What’s needed in the next generation of SaaS billing?

Have you thought about your SaaS billing lately? 

Have you sat down and considered the trajectory of subscriber tastes, industry billing trends, and whether your department can measure up to where SaaS billing is headed in 2024 and beyond? 

These are crucial questions for any SaaS CFO.

In this blog, we’ll explore 1) The trends shaping the next generation of SaaS billing and your role in crafting profitable billing strategies, 2) The billing and operational limitations of legacy accounting tools, and 3) What your tech stack strategy should be to ensure that your business can handle next-generation SaaS billing.

Let’s get started. 

The SaaS billing landscape has evolved

SaaS billing has changed quite a bit in recent years. 

In the past, fixed-price strategies or other simple SaaS subscription models tended to be the norm. 

Software companies would sprinkle in free trials or discounts to spice things up, but SaaS product pricing and billing tended to be very straightforward.

Today, that’s no longer true. 

User tastes have evolved, and flexible pricing strategies such as usage-based SaaS billing now enjoy widespread popularity. 

That isn’t all that’s changed, though.

Something else has evolved, too… your strategic responsibilities

In light of these changes, SaaS CFOs are now counted on to make sure of two strategically important things.

• Your pricing model is the best choice to drive recurring monthly revenue for your SaaS business.
• Your tech stack has everything necessary to support the often-complex billing needs of modern SaaS companies.

Due to these new financial obligations CFOs are shouldering, legacy finance tools are no longer a good option. 

Frankly, they haven’t been for a long time. 

But why are they especially risky if you’re considering experimenting with nuanced pricing plans?

Legacy finance tools are failing modern SaaS CFOs

For subscription businesses, streamlined and profitable SaaS billing doesn’t just magically fall into place. 

It’s the outcome of careful strategic planning paired with a tech stack that enables accurate and efficient billing at scale.

Unfortunately, legacy tools are failing today’s SaaS CFOs in both respects. 

For one thing, they don’t supply the robust forecast functionality that finance leaders need in order to rapidly and accurately test the effects of different pricing structures. 

This leaves companies in the dark about the relative effectiveness of their SaaS pricing.

Beyond that, legacy software lacks advanced features–such as touchless invoicing–that promote billing scalability and eliminate manual errors. 

A tech stack strategy is your solution to this problem.

Modern SaaS companies need a modern tech stack strategy

In order to be certain your tech stack can stand up to the rigors of modern SaaS billing, you need to stop and take stock of your exact operational needs. 

In other words, you need a tech stack strategy.

What should your strategy include to pave the way for next-generation billing?

Prioritize tech stack integration

The gold standard tech stack for SaaS billing is an integrated solution with everything you need in one spot. 

By contrast, CFOs who use legacy tech stacks tend to cobble them together from different software products to make a “homegrown” stack. 

Reports and SaaS metrics are in one app, customer payment information is stored in another, subscription management tools are located elsewhere, and so on.

This is a non-starter. 

Finance leaders need a unified accounting solution with everything in one spot, from reports and forecasts to analytics tools, payment method storage, payment gateway and payment processor, and additional features that make billing seamless.

Embrace touchless invoicing

Touchless invoicing is an essential feature for SaaS businesses looking to streamline their billing processes. 

By automating billing and invoicing, SaaS companies can reduce manual processes, minimize errors, and improve billing accuracy. 

Here are some reasons to embrace touchless invoicing:

• Automated billing processes save time and resources for SaaS companies.
• Automation ensures that invoices are sent promptly, improving cash flow.
• SaaS businesses can benefit from automated payment reminders and recurring invoicing.
• Touchless invoicing provides a seamless billing experience for customers, improving customer satisfaction.

What else should be part of your tech stack strategy?

Strategic billing calls for real-time data

No matter what business model you’ve decided on, access to real-time data is crucial for effective SaaS billing. 

You should view anything less than that as a liability.

Your accounting software should make billing data available to you and your team the moment it’s collected. 

For instance, if you’re experimenting with usage-based pricing, you can’t tolerate delays in your customer usage reports. That lengthens your billing cycle and harms your cash flow.

Don’t compromise on real-time data. 

Robust scenario planning supports profitable pricing and billing

With the rise in non-traditional SaaS pricing models, CFOs’ forecasting responsibilities have grown considerably. 

SaaS finance leaders need to forecast the effects of different billing methods on the company’s revenue streams to ensure they’ve chosen the best path forward.

