It’s a common trajectory: Your startup offers a basic subscription, and that’s it — at first. 

But you know that some potential customers aren’t going to risk going all-in with a subscription from a small startup. So you start offering usage-based pricing as a separate option. This way, people can dip their toes in. 

And then you realize there’s an opportunity to provide your customers with additional products on top of your core product. You further address customer needs by layering services on top of the SaaS subscription. You might also sell physical goods as an add-on to your subscription option.

At this point, it’s clear to you that some potential customers don’t enjoy a lengthy sales process, and would prefer to just try your product on their own. So you develop a product-led growth motion that provides a trial or a free tier. In time, this becomes just as important as your sales-led growth motion.

There’s good news and bad news if you’ve followed this trajectory. 

The good: You’ve likely achieved product-market fit, and customers are receptive to how you’re offering your product.

The bad: You will likely be overwhelmed by the logistics of actually billing for your product if you don’t keep SaaS billing best practices in mind throughout the entire process.

Customers now expect you to offer hybrid pricing (i.e. multiple pricing options) and hybrid sales channels (i.e. sales- and product-led growth), and this means billing for many things in many ways. It’s common for companies to respond by adding many billing engines in parallel, so each use case has its own billing system. That may have been OK once, but it’s unacceptable now.

In the earlier days of SaaS, billing was traditionally defined by use case. You’d typically buy a billing engine that could handle subscriptions (or whatever your use case was), but that engine couldn’t handle anything else. If you wanted to add usage-based pricing, for example, you’d need to implement a second billing engine. When you began developing product-led growth motions, those would also generally get their own billing engine, since the product team’s efforts would exist in parallel with whatever sales was doing. You’d need another engine if you decided to handle complex services charges, and another for the sale of physical goods. 

This piecemeal approach to billing doesn’t work nowadays. Customers want the freedom to choose a mixture of pricing models across multiple sales channels — and to receive a single, reliable invoice at the end. This is unfortunately next to impossible if you try to make it happen through multiple billing engines or manual invoice calculations.

“Customers want the freedom to choose a mixture of pricing models across multiple sales channels — and to receive a single, reliable invoice at the end.” 

Who is Impacted by a Fragmented Billing System?

- Finance teams need to break down sales orders into their constituent pricing components and submit them into the appropriate billing engines. This is a time sink even when everything is operating according to plan, but becomes a massive obstacle when correcting for mid-term changes. Making matters worse is that sales teams often quote product and pricing in CPQ systems that are entirely separate from the billing engine — so someone has to manually translate the quote into terms that billing engines can understand.

- Sales, Product, and Engineering teams suffer, thanks to the use of isolated billing engines. Sales exists in one silo, while Product and Engineering teams exist in another. This deprives all three teams of the unified analytics necessary to pinpoint opportunities for upselling, cross-selling, and improving the product. For example, because only finance typically has access to usage-based pricing capabilities and data, Sales doesn’t know the real data about how customers are using the product. And rigid, hard-to-change billing infrastructure disincentivizes experimentation with new types of pricing. 

- Customers are sold on a holistic combination of products, but that coherence falls apart when customers receive a fragmented invoice with poor transparency. If the customer believes there’s been an error, they will need to piece together the full story from partial invoices.

For most companies, dealing with this fragmentation has been a frustrating but non-negotiable reality for years. Bringing together every billing engine was either impossible or something that only huge companies could do. But turnkey solutions are now capable of unifying billing, changing the game completely. With the right billing engine, you can eliminate all of these discrepancies in one fell swoop, setting up your company for future success. 

Modern billing engines can do more than just handle billing across products: They can bring together the entire quote-to-order-to-invoice process. From there, you can generate a unified data model that accounts for every type of pricing and sales motion. The benefits of such a data model (and the comprehensive revenue analytics it enables) are tremendous.

“Modern billing engines can bring together the entire quote-to-order-to-invoice process.” 

Who Benefits from a Unified Quote-to-Order-to-Invoice Billing System?

- Finance teams can automatically send the customer a single invoice. This spares Finance the unpleasant choice of either sending the customer multiple invoices, or manually brute-forcing the creation of a single invoice by entering all the data into a single engine by hand. And comprehensive revenue analytics let finance teams obtain key metrics like monthly and annual recurring revenue, a major boon for RevRec requirements.

- Sales gain detailed information on how customers are actually using the product. In turn, this helps with identifying product users who are open to expansion. This is especially useful for targeting those brought to the company through product-led growth motions and usage-based pricing, and figuring out who is ready to adopt enterprise-focused, subscription-based tier pricing. And Sales no longer needs to play a game of telephone by sending Finance a spreadsheet for billing and hoping that Finance turns it into an invoice properly.

- Customers now receive a single coherent invoice that clarifies how every aspect was calculated, which improves transparency and trust.

So many companies give each pricing model its own billing engine that this may seem like the way things are done. But it’s not a best practice, and it’s time that myth was busted. The process of adopting unified billing may not seem pressing right away, but it will pay tremendous dividends in the short- and long-term. You’ll save tremendous amounts of time, bolster customer trust to lower churn, and have the data necessary to make smart decisions that put you ahead of the pack.