What is Consolidated Billing?

Billing and invoicing are critical components of SaaS business operations. They can be tedious and time-consuming. When done manually, they can lead to erroneous outcomes, miscalculations, and delays that can trigger frustration among the workforce. Many businesses, especially in the SaaS arena, struggle to maintain payment tracking, invoicing history, and financial records. This can lead to cash flow discrepancies, strained customer-to-business relationships, and reduced profitability. Is your billing process holding you back? Do you think you can benefit from consolidated billing and streamline financial aspects of business?

This blog will explore the concept of consolidated billing and how it facilitates multiple financial transactions. We will also discuss its benefits and use cases in the modern-day business landscape.

Breaking Down Consolidated Billing: An Overview

In the SaaS industry, consolidated billing is a credible financial concept that involves combining multiple transactions or subscriptions into a single unified invoice. This type of invoice features multiple subscriptions billed through a single invoice, thereby avoiding confusion or risks of error in some calculations if done manually.

Consolidated billing simplifies the process of customer billing, especially when a person has subscribed to various services offered. Instead of generating separate invoices for every service used, a consolidated bill is provided to the customer and offers a clear and transparent invoice. For instance, a subscription services company will offer a single bill to a customer subscribed to using streaming services, software, and music platforms.

Similarly, a business using a variety of cloud services, such as storage, computing, and database management, from the same provider can pay via single invoice. In this case a consolidated bill explicitly combines all the bills into one, thereby easing the invoicing process.

Billing consolidation minimizes the task of managing a variety of invoices for the same customer, making billings more effective. However, consolidated billing does not suit every scenario in the SaaS arena. Some businesses may require separate invoices for certain services or products or may require complex pricing models.

This type of billing demands careful consideration and analysis of the billing cycle, method of payments, customer preferences, and business motive. Using a well-curated business plan to bill customers, consolidated billing can be applied to ease financial data management, increase the efficiency of billing operations, and maintain customer satisfaction.

Read further to know how consolidated billing works.

Consolidated Billing: A Step-by-Step Analysis

Step 1:

The consolidated billing begins as soon as a customer subscribes to various services of the same provider. In the SaaS realm, this means different add-ons, software packages, tiered subscription models, or premium features. In some cases, customer preferences can vary in billing cycle, based terms of contract, and pricing, thereby necessitating a unified billing experience.

Step 2:

In consolidated billing, precise calculation of charges for each service subscribed is critical. The system automatically adds charges to the customer’s account based on usage, subscriptions, and one-time fees. This ensures transparency and helps avoid disputes in the billing cycle. This step defines the total amount due, including various charge types. These can include:

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Usage-based fees
One-time charges
Taxes and other fees
Recurring subscription fees

Step 3:

After consolidating charges for all subscribed services, the next step is generating a consolidated bill. Instead of individual invoice creation for each product/service, all charges are combined into a singular bill. It offers a detailed breakdown of customers’ orders and subscriptions, indicating the amount due and the cost linked with each service. Consolidated billing facilitates customers and businesses alike by mitigating several invoices and an air of confusion.

For example, if the billing period runs from the 1st to the 31st of August, the date of billing is determined as the first day following the end of the cycle (1st of September). The billing process is carried out automatically by the billing system on the scheduled billing date. In this process, all the charges in users’ accounts are converted automatically into a single bill. However, in some cases billing cycles can vary, i.e., they can be monthly, annual, biannual, or quarterly, depending on the customer’s preference.

Step 4:

This is the final step of the consolidated billing cycle. In this step, the consolidated bill is transformed into a formal invoice that is dispatched to the customer for payment. This invoice includes all the data of subscription history and associated charges. It involves clear payment terms and methods between customer and business and formal payment requests. In this stage, a customizable template is used, abiding by all regulations such as GDPR, and PCI-DSS. This document can further be used for e-invoicing and billing customers.

Navigating the Business Benefits of Consolidated Billing

In the subscription-based business models, consolidated billing has an applaudable role to play. It enhances customer experience, mitigates churn, enhances bundles, improves payments, helps with brand building, forecasting, product differentiation, and simplification of billing. Here we have elaborated each benefit for your ease:

Improved customer experience

Consolidated billing breaks down the payment process for customers, making it error-free, and reduces the burden on the accounts team.

Churn reduction

Consolidated billing reduces churn rate as it mitigates customer frustration over multiple bills that can pose an undue burden. It can ensure smooth recurring revenue and increased cash inflows.

