This offers great opportunities for companies to further develop their products within this service economy and thus develop new business models, e.g. via subscriptions or flexibly bookable functions. But no matter what service your company offers and how innovative it may be - if the billing is not right in the end or does not meet customer expectations, this can put a good service in a bad light. In the worst case scenario, the service is canceled due to the poor user experience.
Find out what is important when billing digital services.
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Billing is one of the key elements in the user journey - and should not be underestimated, especially in the case of flexible subscriptions. This is because these are recurring events.
In modern business models in the area of digital services, the billing process not only includes invoicing, but also:
- Usage data that must be stored, checked and rated, i.e. calculated and priced.
- Prices that have to be calculated individually based on this data. Topics such as dynamic pricing, i.e. the calculation of prices based on the evaluated usage data and tariffs, including individual discounts, play an essential role here.
- Different billing cycles that need to be managed and offered flexibly.
Checklist: The most important billing factors
New business models such as the introduction of subscription services or usage-based billing are presenting companies and their billing systems with ever greater challenges. Especially when they are very much geared towards customers and their wishes.
Problems do not only arise from new business models - scaling, for example when rolling out to other markets, can also lead to performance problems.
With the help of the following checklist, you can find out whether your company should give billing more priority or whether billing in your company is agile and stable enough to meet future requirements.
Do you have more than 3 points on the checklist? That's not so rare. We often encounter such challenges in practice.
This is usually triggered by the increasing demands that new digital business models place on existing processes and systems. Attempts are often made to expand outdated existing systems - according to a study by MGI Research, these are on average over ten years old. In other cases, parallel billing solutions are created in order to flexibly drive forward product developments in different departments.
However, subscription management involves far more than just a new form of billing. It changes the business logic - and therefore has an impact on all processes along the customer lifecycle.
In addition to the increasing demands on IT systems, there are also major challenges in change management for companies that want to introduce subscription management for their digital services or products. There is often a lack of know-how or experts in this area.
Our most important recommendations from more than ten years of project experience in this environment:
- Use of an established billing system.
Especially in the area of billing, it makes no sense to develop new systems internally. After a thorough requirements analysis, a purchased product on the market should be used. - Consideration of use cases when selecting products.
There is no one billing system provider that is the right choice for all companies in the various business areas. Depending on the use case and industry, the products have different strengths and weaknesses. In addition, factors such as agility and complexity must be taken into account. - Consideration of the entire quote-to-cash process.
When introducing a new billing system, the entire quote-to-cash process should be taken into account. This includes product configuration, price calculation, contract management (contract definition, creation, adjustment, termination) including monthly billing and accounting systems. These take care of clearing, i.e. the neutralization of an open invoice with a document by an opposing transaction, such as the receipt of payment. In addition, accrual-based revenue recognition must be considered in the company's financial accounts. - Management support.
The cultural change should also be actively accompanied organizationally, with management support in particular.
This article was written in collaboration with Sebastian Bitz.
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