A Deep Dive into Modern Billing Tool Capabilities

Modern billing tools are expected to offer sophisticated, customizable solutions for today's enterprise billing, pricing, and subscription management needs.

Juggling between generating and sending invoices to payment collections becomes more challenging if you're still using spreadsheets and manual processes instead of dedicated software. Outdated technology not only consumes more time but also increases the risk of human error, leading to issues in quote development, tracking unpaid invoices, proration, accurate tax calculations, currency conversions, and revenue reporting.

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While most businesses are on the lookout for an ideal billing solution, they often miss out on one critical point — the evolving needs and growth of the business. Overlooking scalability and flexibility can result in costly migrations or limitations in accommodating future growth plans. 

Understanding the key capabilities of a modern billing system calls for a thorough exploration from the perspectives of diverse stakeholders involved in the billing ecosystem. Let’s delve deeper into this through the lens of those who interact with the billing system.

Invoicing and collections

First, let's look at the account managers, customer success, and finance teams. They play pivotal roles in invoicing. It’s safe to say that in most instances, they are the primary users of the billing tool.

These teams bear the responsibility of accurate invoice generation and timely payment collection, not to mention minimizing pending payments. For this — the billing system’s user interface is important. The teams should be able to get a bird's-eye view of the various cross-sections of invoices, created recently and even the older ones. They should be able to pull up all the invoices generated for a certain customer.

In some companies, invoices and collections are split up; in others, they are handled by the same team. The collections team's responsibilities include monitoring due invoices, ensuring timely collections, tracking Days Sales Outstanding (DSO), etc. The billing tool’s ability to send out automated follow-ups and reminders at predefined points (for example, a week before the due date) is vital for timely payments.

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Accounting

Accountants seek an efficient solution for obtaining relevant journal entries related to billing and consolidating financial transactions company-wide. It involves the tracking of revenue data, expenses, payroll information, and the inflow of investment funds. In this process, all financial transactions are carefully noted in the book of accounts.

Revenue data and customer balances are managed in billing systems. A modern billing tool should seamlessly facilitate the automated flow of financial data from billing systems to Enterprise Resource Planning tools (ERPs), eliminating the need for manual exports and uploads by accountants.

Furthermore, the complexities associated with revenue recognition rules based on signed contracts pose additional challenges. A robust billing system should have the capability to automatically handle complex revenue recognition rules and directly inject the data into the ERP.

In an ideal scenario, a modern billing tool should not need an accountant’s bandwidth to create entries in the accounting system. This frees up the accountants’ time to focus on more strategic aspects rather than routine data management tasks.

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Sales

The sales team kickstarts the process by generating and tracking leads. The need for automation starts right from the point of talking to a prospect. The prospect details are then entered into Customer Relationship Management (CRM) tools such as HubSpot and Salesforce.

When the prospect shows interest in the product, a quote is sent to them. An example is shown below.

After multiple back-and-forths on pricing and payment terms, once the quote is finally accepted, a contract needs to be created. The billing tool should be able to create a contract with the product or service details, agreed pricing, and payment terms and conditions. 

Once the contract is signed by both parties, the pricing terms present in the contract are then added to the billing system. In the absence of a billing tool, the data entry into the billing systems is managed manually by the sales team or, at times, the finance team.

The modern billing tools should ensure that once you create the contract — the data should automatically flow into the billing system for which you need quoting and contracting functionalities. The data automatically flows into the billing system via integrations with the CRM or the Configure, Price, Quote (CPQ) software.

It’s also important to ensure that the billing tool doesn't become a bottleneck, hindering deal closures. You need to empower the sales team to price based on customer value. They should be able to sign any deal they want with the customer without being limited by the billing tool.

Most billing tools today are not able to automate the billing for all kinds of contracts; they are only able to automate the simpler ones. For the more complex ones, the sales team passes on the contract to the finance team, who then collects the usage data from product teams, aggregates it with help from developers, and then prepares the invoices manually.

At its core, there's a crucial need for a Quote-to-Cash platform. This all-in-one solution manages the entire journey from quoting to sending invoices, collecting payments, and handling accounting, streamlining processes within a unified solution.

