Discover the Ideal Billing System Example for Product Quality

Billing system example for Product quality

most B2B SAS companies underestimate the  operational complexity of billing and   invoicing and as a result, they do hacks and more  hacks and more hacks and workarounds eventually   leading to the build up of commercial debt that is  operational friction by stacking Legacy contracts   on top of one another until they eventually stop  growing everybody so a topic that comes up often   in my business is okay so we created a great B2B  SAS pricing model but now we actually need to move   it into the operations and creating billing and  invoicing flows for that pricing model so how   do we do that is there a system we can use what  is your preferred Billing System as the pricing   consultant and so forth so I get asked this  question about billing and invoicing maybe I   don't know 10 times a month and right now early  2023 it's a really tough question because there   isn't actually a really good billing and invoicing  system out there for B B2B SAS companies who have   any kind of complexity in their deals so I just  want to break down the problem a little bit for   you showcase where I see most people go wrong what  the costs are and then what you can do about that [Music]   okay so the key issue here is that you have  to take a look at the kind of complexity that   you're putting into the market and this is the  complexity in what kind of complexity of product   you have do you just have one mono product so  it's just like I'm gonna send you this software   solution and we're going to price it or is it  a tiered product system or with modules and   add-ons or can it even be feature toggled creating  essentially a lot of different product IDs or skus   like stock keeping units if you're in that kind of  Erp system where the complexity of what your ex is   selling is quite big secondly the method that you  price by can be any combination of transactional   fees and flat fees usage-based fees which you  have to measure something and then tell it up   and then bill for it in arrears or a license  fee so the access to something and even sort   of thirdly which I've seen nobody saw these sort  of Credit Systems where I've deposit credits into   an account and then the credits are then spent on  usage so if you just consider this a raise from I   just sell one thing no user space is just a flat  fee per month to the full-on complexity of very   sophisticated enterprise software models with all  the bells and whistles some systems are good for   some of these ranges and a really good yardstick  to measure this by is ACV annual contract value so   usually software that has an answer called annual  contract value of less than ten thousand dollars   will also tend to be less complex so usually  with something like this you can get away with   one of these simpler billing and invoicing systems  that are already out there so a lot of startups   20 plus try to handle recurring invoicing and  billing for everyone and they have been doing   a relatively good job at that so if you're simple  just go with one of those paddle.com is a payment   provider that does the whole billing as well so  that's where profit well and price and selling   they got bought by those guys you have others in  Denmark there's employee.com and a Google search   will do you well so what you have to figure out is  that whatever solution you choose can sufficiently   and adequately and completely actually encapsulate  the complexity that you're dealing with okay   the other end of the spectrum like the very  high-end one is usually where something like   suara comes in so sororo is a do-it-yourself  toolbox essentially so a lot of things come   pre-packaged and you can run a lot of things with  it and it has a lot of Integrations already there   with Salesforce and a lot of Erp systems and  so forth so for very large scale Enterprises   sororo usually is a good bet however often there  is so much do-it-yourself and Hands-On development   and setting up and configuration of a system like  that that it actually almost makes as much sense   to do the third option which is to just do it  yourself which is you have your CM system you   have your Erp system and then you build something  in between which then function as your Billing   System and this billing engine that I see a lot of  SAS businesses not just startups but actually also   pretty Enterprise Solutions create is where you  need to focus and and my point is the following   usually it it is sales and product that jointly  say hey okay we have a product that we want to   sell so obviously you over in finance now need to  invoice it and you know these are the rules these   are the systems and these are the products and  these are the prices and so forth and discounts   and all the complexity then Finance gets this  task of invoicing all of this and essentially   has a meltdown because they can see all of the  complexity and operational drag that this is   going to create so they you know call a timeout  to say okay so if we have to invoice all of this   then we need to agree on some ground rules because  you know this can get really hairy really quickly   depending on what kind of discounts you give and  you suddenly pull a feature out of something and   into something else or if we have to measure this  user space pricing how do we do that with you know   we also need to create an audit Trail and so forth  so usually this is the point where development now   gets pulled in on the side of Finance to say okay  so the the development team will then help Finance   build this billing engine so they do that and then  at the beginning the honeymoon phase everything is   fine then what happens is that sales and product  they change something like they build new product   or sales comes up with a brilliant new promotion  or discount tactic so they implement it like they   actually sell something to a customer say okay  yeah so we can build this feature that measures   your API calls and then we'll just charge you you  know 0.001 per API call and we're golden then this   comes back essentially as a scope or feature  request to the billing engine and finance then   says well you change the rules like we build  your building thing and now you're selling   something else or you're