For most companies today, billing has turned out to be a nightmare that eats up valuable engineering time.
Picture this: A CEO, losing sleep not over the challenges of keeping pace with innovation or market dynamics but over the drain of engineering resources, delays in product launches, and restrictions on pricing experiments, all because of the lack of capabilities of their current billing systems.
Case in point: Engineering time is limited, and when you involve them in fixing a billing issue, you're essentially saying no to many other potential improvements.
Let’s break this down for you.
Engineering bandwidth in billing
Imagine a scenario where your engineering team, eager to launch a new feature or fix a nagging bug, gets pulled into sorting out billing complexities. It's like planning to build a new section of your house, but suddenly you find yourself fixing the plumbing instead.
The time spent on billing challenges is time not spent on refining your product or addressing critical tech needs. This isn't just a short-term setback; it ripples through your product's journey, affecting what could have been. That's the real cost — the opportunities you miss when billing complexities consume your engineering bandwidth.
To understand where and why engineering bandwidth is consumed when solving billing problems, we need to consider the types of billing tools that companies depend on.
We’ll take a closer look by breaking this into three different billing scenarios where the engineering team's involvement varies.
While an ideal billing tool minimizes the challenges, legacy tools, and in-house systems demand strategic engineering decisions to navigate complexities and optimize operations. Careful consideration of these scenarios is crucial for businesses aiming to balance innovation, operational efficiency, and optimum engineering resource utilization.
Scenario 1: Ideal billing tool
In an ideal billing tool, advanced features automate billing processes — minimizing the engineering team's involvement. These new-age tools enhance billing efficiencies and enable teams to focus on strategic initiatives rather than spending time on routine billing complexities.
However, it's crucial to note that even with the most ideal billing tool, there might be instances where engineering bandwidth is still necessary, particularly depending on the complexity of the specific use case or the need for highly customized functionalities, as seen below:
- Sign-up flow: Sign-up flows are typically the user’s first interaction with the product. So it’s only natural for companies to go all out in ensuring they create a sign-up flow that leaves customers with a great first impression about the product, in turn boosting user activation rates. Once a user signs up or their pilot plan ends, a contract needs to be signed with the user to bring them on board. This is where the engineers will need to step in and take charge of contract creation and user setups, steering through sign-up complexities to ensure a seamless onboarding process. For instance, in a SaaS environment, this may involve integrating the billing tool with the user authentication system to automate account creation upon subscription. Though in some cases, the time and efforts needed from the engineering team are minimal, their bandwidth is required to create a customer and contract in the billing system.
- Plan changes: When a user opts for a different plan, the billing tool typically automates plan changes, streamlining the process for efficiency. In a self-serve option such as this, users can independently switch plans. However, in situations where companies prefer meticulous control over the sign-up and contract modification procedures, engineering support becomes essential to facilitate the plan change.
- Usage data integration: When it comes to usage data integration, most companies take different approaches to efficiently manage and exchange usage data. The engineering team plays a crucial role in maintaining seamless API integrations to ensure uninterrupted data transmission. In certain instances, companies seek to optimize engineering bandwidth by seamlessly integrating the billing system with their existing data warehouse. Alternatively, to ensure security, they may choose to employ APIs for sending usage data directly to the billing system.
- Currency conversion: Managing multiple currencies adds complexity to billing systems. The engineering team is pivotal in handling currency conversion rates and ensuring accurate billing across different currencies. For instance, when a customer subscribes to a SaaS platform in their local currency, the billing system must convert the fee to the company's base currency (e.g., USD). The engineering team implements mechanisms to calculate conversions accurately based on real-time exchange rates, considering their fluctuation.
- Proration: Implementing proration in billing requires significant engineering involvement. Engineers write custom code to accurately track and calculate service usage within billing periods, and dynamically adjust charges or refunds based on actual usage. For instance, if a customer upgrades a software subscription mid-cycle, engineers will need to set up the code to prorate charges based on service usage duration and plan changes.