Quick payments

Consolidated bills allow quicker payments, as customers don’t have to wait for each subscription bill separately. It can reduce the manual hassle of collecting various payments on different due dates.

Brand Reputation

Billing consolidation increases your market presence and ensures customer loyalty. It depicts brand focus on customers and attracts new customers through solid image building.

Predictability

Predictability of billing cycles and payment timelines can help ease revenue forecasting, thereby easing financial calculations and planning. It can be fruitful to navigate future financial strategies with ease.

Automated Reports

Consolidation helps to centralize all vendor transactions into one platform. This allows workflow automation for invoice sorting, approval seeking, and payments. Thus, data centralization in this way establishes the accuracy and credibility of transaction reports.

Simpler Bills

Consolidated billing allows automation and simplification of billing. It reduces the administrative burden linked with generating and processing a variety of invoices. This can incur cost savings, saving time for employees to focus on other tasks.

Bundling

Consolidated bills allow bundled offer utilization on the customer’s part. They can include multiple services to existing plans at a discount, thus increasing higher average revenue per user.

Factors to consider for implementing consolidated billing

A variety of factors contribute to a smooth implementation of consolidated billing. They are as follows:

Similar Billing Date

To generate a unified invoice involving multiple subscriptions, they must have the same bill date. In case of dissimilar dates, a different approach can be implemented. A customer subscribes to three services from the same provider:

Service A: The billing date is the 15th of every month.

Service B: The billing date is the 20th of every month.

Service C: The billing date is the 15th of every month.

To implement consolidated billing, the provider can

Align the billing dates for Service B to the 15th of every month to match Services A and C.
Alternatively, prorate charges for Service B to match the billing cycle of Services A and C.

By considering similar billing dates, the provider can generate a unified invoice for the customer, simplifying the billing process and improving clarity.

Uniformity of collection method

In the case of subscriptions in consolidated billing, they share the same payment collection method, either automated or offline via traditional modes. Suppose a customer with multiple subscriptions has an offline collection method for subscriptions A and C, whereas subscription B is automatic. In this case, A and C subscription invoices will be consolidated, whereas subscription B will have a separate invoice.

Uniformity of Payment Method

In this case, subscriptions with the same method of payment are combined into a single invoice. Suppose subscriptions A and C have credit card payment methods, whereas B and D are through wire transfers. In this case, A & C will have a different consolidated bill, and B and D will have a separate bill.

Same Currency

Another considerable factor is that the charges of subscriptions you wish to combine must have the same currency. For instance, if subscriptions A and C have USD currency and B and D are billed in pounds, A and C will be consolidated and billed together, whereas B and D will have a unified consolidated invoice.

Consolidated Billing Best Practices: What you must know

Despite the similarities of traditional billing and consolidated billing, having complete knowledge of industry best practices is important. Here we have defined some consolidated billing best practices for improved implementation of this kind of billing process.

Figure out the billing cycle

Keeping track of the billing cycle in consolidated billing is crucial; this is especially endorsed for businesses offering ongoing services and long-term contracts. By analyzing the billing cycle, it can become easier to bill customers. An important tip is that billing cycle must be short as it can avoid risks of missed payments and ensure consistent revenue inflows.

Don’t Miss Details

Incomplete or missing invoice details can delay payments, as customers may fail to understand the billing breakdown. Thus, it is crucial to enlist all the details in the invoice. The details include:

Invoice date of issue
Invoice number
Subscribed plans
Subscription ID
Payment method
Total amount with tax charges
Due date for payment
Contact details
Additional charges on one-time-used services
Any other business-related details

Clarity of Charges

One considerable best practice is to offer a clear breakdown of charges in the invoice. It involves an itemized list of services, quantity or usage details, taxes and fees, promotions or vouchers applied, total charges of each service, unit prices, and more. This practice can help gauge business performance and eliminates room for disputes or queries.

Seamless Consolidated Billing with SubscriptionFlow

With our top-tier expertise in billing and invoicing processes, we make your business operations smooth. Not only do we offer automated billing, but we also render real-time tracking, customizable invoicing, and dedicated support for meeting your billing needs with precision and efficiency. Using consolidated billing, your business can thrive and excel, accommodating customers attracted to varying subscriptions.

The Takeaway

Consolidated billing is a game-changer for businesses, as it can simplify invoices, improve customer experience, and reduce administrative load. By combining multiple services into a single bill, companies can ensure efficient payments, streamline financial processes, and achieve unparalleled revenue gains. Looking to implement consolidated billing into your business cycle? Contact our team at SubscriptionFlow today and maximize your business revenue.