How to Choose a Billing Software SystemKey criteria for choosing a billing software system
What to look for when selecting a billing software system
Choosing a subscription billing and management system is one of the most important decisions a business ever makes. An effective billing system needs to interface with nearly every function of your organization.
However, it’s hard to foresee the current and future needs of a billing system. It’s also tough to know if a software vendor can meet those needs.
Before getting locked into a billing systems vendor, invest time and effort into your choice. If you do it right, you’ll only have to choose a billing system once. An adaptable and reliable billing system will scale with your business, becoming a foundation of a strong revenue stream.
“We’ll just migrate later.”
It’s tempting to choose a billing system quickly with the thought of “migrating later.” This is often a mistake.
It’s difficult, risky, and costly to migrate a billing system, which contains lots of active data: ongoing subscriptions, unpaid invoices… even credit cards. Migrating this data to a different system might take months or years of engineering work.
- Core operations & supported business models
- Integration points
- User experience
- Globalization capabilities
- Fraud detection & prevention
- Retention management (dunning) & chargebacks
- Pricing model flexibility
- Data & business analytic
- Financial reporting
- Account & subscription levels
- Entitlement management
Core operations & supported business models
- Analytics and business intelligence
- Marketing (promotions, discounts, partnerships)
- User services/support
- Product (access control)
- Financial reporting
- Sales (subscription creation, visibility into customer usage and trends)
- Tax calculations
- Ecommerce site
- Fraud detection and prevention
- Mobile apps
- Payment processing and gateways
- Customers using the product
- Finance staff
- Customers using the account management system
- Business owners
- Customers using a mobile app
- Customer Service Representatives
- Engineers and integrators
- Multi-language: Provide templates in different languages for all user-facing documents, including emails.
- Internationalization of currency and date/time representations: Use correct decimal and thousands separators and present day, month, and years correctly.
- Internationalization of currency rounding: Some locations have local rules that define different rounding conventions in different jurisdictions. The rounding, unlike other aspects of internationalization, isn’t just a feature of the presentation layer. It must be built into the billing system. If you were to round the items on an invoice after it is created, they may not add up to the original total.
- Time zone handling: Without a proper time zone logic, the system can potentially present customers with a bill on the wrong day.
Fraud detection & prevention
Retention management (dunning) & chargebacks
Pricing model flexibility
Data & business analytics
Most systems provide basic metrics (trials converted, overall MRR, etc.). You should also be able to segment this information in various ways (by product, plan, billing term, country of origin, currency, payment type etc.).
Subscription bundling & hierarchical accounts
Entitlement and billing are very closely associated. Though they can require separate business logic, they need to be constantly in sync.
Building entitlement management on top of a third-party SaaS billing system that wasn’t designed it can be a painful undertaking. Make sure you understand how a single view of the data between the two is achieved.
- API capabilities versus UI capabilities
- Deployment options
- Developer experience
If you’re looking at a billing system from a SaaS vendor, they should:
- Restrict access to their API to calls from particular IP addresses.
- Use credentials to log in and connect using HTTPS.
- Carry out regular vulnerability scans and penetration tests using third party systems.
In addition, if they deal with credit cards, they should have the appropriate level of PCI DSS compliance.
On one hand, this is good because your peak load can be handled by a big pool of server resources shared across all customers. However, there’s the potential for failures caused by the peak loads of other users.
Make sure you know the figures for the overall load that a billing system provider can handle and how close to that maximum they are.
Check what level of uptime the software provider commits to. Ask them how long and how often offline maintenance occurs.
API capabilities vs. UI capabilities
- Multi-tenant SaaS: All the issues of maintenance, hosting, and updates are handled by the provider
- Running billing system in-house: You have more control over security and availability, plus better access to your data.
- Standalone SaaS: This is similar to multi-tenant SaaS, except you get your own instance.
- Virtual appliance: Runs in-house, but it’s packaged to make it easier for a third-party to maintain.
- Quality and availability of testing environments
- Quality of the APIs and API documentation
- Client libraries in multiple programming languages
- System maturity & long‑term viability
- Client references
- Quality of support
- Quality of integration
- Vendor lock-in
- Standards & legal compliance
System maturity & long‑term viability
You don’t want to be forced into a change because your billing software vendor went bust. Look for a billing and management system tried and tested in the real world, with a reputation for stability as well as long-term plans for improvements and support.
Quality of support
Talk to support staff to see how much they really know about the billing system. Find out if you’ll get to talk with engineers to solve the hard problems.
Quality of integration
Look for a support team that has done billing integrations before. Review the proposed integration schedule and make sure you understand how it can be achieved in the time frame they predict.
Once locked in to a billing system software provider, it’s difficult to switch. If you’re required to sign a contract with a billing systems provider, make sure you understand how long the contract lasts and under what terms you can leave the contract. You’ll be limited to their road map in updating your billing processes, experimenting with pricing models, or using a different third-party service provider.