The Strategic Advantages of Automating Subscription and AR Management

The Strategic Advantages of Automating Subscription and AR Management

By Alex Siegler August 11, 2022 at 2:45 pm

Financial processes are essential for any business and they form the pipeline through which SaaS companies receive revenue and continue operations. Accounts receivable (AR) processes usually vary depending on the customer, with some being prompt with their payment while others require additional reminders. SaaS organizations feel this difference more than most due to the various product types, payment methods, and subscription models they have to manage. 

Here are some of the most common challenges SaaS businesses face when they attempt to digitize and modernize resource-intensive and error-prone AR processes. 

 

The Challenges to Digitizing AR Processes for SaaS Companies

Customers Engage With Businesses Using Different Payment Models

SaaS companies have unique operating models that can sometimes mean they offer the same product to different customers via tiered and variable pricing using different payment models. This is especially true for businesses that are still in the early stages of their existence. 

Different industry surveys have revealed that as many as 38% of SaaS businesses charge their customers based on usage, 40% charge based on value, and 50% charge based on users. This shows the diversity of payment models within the industry and how popular each of these models are. The relatively even distribution of payment models is a strong indicator that SaaS businesses need to offer multiple payment models to appeal to customers—and finance teams must offer multiple payment processes. 

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Early-Stage SaaS Companies Must Ensure That Resources Are Spent Efficiently and Prudently

While there are SaaS companies that have an abundance of resources in their early stages due to large investments from generous venture capitalists or angel investors, a vast majority of companies have limited financial resources while they establish themselves. As a result, these companies must evaluate the benefit that each dollar spent can generate for the business and decide if that dollar could be spent elsewhere for a better return. 

While effective and efficient financial processes are extremely important for the success of any company, business leaders can be reluctant to spend money on administrative and financial processes instead of product development or other processes that more obviously and directly impact the company’s ability to generate revenue. 

 

Information Silos Impede Standardized SaaS Billing Processes Across Operational Teams

Like any other industry, information silos are a scourge in the SaaS space. Between sales, marketing, operations, and finance, each department has a unique approach to dealing with data. However, each piece of data generates insight into the financial impact of decisions made in different parts of the business. The gaps in information between departments ultimately lead to business leaders having an incomplete understanding of how each business decision or operational process affects the company’s overall financial performance. This also makes it difficult to standardize billing processes across different teams that might each deal with a different customer profile, payment model, or operational requirement. 

 

Why SaaS Businesses Must Develop and Maintain Smooth AR Processes

Optimize Operational Costs Instead of Diverting Resources Away From Tedious but Necessary Financial Processes

The most important step in procuring funding to modernize financial processes is communicating the need for additional services that can help deliver greater value. This is usually also the most important challenge that over a third of business teams have to overcome to meet their goals. Specialized software can deliver deeper financial insight to business leaders and optimized processes improve profitability and reduce waste. However, it is not always easy to convince business leaders to divert funds away from operational costs to fund the solution for what is erroneously perceived as a minor issue. 

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Create Consistent Processes Across Different Customer and Payment Types

How SaaS businesses handle billing and manage subscriptions often depends on the chosen payment model of each customer. However, finance teams that establish consistent processes for collection, regardless of the way a customer interacts with the business, can simplify AR management for the business. This makes it easier for finance teams to consolidate and analyze financial data that can then be used for data-driven strategic decision making by business leaders. 

 

Develop a Strong Data Foundation for Effective Financial Forecasting and Budgeting

Automating SaaS billing processes does significantly more than streamline revenue generation and payment collection. It also facilitates the collection and analysis of data points that can help determine the financial performance and health of a business. Optimized and automated data collection methods can help close the gaps between operational silos and simplify the sharing of operational and financial data across departmental lines. Modern software also reduces the likelihood of human error tainting data important for decision making. This allows finance leaders to use financial data in budgeting and forecasting processes with the assurance that it does, in fact, reflect the company’s reality on the ground. 

 

How to Use Specialized Software to Manage Subscriptions and SaaS Billing Processes Effectively

Between invoicing, customer engagement, and payment processing, financial teams must contend with many processes. SaaS companies have the additional responsibility of dealing with multiple payment types across customers that are on trial periods, discounted periods, one-off purchases, and subscriptions. Automating the management of these processes allows financial teams and business leaders to focus on tasks and processes that generate greater value for the business instead of being bogged down by administrative tasks. 


To learn how Place can help you develop and maintain effective subscription and AR management processes, schedule a demo with us today.