selling the same thing in  a different way so sales and product essentially   run with something from a commercial or Market  perspective that then Finance with the help of   development have to pick up in terms of billing  so this is the conflict that usually is around   building in most SAS organizations essentially  what you have to realize is if it goes unmanaged   it will eventually become a real property and it  is in a lot of organizations it is a real problem   so the real problem can manifest in a lot of ways  either the real problem manifests in the way that   you just have chaos in Billing right and even  to the extent that oh yeah well we could build   these things but actually operationally we can't  so let's say we have a right to charge a customer   but we're actually not charging them because  we don't have the system set up to charge them   so we're just going to forego that Revenue right  this happens more than you think or what happens   is that the Billing System essentially becomes  the source of Truth which means that you're now   restricting yourself in the commercial side saying  well we can't sell these things or we won't sell   these things or we won't build these things or  and so forth I once said with a global Enterprise   like billions in revenue and they were building  a solution for hospitals around Imaging doesn't   matter and we had a really good pricing model for  them and we could monetize their Innovation their   software really really well they had a lot  of Market penetration already with existing   solutions that we knew that we could go in and  create tens of millions of ARR in year one by   pushing this new model into the market however  they didn't know how to bill it so at one point   in the project it was a real consideration for the  executive team to just charge flat fees that would   essentially reduce the revenue of the product to  attend so they were willing because they didn't   have the billing operations an engine in place to  forego essentially tens of millions of dollars of   annual recurring Revenue simply because they  didn't know how to invoice it so this kind of   issue exists more often than not and what needs to  happen is that top management the CEO essentially   needs to together with the involved group Finance  Dev team sales product own the complexity of the   product and say okay we have two options one  reduce the complexity that we're pushing into   the market later we reduce the number of feature  toggles and add-ons and models and so forth that   we have and we reduce the amounts of let's say  commercial models that we put into the market so   we're not going to get creative with discounts  and contract structures and so forth so we have a   complexity over here that we have participant with  that we reduce okay so that we fit into whatever   building engine we have and on the other hand you  turn to finance and development say well you need   to actually be prepared to offer these guys some  flexibility right there needs to be the ability   to create some flexibility and complexity  in the market so it's a balance where you   say well we have some complexity that we want to  push into the market and then we have a capacity   for complexity in our dude yourself we build it  ourselves building it and these two needs to be   weighed if you at any point let's say close your  eyes and just do something that you don't have   let's say coverage for in your billing engine  that's where commercial debt starts to pile up   right and this commercial debt will eventually  create operational drag where you don't invoice   what you actually could invoice or you don't raise  prices where you actually could raise prices and   you don't grow as you could grow I had a startup  that sold for it was like a half unicorn but there   could have been a full unicorn this was sort  of 2021 they sold three weeks before they sold   we were in a board meeting where everybody agreed  that there are 600 global Enterprise clients could   get their prices raised by 80 but we couldn't  do it operationally because all of the contracts   were essentially handcrafted for each of these 600  Enterprise clients so there was just a one-to-one   system with invoicing every single one of them and  just taking all of that and putting into one let's   say new structure discipline system that could  handle billing and upgrades and price upgrades   for all of these 600 global Enterprise clients  was just too much work so the organization just   didn't want to do that so they just sold instead  to a large trade buyer who then got the headache   of cleaning all of this up so these guys could  have had I think like securely could have had   a unicorn if they had structured their Billing  System correctly from the get-go and not piled   up that much commercial debt so this is sort of  what is at stake and really the biggest mistake   you can make is underestimating the problem like  from a top management perspective just closing   your eyes off what kind of operational drag this  will create on the long term if you don't get this   balance between who owns the billing engine which  is often financed and with the support of the dev   team and who uses the building or sort of drives  the scope of it which is sales and product so you   need to get these people in a room and get them to  agree on a very detailed level actually and on a   recurrent basis like twice a year or something  to say okay so what exactly is it that we want   to do on the sales side and the product side  and how should we sort of match this on the   billing side so that we're sure that we can  move forward with efficiency in our building   okay so this is the situation as is I know that a  lot of startups are trying to solve this on a more   sophisticated level than than has been the case in  the last couple years so I'm seeing startups come   to me for Angel funding or for advice and so forth  right now that want to solve sort of Enterprise   level billing for SAS so I'm assuming in the  next couple years we're going to see a solution   that actually does this and does it well but we  don't have one right now so this is the State of   Affairs guys so until then you you just have to  sort of do it yourself and do it with discipline   because eventually it's going to  pay off all right take care guys