SaaS Billing

Software as a Service (SaaS) is a cloud-based business model that offers access to software applications and services over the Internet in a cost-effective manner. In that model, the provider maintains all physical resources required to run the application, meaning the client does not need to worry about the hardware infrastructure for installing and running the software; instead, users subscribe and start using it by paying the charges regularly.

Since the SaaS business model applies to everyone, onboarding and charging a single customer does not stand true. Thus, a specialized SaaS billing system comes into play to address all billing use cases. It is a comprehensive process to bill subscribers and collect payments regularly for the services offered by SaaS companies. In other words, it involves many different things until revenue recognition, as described in the section below.

Numerous cloud-based SaaS businesses operate on various billing models, like subscription-based tiered plans, subscription plus usages, or per-user-based, and therefore need a saas usage billing system that supports their current business use cases and future needs. 

For example, SaaS billing applies in many areas like chat-based communication, online video conferencing tools, project management, issue tracking, an e-commerce platform for online stores, cloud-based sales, marketing & CRM, creative web design tools, payment gateways, SMS gateways, and many more. Companies are more inclined towards SaaS-based offerings to maximize business potential and growth.

Let us look at each of those areas that are essential for managing SaaS billing and revenue.

It is also known as the signup process, where a user selects a plan and makes the payment, which creates an account in the SaaS application. Due to the nature of every SaaS-based application/service, it is necessary to allow users to register themselves to access applications. Therefore, SaaS applications require integration with a backend billing system to manage all your SaaS customers efficiently. EarnBill solves this use case with a single REST API call and creates a customer account with a subscription plan and payment card details.

Furthermore, the EarnBill SaaS billing solution provides flexibility to capture additional information using simple configuration and defining user-defined fields (without any code customization efforts); this helps align business requirements efficiently and seamlessly. With the help of the EarnBill APIs suite, you can easily offer a few other features like subscription cancellation, plan upgrades, and downgrade features.

The rating and charging depend on the type of subscription model and how companies want to charge them regularly. EarnBill offers a comprehensive product catalog that comprises plans, bundled items, built-in pricing strategies, discounts, a free trial period, multiple billing cycles, and supporting configurable options to launch your offerings and business ideas. Further, the EarnBill plugin-based architecture also enables customization in the system to meet your specific requirements. Below are some of the most common SaaS billing models: 

• A Free Plan (No Charges):

As the name suggests, it comes with no cost, which means users get limited access to the functionalities, features, and capabilities. However, the company may want to manage those user accounts as they may convert into paid subscribers. EarnBill helps with this by simply creating a subscription plan with a zero price for an unlimited period.

• Freemium Plan (Free + Charges):

In this, SaaS companies may initially want to offer limited or full access to users but for a limited period at no charge. However, the EarnBill charges customers automatically after the free trial period. In other words, a freemium is a mixture of free plus premium (which comes at a cost), meaning a shift from a free model to a chargeable model. The EarnBill solution offers this feature in a configurable way where you create a plan with price and free period, leaving everything else on the EarnBill system to charge customers automatically.

• A Flat Subscription Plan:

With this, the company may want to offer all application features and charge everyone at a fixed price every month (monthly payment collection), but the plan period could be yearly. With EarnBill, you can easily handle this scenario and start charging your users.

• Tiered Subscription Plan:

In this plan, companies offer multiple plans with different sets of features at various price points like Free (already covered above), Basic, Professional, and Enterprise, and bill customers accordingly based on what each one has opted for. In EarnBill, businesses can create as many offerings (plans) as they want, along with dependent products (if any), and configure what pricing model suits their business. The EarnBill SaaS billing engine applies charges based on their subscribed plan, period, and proration.

• Subscription + Usage-Based Plan:

It includes a fixed subscription price and a usage-based product to calculate charges based on actual consumption. The EarnBill mediation engine processes UDR (Usage Details Record) and charges customers. It applies in both a prepaid and postpaid manner. For example, a cloud-based infrastructure company offers storage space based on consumption (with a flat subscription), so if usage exceeds a given limit, then the system charges the extra usage and bills customers accordingly. Another scenario is charging customers based on the number of API calls as part of API Monetization.

The next crucial step after rating and charging is generating invoices regularly (as per defined frequency), which includes composing an invoice with a subscription fee and usage charges, followed by distributing it to the customers. The solution should facilitate businesses to design invoice templates on their own, preview, and use them since invoice format and its design vary depending on the business requirements. Further, EarnBill comes with an automated process for invoice generation and distribution via scheduled jobs (as per defined frequency) and a data consistency report to ensure everything is correct.

The most crucial part of any business is payment collection and its reconciliation automatically. SaaS companies collect payment from the user account using pre-authorized card details based on calculated charges. The EarnBill enables you to set up an automated payment collection with a retry mechanism if the payment fails. The system also sends notifications to the customer.

EarnBill SaaS billing is a comprehensive and flexible system that easily integrates with your application based on business requirements in a cost-effective approach using its plug-in-based capability. Further, the EarnBill is the best billing system for SaaS businesses since it covers broader aspects of billing and revenue management, including prepaid and postpaid solutions, along with revenue realization through its automated collection module and capability of handling complex billing use cases.