Tech and product

Billing tools need to empower product and tech teams by seamlessly automating interactions, facilitating automated data exchange across diverse business systems, and ensuring easy access to relevant data, including analytics.

The tech and product come into play when data needs to be sent to the billing tools. 

This could be in two forms:

1. API support is needed for usage data to flow into the billing system. some text

• Let’s take the case of subscription models. Subscriptions can be created automatically from the product — for instance, when you sign up on Netflix, a subscription is automatically created in billing systems via APIs.
• A well-designed dashboard with structured views on metering, invoicing, monitoring, receivables, and other billing data becomes more efficient for your engineering team when equipped with developer-friendly APIs, significantly reducing custom development time.

2. In the usage-based pricing case, the involvement of the tech team is even more critical. They need to get the billing system to understand the usage data from raw events. Rudimentary billing tools have APIs that the tech team can use to send data to the billing system. The API approach involves a long onboarding process and technical cycle. The easier approach is to integrate the data source directly with the billing tool, where the tool effortlessly pulls data from where it already resides.

Moreover, opting for a billing tool with the capability of tracking balances of various kinds of credits and other entitlements automatically can remove this burden from the engineering teams, reducing the time needed to construct this infrastructure by several months.

For product and tech teams, leveraging a modern billing tool equipped with user-friendly webhooks to update the product on necessary feature provisioning is invaluable. This allows engineering teams to concentrate on product development without getting bogged down by the specific billing terms negotiated with diverse customers. Billing tools featuring configurable webhook alerts for payment delays, customers surpassing usage thresholds, or depleting credits and balances further empower product teams to respond uniquely to events within the billing system. Additionally, proration mechanisms ensure accurate billing adjustments when customers upgrade or downgrade their subscription plans mid-cycle. Similarly, robust currency conversion features enable the billing system to process transactions in multiple currencies, catering to a diverse, global customer base. By incorporating these functionalities, billing tools ease the burden on engineering teams, streamlining infrastructure construction and enhancing overall operational efficiency.

Business finance and analytics

Finally, among internal stakeholders, the business finance team and senior management play a crucial role. As leaders steer the business toward success, they need visibility into various facets of the business. Knowing the financial health of the business is key to making informed strategic decisions. 

Senior management requires comprehensive visibility into a variety of statistics derived from contracts that are signed with customers, payments that have come in or been pending for a long time, cash flow situations, etc.

For example, metrics like:

• Monthly Recurring Revenue (MRR)
• Annual Recurring Revenue (ARR)
• New signups
• Churn rate
• Pending collections
• DSOs
• Usage metrics

Modern billing tools should be equipped with an advanced analytics module that empowers the business finance team to comprehend the revenue and financial health of their business across regions and markets, as shown below.

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Users

From the point of view of end-users, the billing tool should provide direct access to billing-related information for a seamless experience. This includes viewing invoices, making payments, changing addresses, and other details.

In the case of usage-based billing — customers should be able to track usage, see what their upcoming invoice looks like, and be able to change plans by themselves. As per a Deloitte report, the aversion to "bill shocks" is strong, considering how clients need to keep up with their annual budgets, and up-front clarity on costs for the year ahead is critical. As a result, many clients prioritize the predictability of software spending in their decision-making. While some clients are comfortable with an annual lump-sum payment for software, others place value on the option to defer or stagger payments, potentially being willing to pay extra for such flexibility. Billing model preferences vary based on factors like client industry, accounting principles, and cash flow positions.

Wrapping up

From kickstarting the process in sales, where contracts take shape, to the essential role of tech and product teams in syncing up data and the careful management of invoices by accounting and finance teams — everyone plays a part in making billing smooth. As your billing workflow gets more complex, opt for a tool that makes the process easier for every stakeholder who is involved.

With Zenskar, we've created a solution that fully automates your business's financial operations from end to end. Say goodbye to manual interventions and technical complexities. It empowers every stakeholder involved, allowing businesses to concentrate on growth while Zenskar effortlessly handles all revenue-related financial operations in the background.

‍Unlock the full potential of modern billing capabilities with Zenskar — book your demo today for a firsthand experience of streamlined and powerful billing solutions.