Software Trends in the Billing Arena
Introduction
If you’re reading this viewpoint, you likely have a vested interest in some combination of billing operations, software, and automation. In this discussion, we’ll go deep, be direct, and hopefully broaden your understanding of how software can help (or hurt) your billing transformation goals.
The purpose of this article is to provide you with a refreshed understanding of your software choices when modernizing your billing processes and tech stack. We’ll first outline the table-stakes functions for a SaaS-based billing tool. Next, we’ll highlight seven trends we see in how solutions are evolving to meet your needs. Throughout, we’ll discuss outward expansion of the tried-and-true offerings, emerging software categories, and share a few specific thoughts on a few specific vendors.
An important disclaimer – software is one tool for improving billing automation, business agility, and speed to close. Careful program planning, crafting of the business case, and quality project execution underpin success more so than just picking a cool new technology – more to come on these in future blog posts. Onward.
The Bones of Billing
To discuss trends, we first need a baseline. For just over a decade, SaaS billing solutions worth their salt have checked a core set of functional boxes while leaving other features to third parties with varying levels of productized connectors to partner solutions. At the risk of over-generalizing, the key vendors in Billing have always had strong offerings in:
1. Product, pricing, and discount configuration
2. Invoicing and bill cycle operations (with 3rd party help from tax platforms)
3. Payment processing and cash applications (with 3rd party help from payment gateways)
4. Billing adjustments
5. Dunning and Collections
6. Revenue Recognition (said with a hesitant cringe, more to come)
With this being the center of the bullseye for the blue bloods, what was left to the periphery were:
1. Quote and order management
2. Integrated self-service experiences
3. Mediation and complex rating
4. Subledger reporting for Balance Sheet (cash, AR) and Profit & Loss (revenue)
With most of these above functions being core to most businesses, this can lead to a messy mix of software, half-baked integration strategies, and manual processes keeping things intact. Together they get the job done but suffer quality hits in times of rapid growth.
On to the reason you’re here.
Trend #1 – Mediation as an Add-On
Mediation is a pre-billing activity that:
Ingests consumption data from many sources in many formats at scale (billions of records/month)
Normalizes this data into a consistent schema
Enriches this data with information from other data sources
Transforms, correlates, aggregates, dedupes, and performs other data transformation tasks to prep the data for billing
Ships the neatly packaged usage data to the biller for billing
While DigitalRoute has been, and likely will continue to be the bellwether in this arena, billing platforms have waded their way into the mediation space, with notable callouts to:
The (hopefully) obvious advantage of mediating and billing from the same platform is taking engineering off the critical path for monetizing high-volume usage in all shapes and sizes. While this upside helps shorten implementation and enhancement cycles, tread carefully. We still think mediation should NOT be a necessary bolt-on solution for supporting complex rating processes. Mediation preps data, billing rates data. Don’t force feed rating logic, pool management, or credit balances into the mediation layer.
Trend #2 – The Emergence of Usage-Based Pricing Tools
We wrote about this up-and-coming class of software extensively in our Software options to support usage-based pricing viewpoint. Sitting between massive amounts of consumption data and automated, accurate invoicing exists the world of usage processing. Why can this be a challenge?
There is too much data. 600 million usage events can’t load into the biller without dimming the lights.
The rating logic is too complex. Pooling usage across 100 consumers, rating against a tier-based rate card, and then rerating against contract incentives requires a TI-84, not your grandparents’ 108. So, a day of Do Not Disturb, an Excel workbook, and a CSV into NetSuite is the solution.
With solutions like m3ter and Continuous leading the way, niche rating engines close these gaps more economically (and therefore, faster) than a full-blown billing redo. Should you be generally happy with your current billing solution and looking to move to or optimize a usage-based pricing strategy, start here. They serve as solutions to augment your existing CRM and ERP in a minimally invasive manner – each with their own ideal customer profile. As monetization strategies for AI and LLMs continue to evolve, UBP tools take the pain out of business systems when brining these offerings to market.
Carefully consider the integration requirements across your use cases. Complex pricing is complex, no matter how sophisticated the system. Above all, don’t ignore the data journey – it is more than just putting a cost on a record. Again, read more here.
Trend #3 – Support for Accounting Teams Keeps Getting Better
When shifting billing operations to a new, modern tool, shortening the time to close revenue each month is a must have. Typically, one of two strategies is taken to integrate billing data with ERP/accounting applications for balance sheet and income statement prep:
Record Replication: Generate billing records in the billing system, and then sync those records to their corresponding objects in the accounting system. Many productized connectors operate on this basis and are well suited for companies with automated accounting rules built and functioning in the accounting system today. In plain speak, I generate an invoice in Billing System A, and then sync that invoice to NetSuite as a NetSuite invoice, and leverage all the wonderful NetSuite accounting rules already built. The primary drawback to this approach is keeping invoice (and therefore, customer) balances in sync. Across all payment and adjustment use cases, this simple concept can spaghetti into a moderately complex bi-directional integration depending on the two technologies.
Ledger-to-ledger: This is where things are growing up. Top-shelf solutions house a chart of accounts and the corresponding accounting and revenue recognition rules to automate journal entry creation for every transaction on the platform. The result is increased automation for cash, AR, and revenue accounting, with the billing system spitting out month end trial balances and ledger-ready entries for the transactions it owns. Revenue contracts, performance obligations, SSP, and contract modifications are quite well-baked concepts to handle revenue allocation for moderately complex contracts.
