Five Reasons Point Billing Systems Are Failing

Posted by William Schonbrun, GM of Billing, NetSuite

The era of one time, transactional, purchases of products and services is coming to a close. Replacing it is a hyper competitive, customer driven world where products and services are bundled together and paid for continually, provided value continues to be delivered and a competitor hasn’t emerged with a better option at a better price.

The rapid rise of these new business models is also accelerating the rise of subscription management, billing and invoicing solutions that are up to the task. Companies that are adapting their business models to this new reality are increasingly embracing the cloud economy—one in which agility, global reach, ‘as a service,’ real-time and anywhere, anytime availability are a must.

In order to effectively move from a singular billing method to a hybrid model which bills for transactions, subscriptions and usage simultaneously, a billing system must have real-time visibility into the business transactions that generate the invoices, and ensure accurate and compliant revenue recognition – sometimes even before the invoice has been generated.

Standalone billing systems inherently can’t handle this change – they’re simply too far from the action. They’re too far from where the customer is acquired, contract terms established, products and services selected and delivered. In fact, the increase in M&A and investment activity in this space over the last several years indicates that these point billing solutions will soon be extinct.

Standalone billing systems are quickly giving way to business systems with billing at the core. Here’s why:

  1. Support for Hybrid Business Models with Complex Billing Requirements. Point billing systems only focus on one part of the billing picture: subscriptions, project management, one time purchases or expense management. But today, customers often buy all of the above—all at the same time and in the same order—from more vendors. So, it’s not just about subscriptions anymore. It’s about subscriptions, usage, and transactions. Point billing system software that focuses on subscriptions and subscription management leaves companies totally exposed when managing other billing models in the ‘everything economy.'
  2. Revenue Recognition. Getting out of sync with revenue recognition is a bad idea, and point billing systems are simply unable to keep up with evolving revenue recognition standards. They lack the data necessary to establish the correct revenue recognition at order time and to keep it up to date as elements change over time. In terms of establishing the correct revenue recognition with a point billing system, customers have two choices: 1) They can purchase another point revenue recognition system, which is costly or 2) They can establish manual processes to continually audit subscriptions and orders and to keep everything in sync, which is inefficient and risky.
  3. 360-Degree View of All Customer Billing. Since point billing systems can only handle part of the billing/business model, customer relationship data also becomes fragmented. You’re either adding a data warehouse to pull the data together, or perhaps just dumping data from multiple systems into Excel and joining them together, which is equally as inefficient, wasting of valuable time and resources.
  4. Synchronized Data. Whether synchronizing account data, subscription/order data, or invoice/payment data, the bottom line is that moving any kind of data between disparate systems is tricky and dangerous. Point billing solutions rely on data being sync’d back and forth to operate. Even if the billing systems and core applications are written in the same language, they can—and do—get out of sync if they aren’t part of the same suite.
  5. Total Cost of Ownership. Implementing multiple systems/platforms is expensive. Working with one vendor across all needs will yield better value than negotiating new relationships with point solution vendors, especially in areas where there is overlap.

For years, ‘billing’ (especially recurring/subscription billing) was considered a specialty area and application. Now that hybrid billing is mainstream and there are solutions with hybrid billing and business models built into their core, there’s simply no reason to ever look at a point billing solution again.

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