- Compliance with regulatory standards: The billing system requires robust security measures to safeguard sensitive customer data and comply with industry regulations. The engineering team needs to continuously monitor and update the system to meet evolving compliance requirements. They also need to implement encryption, access controls, and authentication procedures to prevent unauthorized access or data breaches.
- Custom user dashboard: Companies may have specific preferences regarding the user dashboard, including opinions on color schemes, look and feel, the displayed information, and even font choices. In certain cases, companies prefer the user dashboard not to appear as an external page that their customers have to navigate to. Customized user dashboards are powered by data retrieved through APIs in the billing system. What's important to understand here is that developing and maintaining a personalized user dashboard utilizing billing system APIs requires a significant amount of engineering resources.
Scenario 2: Legacy billing tool
Legacy billing tools present a unique set of challenges due to their outdated features and inflexible structures, demanding much of the engineering team’s time and effort. These billing tools, rooted in older technologies, often struggle to adapt to modern business needs and pricing logic.
Pricing models have only gotten a lot more complex over the years, and the rigid structures of legacy billing tools make it a lot more difficult to accelerate the speed and flexibility of pricing iteration and match it up to the pace of product development. The challenges posed by legacy billing tools call for extensive engineering involvement to address the tools’ limitations and find workarounds, diverting valuable resources from working on other strategic product-related initiatives.
- Coupling of pricing and usage: Legacy billing tools often pose challenges, particularly with tightly coupled pricing and usage data. This creates a significant strain on engineering resources, as they need to work with the complexities of these tools and eventually establish a parallel store of information within their product. For example, engineers may find themselves creating workarounds to handle contract structuring complexities or storing billing tool-related IDs within their system, tied to specific subscriptions or even individual customers. These situations are far from ideal, as a billing system typically should have fully decoupled usage and pricing data. With this decoupling, engineers wouldn't need to concern themselves with how contracts are structured or the complexities of how the billing tool interprets non-usage data, especially contractual information. Consider a scenario where a customer subscribes to multiple services, each billed according to a different metric. In a fully decoupled system, engineers wouldn't need to worry about intricacies like which customer is billed for specific metrics or how data is sent to a particular invoice based on the signed agreement. Decoupling ensures a more streamlined and efficient process, allowing engineers to focus on enhancing the core product rather than managing billing complexities.
- Flexible pricing: Over the years, pricing models have only gotten a lot more complex. A prevalent trend is the adoption of consumption-based models, wherein pricing is closely tied to real usage metrics. From ramp deals to credits that can be carried over and custom pricing units — new-age pricing models demand greater flexibility.
A significant challenge arises when a billing system lacks the flexibility to accommodate these diverse pricing models. For example, when numerous contracts are signed with pricing models that the billing system doesn't support — engineers often resort to creating a thin layer of software on top of the external billing system to bridge the gap between contract requirements and billing system capabilities.
- Manual workarounds: When a billing tool falls short of supporting specific pricing models, companies often set up a dedicated team to handle tasks manually, creating workarounds. Typically, the process begins with individuals manually managing pricing models that are not supported by the billing tool. As the manual effort becomes more cumbersome and frequent, the engineering team gradually automates these tasks. Soon, what begins as a workaround snowballs into a massive in-house project, where engineers focus on building a mini billing system.
- Managing provisioning and entitlements: To handle provisioning and entitlements within the billing system, substantial engineering bandwidth is required to establish and consistently maintain seamless communication channels between the billing system and the product.
- Provisioning: Provisioning is the mechanism driven by billing but embedded in the product. For instance, when a customer purchases five seats, the billing system communicates with the product through webhooks, instructing it to provision the acquired seats. Once the customer reaches the purchased seat limit, the system blocks any attempt to add an extra seat. In this case, engineering bandwidth is pivotal for developing and maintaining the communication channels between the billing system and the product.