Our take? When considering a new enterprise-grade billing tool, subledger processing in the billing system is a must-have. This will likely increase your implementation costs but provide you with a congruous data model for contract, billing, and revenue data.
Trend #4 – What do we do with AR Automation?
This is a genuine question – is there really, really value in a standalone tool for delivering (not generating) invoices, collecting and applying payment, and handling past due customers? Dunning and collections are a well-supported set of functions in today’s cloud-based billers that automate customer and rep notifications, payment retries, service suspension, and integrate to product and provisioning interfaces for things like in-app messaging and deactivation.
For the time being, we’re skeptical of this class of software (to be fair, we’ve never used or implemented it either). With strong collection modules being commonplace, better support for customer portals, and smart-retry type offerings from payment processors, the AR armory seems well stocked without throwing more technology at the problem. Please tell me I’m wrong if you know better.
Trend #5 – Power (Back) to the Platform?
Salesforce’s Revenue Cloud reaffirmed the power of the platform. If you can manage opportunities, sales cycles, order management, and billing on the same piece of technology – do it. With an aging offering, Salesforce has shifted gears away from the acquisition-sourced managed package to in-house engineered Revenue Cloud Advanced, the next iteration built on Salesforce’s core platform.
The new offering aims to address the performance limitations inherent in a managed package, along with a few functional bugaboos around amendment processing. More scale, more flexibility, and (on the flip side) more complexity to implement and maintain.
Nue’s emergence provides folks looking to run rev ops on Salesforce with another alternative to Revenue Cloud. Nue understands that separate technologies and data models between quoting and billing can lead to painful integrations and more paralysis than agility and is leveraging their pedigree to build an integrated CPQ, billing, and analytics tool in a single offering, all available on the Salesforce platform.
Similarly, MonetizeNow marries quoting, billing, and usage metering into its offering as a one-stop shop alternative to the Salesforce offerings. Complete with integrations to common tax, finance, and payment processing tools, MonetizeNow is continuing to gain market traction as their customer base and product offering grow.
Trend #6 – Customer Self-Service
Billing bolt-on customer portals allowing customers to manage their billing profile and preferences are offered by most SaaSs vendors today. Most can be configured and deployed with little code, branded to your spec, and allow customers to manage payment methods, contact preferences, view charges, and pay invoices. Additionally, these portals support localization requirements for language translations and regional preferences.
Vendor investment in portal solutions is a mixed bag. Some have this feature in maintenance mode, while others are dropping new features quarterly. With few exceptions, these customer experiences are centered around managing billing preferences and taking payment. They are (most commonly) not well suited for upgrading, downgrading, and generally allowing customers to buy new products or change quantities. And in most cases, they shouldn’t. For single-channel, ecommerce focused companies, fine – write purchase information straight from the web to the biller. Teams with multiple channels, including sales-led, quickly lose track of the customer’s entitlements when an omni-channel selling environment isn’t coupled with an airtight install-base management strategy.
Trend #7 – Let’s talk about Stripe
It’s time we give a bit more praise to what the folks at Stripe are up to. Stripe, a heavyweight in the payment processing space, is on a rapid ascent to the northeast corner of analyst charts. While this can be sluffed off as good marketing, let’s take a closer look at the highlights of their offering and strategy:
Stripe is the only solution with native billing, tax, and best-in-class payment processing and revenue recovery tools on the same platform. Non-Stripe architectures generally require at least three systems to support these functions (billing, tax, payment processing).
Stripe is simple to configure and launch, often not requiring third-party help.
Stripe is decoupling their product suite to operate independently with other systems, allowing (for example) Stripe Billing to standalone and process payments through another PSP.
With a few minor exceptions that benefit the end customer, Stripe offers pay-as-you-go pricing to better match price to value for their enormous user population. Your cost grows with your business – pay as you go.
Yes, Stripe is still highly tailored to B2B SaaSs and B2C commerce business models. However, their evolution is value-driven with much emphasis currently placed on the Revenue and Finance Automation offering. Enhancements like configurable invoice templates, Automations (think no code collections workflows), and usage-based billing are testaments to the investment Stripe is making as a billing contender. Let’s be real, $1,000,000,000,000 was processed on Stripe in 2023 – feels legitimate.
Takeaways
This got long, we apologize – but we’re a passionate lot over here at Ravus. Here are a few things we hope sunk in:
The software options available to those looking for a billing tune up can be overwhelming. Billing systems do more than billing and new vendors are filling niche roles. For enterprise billing operations, we really like the team and product at BillingPlatform.The platform’s functional footprint is enormous, and its extensibility allows users to automate the most unique of use cases. For complex revenue operations, “BP” is most well-poised to automate away pain, lower operating costs, and support standard and customized revenue models.
Simplification and consolidation continue to be good notions. We’re already on the next wave of Salesforce-centric rev ops tools. Alternatives to the Revenue Cloud stack finally give teams viable CPQ and billing alternatives, while providing interoperability with Salesforce.
We’re here to help – drop us a note if you’d like more curated thoughts applicable to you and your team.
And finally, in case you’re thinking “how can this moron write about technology trends and without mentioning AI once?” we’ve got you covered here.
Take Care,
Mitch Colyer, Co-founder