Cloud accounting software is the clear winner in this arena because:

• The cloud enables algorithmic scenario planning: Modern accounting tools leverage artificial intelligence (AI) technology and machine learning (ML) algorithms to create real-time forecasts. Algorithmic forecasts change in real time as you alter your starting assumptions, making them an invaluable tool for quickly comparing billing scenarios.

• Cloud-based forecasts are more reliable: Automated forecasts are more accurate than their manual counterparts because they eliminate manual workflows. They can also project further out than legacy forecasting methods can.
• Modern software has better data models: Legacy finance tools lack the right financial models for forecasting usage billing scenarios and other flexible pricing methods. Modern accounting software, on the other hand, comes packed with advanced data models to help CFOs leverage the latest pricing and billing techniques.

Cloud-based SaaS forecasting should be part of your tech stack strategy.

Look for a tech stack that can scale with you

Can your tech stack grow with your company? 

If so, to what extent? 

Neglecting to ask these simple questions can cause serious inconveniences. 

You might have to upgrade your tools much sooner than you’d hoped, rerouting valuable time and resources from your strategic planning.

Don’t risk it. 

Look for a cloud-based accounting suite that instantly scales up or down to reflect your current transaction volume. 

Otherwise, you’ll eventually hit scale-related billing bottlenecks where your system’s performance suffers or possibly fails altogether.

As a finance leader, cloud software makes a real difference in helping you skip the growing pains that come with scaling a company.

Billing model flexibility is at a premium

To keep up with modern SaaS billing, CFOs need SaaS billing software that can handle the full range of today’s popular pricing methods.

Your billing platform should support:

• Usage-based pricing
• Hybrid pricing models
• Freemium billing
• Feature tiers, per-feature pricing, and more

Don’t let an outdated tech stack limit your subscription billing options.

Data silos complicate SaaS billing

Data silos are a common problem in SaaS companies, and they hinder efficient billing processes. 

By investing in the right SaaS billing solution, SaaS CFOs can break down data silos and improve billing flexibility.

Data silos prevent the seamless flow of information at a company. 

For effective SaaS billing, that can’t be tolerated. 

CFOs need to make sure that data can flow between different tools, such as customer management systems and billing software, and between different departments at your company.

Data silos are also a risk to the quality of your customer service. 

By sequestering customer data such as payment or billing information, silos make manual billing errors much more likely. 

Be sure to opt for a centralized accounting solution that tears down data silos.

Don’t forget about revenue recognition

On top of everything else we’ve talked about, you should go the extra mile to be certain your tech stack can handle advanced revenue recognition scenarios. 

If your accounting system lacks the revenue recognition flexibility you need, you’ll leak a non-trivial amount of your annual revenue.

By selecting a cloud-based accounting suite with automated ASC 606 management, you can avoid non-compliance fines, eliminate revenue leakage, and streamline one of the most tedious workflows in SaaS finance.

RELATED: SaaS Revenue Recognition: A Step-By-Step Expert’s Guide

Always vet your software vendor

The last piece of your tech stack strategy is thoroughly vetting your software provider. 

How much experience do they have serving companies like yours? 

Can they cater to your precise financial needs and challenges?

Does their product feature the latest AI technology to help you streamline billing and other vital tasks? 

Can it run forecasts almost instantly, send automated invoices in as little time, and connect with customers’ debit cards or a company credit card for frictionless transactions?

They should also offer a free trial or product tour to allow you to assess their tools. 

Just as crucially, make sure they provide personalized training and support to get you and your team up and running with your new software if you buy from them.

Why is early-stage SaaS billing especially important?

For CFOs of early stage SaaS companies, billing is especially critical. 

Your company doesn’t have the marketplace clout of a more established enterprise, so users might be more hesitant to give your product a go.

By making sure your tech stack can support optimized SaaS billing and modern pricing plans, you can strategize your way around that disadvantage. 

But only if you’ve got the right tech stack for the job.

Sage Ahead is custom-built for your financial needs

Sage Ahead is a cloud-based accounting suite designed to help early stage SaaS CFOs scale from seed to IPO and beyond. 

The software is fully integrated and automated, supplying everything you need to grow your company in one centralized platform.

The tech stack includes:

• 500+ billing models ranging from subscription to usage and hybrid billing scenarios, with corresponding revenue recognition.
• Built-in subscription management platform, AP and AR, cash flow, GL, forecasting and reporting.
• 200+ investor-grade KPIs and reports, real-time data, and the latest AI and ML technology.

Sage Ahead can be deployed as quickly as 60 days and costs up to 40% less than buying the components separately. Learn how it can help you.