Technology & Innovation

How does a good finance tech stack support better billing?

Can your tech stack handle modern SaaS pricing models like usage billing? Learn more and get expert tips on our blog.

For SaaS CFOs, securing revenue growth and bolstering customer satisfaction are closely linked to your billing model. 

Customers of subscription services have outgrown the fixed price business model as their default choice, preferring the flexibility of usage billing and other methods. 

But you can only deliver that important aspect of the customer experience if your billing system is up to the task.

In this blog, we’ll dive into 1) The industry trends around SaaS billing that you should be aware of as a finance leader, 2) The rise of non-traditional billing models, such as usage billing, that have taken hold among SaaS companies, and 3) A tech stack strategy that will enable you to leverage practically any pricing plan you can imagine.

SaaS billing has evolved. Can your tech stack keep up?

CFOs are expected to leverage SaaS billing strategically

The obligations of a SaaS CFO have changed dramatically in recent years. 

Previously, CFOs were siloed and primarily responsible for historical reporting and similar functions.

Now, your role is of central strategic importance. 

SaaS finance–and especially billing–is recognized as playing a key part in driving customer demand for a SaaS product. 

To adapt to changing user demands, organizations are embracing more flexible billing models that factor in things such as customer usage. 

Various hybrid pricing approaches are also becoming common billing models for SaaS.

In particular, usage billing is growing popular among SaaS companies and customers alike because:

  • Usage billing’s flexibility tends to increase retention rates.
  • Usage pricing lowers the barrier of entry for users to try a product.
  • It enables companies to easily identify and upsell their “first tier” customers.

Even with strong initial growth, a company’s customer base will steadily shrink if users don’t feel that your product pricing fits their needs or level of use. 

That’s why SaaS CFOs are counted on to conduct extensive forecasting and strategizing to find the best billing model for their company.

As a finance leader, it’s up to you to ensure your accounting software can support non-traditional pricing models such as usage billing. 

That calls for a tech stack strategy.

Part 1 of your tech stack strategy: Knowing what to look for

Your tech stack strategy for optimized SaaS billing involves two pieces: 

  • Knowing what you need in your accounting solution
  • Knowing what you need to steer clear of. 

So, what do you need in order to turn SaaS billing from just another finance operation into a genuine profit driver?

Tech stack integration is pivotal for subscription billing

When it comes to tech stacks, it’s not uncommon for SaaS CFOs to assemble their own system piecemeal from different software products. 

For streamlined SaaS billing with modern pricing models, however, this won’t work.

To succeed with usage billing or other nuanced approaches, SaaS businesses need an integrated billing solution that delivers:

  • Financial reporting with all the SaaS metrics you need in real time.
  • Predictive analytics to stay attuned to customer behavior.
  • Touchless invoice automation to eliminate manual billing errors.

What else should be part of your tech stack strategy?

Dynamic scenario planning to help you select the right billing model

When you’ve opted for a usage-based or hybrid monetization model, the accuracy and range of your SaaS forecasting become extremely important. 

Even minor adjustments to your price points can carry dramatic downstream consequences for your bottom line.

Billing forecast model for a SaaS company.

This is especially true if:

  • Your usage pricing strategy features more than one billable event.
  • You’re utilizing a la carte feature bundling with many possible billing permutations.
  • You’re exploring cross-sell and upsell offers on top of usage billing, which is a common practice, and you need to know how to price them.

Cloud accounting software with machine learning (ML) and artificial intelligence (AI) functionality can create accurate forecasts for even the most complex billing scenarios. 

Your finance tech stack should tear down data silos

Streamlined SaaS billing requires centralized data within your department for tasks such as revenue recognition, and more broadly for transparency in your organization. 

The ideal tech stack for streamlined billing should get rid of data silos at your company. 

Why are data silos such a problem?

Revenue recognition data for a SaaS company.

For one thing, manual and siloed revenue recognition is known to be error-prone and carries high leakage rates. 

Beyond that, you need to keep in close touch with stakeholders in sales and marketing, customer success, and other departments to ensure your pricing strategies are playing out as planned. 

With data silos, you’re left relying on email chains and other inefficient methods of communication. 

Your tech stack should supply a single source of truth for optimized revenue leakage and departmental data flow.

