Historically, enterprise billing systems have been the domain of corporate IT departments. The applications were difficult to install, use and maintain, and so, despite the fact that billing seems like it should be a finance department function, responsibility for managing billing systems has, for many years, fallen squarely on the shoulders of IT.
But times have changed. Cloud technologies have made it easier for companies to deploy billing systems, and responsibility for managing these systems has shifted to the solution vendor and away from the solution buyer. Aside from the fact that there is nothing to install or manage with cloud-based systems, these newer billing systems are more intuitive than legacy systems, making them easier for non-technical staff to use.
It is therefore becoming much more common for the billing function to reside in the finance organization. But the transition hasn’t been totally seamless. Finance has faced a steep learning curve in many organizations when it comes to billing, as staff must transition and expand out of a pure accounting role. The challenge isn’t just that finance has to learn how to select and use billing systems. Many finance organizations are also challenged by having to adapt to new products/service offerings, pricing models and packages put forth by finance’s new “customers”: sales, marketing and product development.
In short, despite the relative ease-of-use of modern billing systems, corporate finance departments are still somewhat unprepared for their new billing system responsibility. So, how can they get up-to-speed more quickly? And what exactly do they need to know?
Following are five things finance should consider when moving to a new billing system:
Volume Scalability
Finance needs to plan for growth in business – and consider how growth might affect billing. For example, when one company acquires another, the acquiring company must incorporate the new company’s products and services into its billing model. In a short period of time, a company might double (or more) the number of products/services it sells, and the manner in which they’re priced, rated, invoiced and recognized. The billing system must be able to scale to adapt to these changes in volume and complexity.
Furthermore, it has, traditionally been IT’s responsibility to plan, evaluate and implement the systems necessary to support business growth. Now, finance must become educated about a new system’s capabilities, and how changes in data volume and rating methods will be supported by their billing application. A few good questions for a finance exec to ask a billing vendor:
- How many transactions per second can the system rate?
- How does the system scale for mass-storage and associated data access (think reporting and user interaction with the system here - i.e. response times as scale)?
- Many systems offer user self-management. How many concurrent users can the system’s customer portal support?
- Finally, if the answers to these questions fit your projections for volume, how much does that configuration of the solution cost?
Functional Scalability
Let’s first define what we mean by functional scalability. The term refers to a system’s ability to provide an integrated and accessible feature-set that can easily adapt and change to business changes. It’s great when a system does many things, but when you look deeper, does it do those things in the highly evolved way in which your company operates? Further, when your business changes, how quickly can the billing system be adapted to accommodate those changes?
Take something as basic as an invoicing cycle. Some billing systems ship with a monthly option that lets you define a close day for the system, while other systems force an invoicing cycle at the product level (i.e. a subscription). Other systems give you the flexibility to define a general invoicing cycle on a customer-by-customer basis, while allowing you to create rules for automatically grouping certain product lines or charge types on their own separate invoices and cycles, or defining a cycle based on an event as opposed to a fixed time interval.
Some systems allow you to manage a flat-rate subscription business model well but break down when it comes to variable, metered usage models. Other systems provide a robust array of rating methods that include the ability to introduce function-based logic into your product schemes for highly specialized rating.
While many systems offer functional scalability in some shape or form, not all systems are easy to configure and may even require programming. Be sure to weigh robust customization ability against ease of configuration and solution transparency so that you don’t end up creating a new IT department just to manage your billing application’s customizations.
Some key questions to ask billing vendors about functional scalability:
- How flexible is the rating engine and how easy is it to configure?
- How flexible is the data structure and how easy is it to customize?
- How flexible is invoicing from cycles, to delivery, to presentation, and how easy is it to configure?
- What are the capabilities to support diverse product dimensions and schemes such as tiered pricing, promotions, bundles and dependant charges?
- How well can the system support diverse data requirements and business processes?
- How open is the System’s API’s and how well do customizations to the application translate into those API’s?
- How flexible and accommodating is the applications User interface and how well can the system as a whole adapt to specialized business processes?
Compliance
Compliance in financial reporting and disclosure is a given for most commercial ERP or financial systems, but with the incorporation of advanced, customer-self management features and requirements, other compliances, such as PCI, come into play with the ability to automate or externalize ACH and credit card payments. Finance executives must be sure that if they are leveraging built-in payment processing capabilities in their new billing system, that these systems are secure and compliant.
If you are part of an enterprise organization, chances are that the company must adhere to SOC and/or other audit and reporting requirements, such as ACS 606 for revenue recognition. Finance execs should look into whether or not their new billing system has these revenue recognition capabilities built in, and what the vendor’s compliances are because even though the system may be software as a service, the software will become part of the company’s infrastructure, and as such, it must maintain the same compliances in overlapping areas.
Data Transparency
A lot of focus around the functional aspects of billing come in the form of features such as rating, invoicing and payment processing, but one thing to consider – especially with more flexible and configurable systems – is the ability to access the data stored in the system. When evaluating billing systems, finance execs must be sure that the system has built-in reporting that allows for access to all the critical, underlying data structures necessary for understanding not only the revenue aspects of the business, but also provides insight into customer activity, setup, churn, etc.
When dealing with high-volume usage rating, it’s important that finance operations has access to the rating process and are able to see and influence the various stages of rating that happen along the way. It’s also important that the billing system provides the ability to effectively manage a high-volume rating process, which means the ability to view the process at a high level while being able to access the details and anomalies on demand, so that both proactive and reactive measures can be taken quickly and across a vast number of records.
Auditability
Finance has a variety of needs as it pertains to billing auditability. Primarily: was everything that should have been billed, billed? In addition, finance needs to know how a given rate was sourced. For example, in more advanced systems that leverage an account hierarchy, a rate may be inherited from an account structure that is three or four levels deep, with a corporate contract at the top of the hierarchy or overrides somewhere in the middle. Understanding at a glance where a particular rate was sourced can eliminate hours of research when troubleshooting a customer dispute.
In big systems with multiple users, it’s important to have an audit trail of when a particular record (ex: a rate on a contract or billing address) was changed and by whom. Different systems offer different levels of auditability from generalized audit fields to full-blown history tracking at a record level.
With the introduction of automation comes the need to peer into the black box occasionally to see where something may have gone wrong in things like workflow or integrations. Without full visibility at a transaction level for all processes that happen behind the scenes, a billing system can become mysterious and unmanageable over time. Companies must be sure that their new billing system ships with the ability for audits at the user, record and system level, so that finance execs can stand behind the revenue its responsible for, with full confidence in and knowledge of the path the system took to get there.
Nathan Shinn is the Founder and CSO of BillingPlatform.