will feel at ease and trust your brand.
The 7 Billing Challenges Subscription Businesses Face
1. Failed Payments Leading to Revenue Loss
All customers face churn. That’s a fact. But it’s one thing to lose customers because they’ve decided to stop using your services, and a very different matter to say goodbye because of failed payment attempts.
Imagine having a simple glitch in the transaction process cause a payment failure resulting in lost revenue. Involuntary churn is really painful for SaaS developers because it could have been avoided with the right payment partner.
Failed online payments happen for several reasons, from insufficient funds to incorrect payment details or even connectivity problems. And without an automated invoicing system, problems can frequently occur, causing significant revenue loss.
One of the ways recurring billing solves this problem is through effective dunning management. This process identifies the failed transaction in a timely manner, and then performs several payment attempts to successfully complete the transaction In addition to these measures.
It also sends the customer in question several payment reminders in case the online transactions continue to be declined and requires them to update their payment details.
What is even better is that this system can be proactive, and here’s how. By sending pre-dunning emails, your customers are informed that their credit card is about to expire.
You can even work together with your users to have multiple options for backup payment methods in place to fall back on in case the primary option is declined.
2. Overcharging or Undercharging Customers
Using an outdated or manual billing system can lead to costly mistakes you simply cannot afford to make in the competitive subscription market. Undercharging customers leads to revenue loss.
Overcharging them, on the other hand, triggers customer loss. Either way, you are on the losing side, and that’s obviously not something you want.
The simple way to solve this problem is by using a solid and reputable recurring billing system that accurately calculates the amount due while managing all changes that might have appeared in each customer’s account.
This can include anything from upgrades, coupon codes, or discounts to account cancellations.
Learn 5 more billing issues and how to solve them on PayPro Global's Blog.