Part 2 of your tech stack strategy: Knowing what to steer clear of

Now you’ve got a better idea of what to aim for in your tech stack for optimized billing, let’s look at some risks to avoid.

Tools that aren’t scalable

As we mentioned, legacy finance tools have failed pretty miserably at meeting the needs of today’s SaaS CFO. 

One of the most glaring examples is their lack of scalability. 

Legacy finance tools can’t offer scalable SaaS billing, so you’re guaranteed to eventually hit a point where your system can’t keep up with your transaction volume. 

This will invariably lead to billing errors, customer dissatisfaction, and higher churn rates.

Automated accounting solutions offer the important benefit of being scalable in both directions. 

They enable seamless expansion when times are good, and you can scale back down just as easily if you hit a few bumps in the road.

Tech stack products that don’t deliver real-time data

Real-time data is at a premium for companies deploying usage billing and other variable pricing methods. 

Keep your distance from any tech stack products that force you to suffer through reporting lag or any lapses in data flow.

Role-based reporting data for a SaaS CFO.

Think of it like this. 

An effective SaaS billing method is like a snowflake. It will quickly melt if the surrounding conditions aren’t just right. 

Does your billing strategy match external conditions like the economic climate and users’ changing tastes? 

If not, you’ll watch your plans melt before your eyes.

Real-time data is the missing link that keeps this from happening. 

It allows you to stay attuned to events and trends, and then go back to the drawing board to quickly adjust if needed.

Tools without sophisticated analytics capabilities

CFOs need an effective means of drawing profitable conclusions from their existing data. 

That’s the gist of predictive analytics in a nutshell. 

A simple concept, but it has large implications for SaaS billing success.

Legacy tools without robust predictive abilities leave CFOs in the dark about important billing questions.

For instance, companies that leverage usage billing frequently upsell and cross-sell customers to create additional revenue streams. 

If you have multiple products you could offer existing customers, how do you know which ones would resonate with different user segments?

A cloud accounting suite with predictive analytics AI could review your historical reporting data and make profitable pricing and segmentation suggestions.

Software that can’t automatically collect usage data

If you’re considering usage billing or a hybrid billing model that incorporates it, you’ll need to make sure your tech stack can collect, centrally store, and rate customer usage data.

All three of these elements are essential because:

  • Streamlined usage data collection paves the way to accurate billing.
  • Centralized data storage makes sure stakeholders always have access to usage data when it’s needed.
  • Usage rating, or the ability to assign various prices to multiple billing events, can make usage billing an especially profitable strategy.

Unfortunately, legacy software solutions fall flat in all three of these key areas. 

We would strongly advise against attempting usage billing with a legacy tech stack that isn’t specifically designed for it.

A stellar tech stack is especially important for early-stage SaaS billing

For CFOs at early-stage SaaS companies, billing is an especially pressing issue. 

Younger SaaS companies need every advantage they can get to carve out market share in a highly competitive landscape.

For early stage SaaS CFOs, effective billing plays an essential role in shoring up your number of users, keeping satisfaction high among your subscribers, and enabling you to win your market through superior strategizing.

The big if in all of that, however, is your tech stack. 

Ultimately, the effective use of technology is what enables you to turn your billing strategies into recurring revenue.

Sage Ahead: A tech stack custom-built for you

SaaS billing has entered a new state of complexity, and that trend shows no signs of slowing down. 

Many SaaS companies have moved beyond pure fixed pricing. 

As a finance leader, this puts additional strategic pressures on you that aren’t present with more simplistic pricing models. 

Whether you’re experimenting with usage billing, hybrid billing, or anything in between, your tech stack must measure up. 

Sage Ahead fits the bill.

It’s a cloud accounting suite designed for the financial needs of early stage SaaS companies. 

Built to help you scale from seed to IPO and beyond, the software has everything CFOs need for modern SaaS billing:

  • Cloud-based reporting, forecasting, touchless invoicing, GL, cash flow tracking, and advanced revenue recognition in one solution.
  • Flexibility for 500+ billing models ranging from subscription to usage billing scenarios.
  • Fully automated, with best-in-class design practices and automatic documentation for algorithmic forecast models.

A great tech stack is the key factor for enabling streamlined and profitable SaaS billing. Learn more about how Sage Ahead can help you.