The Five Key Capabilities of Usage Billing Software

August 1, 2019

Published by: serena

Whether it’s Software as a Service (SaaS), usage-based pricing, scalable subscriptions, or other pricing frameworks, today’s forward-looking businesses are embracing more innovative business models: new price options, product/service bundles, it’s a direct response to buyer demands and preferences in both B2B and B2C sectors. Those buyers want options – and the flexibility to change those options at any time. That creates significant billing and revenue-recognition headaches, including:

  • Tiered pricing
  • Commits
  • Ramp-ups
  • Trial periods
  • Pre-payments
  • Adjustments
  • Usage updates
  • Credit and rebills

Unfortunately, these are complexities that legacy billing infrastructures simply can’t accommodate. Such solutions were built for the quickly fading era when companies sold and shipped a predictable number of goods from a standard price list or catalog, with few exceptions. Today, however, companies must contend with a vastly greater number of pricing permutations, changing business rules and proliferation of data sources.

That’s why they need a modern monetization platform, one offering usage billing software that contains the following key capabilities.

Pricing Flexibility

When you have a flexible product catalog and a dynamic pricing engine, you have the ability to model virtually any configuration, service, term and price. You can quickly set up configurable pricing models (e.g. recurring, usage, one-time, pre-payment, and more) with standard or custom billing cycles. Before you implement a pricing model, you can pre-validate it to gain some predictive insights into how it will affect future revenue streams.

Contract and Order Management

It’s essential to have an end-to-end profile of each contract through its entire lifecycle. This helps ensure you never miss a renewal, price adjustment, or amendment. By centrally tracking all amendments, you can guarantee there’s no revenue leakage while also gaining new insights about the total customer value.

Usage Data

Many business models price their products/services based on consumption and usage – such as mileage or fuel usage in rental cars or monthly data usage in a cell phone plan. Make sure your usage billing platform can collect data from any source – such as IoT sensors, machines, files, APIs, and mobile devices. What’s more, you need to mediate and translate all of that disparate data into a uniform format using rules and custom formulas.

Agile Billing

Before we go into agility, let's define usage billing.

Usage-based, or metered, billing is a form of billing in which customers are charged solely based on the use of a product or service. Turning this usage data into revenue requires a solution driven by a billing engine sophisticated and flexible enough to handle any usage-based pricing model. This engine must be able to trigger various events based on user configuration in order to accurately bill a customer for their consumption.

The right usage billing software solution must be able to handle the complexities and scale effortlessly from one-time charges to simple subscriptions to virtually any usage-based model. You can define the events that trigger billing and revenue recognition. You can consolidate bill runs, pre-validate bill runs, and tailor invoices to each customer’s unique requirements and preferences.

Smart Revenue Recognition

Achieve ASC 606 compliance with intelligent triggers that recognize revenue based on activities from any source system. Ideally, your revenue-recognition system should automatically calculate revenue waterfalls and easily maintain retrospective and prospective changes.

As your business moves forward to embrace innovative business models and digital transformation, usage-based billing software built with these capabilities will be essential to achieving successful outcomes.

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