- Entitlements: Entitlements within the billing system include what a customer is entitled to based on their purchase. For example, if a customer acquires 100 SMSes and 50 minutes of talk time, the billing system tracks these entitlements. If usage exceeds the entitled balance, the billing system sends alerts to the product. Typically, entitlements operate as a prepaid balance, and any usage beyond the entitled amount is billed at the end of the month or stipulated period as arrears. While entitlements track what a customer is entitled to, provisioning informs another system about actions within the billing tool. In managing entitlements, engineering expertise is essential to establish alert systems, handle prepaid balances, and integrate data with the product — ensuring a smooth billing process for additional usage.
Scenario 3: In-house billing tool
Creating an in-house billing system may, in some instances, give companies more control, but it comes with its own set of challenges. Companies must build the tool from the ground up — maintaining and optimizing various parts of the billing system. This requires an in-depth understanding of each part of the billing workflow along with determining the diverse needs of stakeholders within the organization.
In an in-house billing system, engineers become deeply involved in managing diverse modules essential for efficient financial operations, such as invoice generation and ensuring timely payment collections. Moreover, addressing flexible pricing requirements, managing accounting needs, ensuring global tax compliance, and handling third-party integrations pose significant challenges, particularly as the organization grows and handles larger transaction volumes. If you consider tax regulations — they vary across regions and jurisdictions, making tax compliance a challenging aspect of billing management. Businesses must accurately calculate and add applicable taxes to invoices, considering factors such as product type, customer location, and tax exemptions. If not executed correctly, these factors can lead to a poor billing experience.
Let’s not forget that billing is a critical touchpoint that can make or break the customers' perceptions of an organization. Any form of inaccurate or irregular billing can lower the customer's confidence and trust in your systems. More importantly, it is a costly mistake to make, given that 70% of customers opt to take their business elsewhere due to poor customer service.
In-house billing systems require ongoing attention and efforts from the engineering team to ensure the system works smoothly and meets the company's specific requirements. In our recent blog post, we unpacked the many challenges of an in-house billing tool. We guide you through the process, from engineering hurdles to operational complexities and the constraints associated with scalability.
Strategies for optimizing engineering bandwidth in billing
Reports indicate that among engineering teams that are under immense pressure to speed up the development and release cycles of new applications, nearly 74% of them regularly release insecure applications. The repercussions of excessive engineering involvement in billing processes involve hidden costs, broader business impacts, and potential growth setbacks.
Here are a few key strategies to break free from the costs of consuming engineering bandwidth for billing:
1. Choosing the right billing tool
The right billing tool not only aligns with the business model but also inherently addresses common engineering challenges, optimizing processes and freeing up valuable engineering resources for core tasks.
2. Leveraging automation
Automation in billing processes streamlines operations, revealing specific areas where engineering bandwidth can be reclaimed for more strategic initiatives.
3. Collaboration across teams
Given that billing solutions involve collaboration with finance teams and other stakeholders, it’s important to ensure cross-functional understanding to optimize the entire billing workflow.
Free up your engineering team's bandwidth
Tracking usage data is not the best use of your engineering team’s time. Every hour spent grappling with billing complexities is an hour not invested in refining core product features or fortifying security protocols. It's a trade-off that goes way beyond the immediate tasks, influencing the trajectory of innovation and the robustness of your product.
We built Zenskar to help businesses like yours break free from the shackles of manual billing tasks, allowing your engineering team to channel their expertise into core product advancements. Designed for efficiency, Zenskar's robust platform effortlessly manages intricate contract structures and various usage data sources. From automating usage data metering to handling payment collections and generating comprehensive reports on revenue recognition, Zenskar ensures a seamless process — all without requiring any engineering effort. In an ideal scenario, clients can concentrate on business growth, leaving Zenskar to autonomously manage all revenue-related financial operations in the background, requiring no direct involvement from client teams.
To explore how Zenskar can help streamline your billing processes and implement a scalable system, book a demo with us today.
