by Amy Pruitt, Zuora Account Executive
Why do I need a recurring billing system when I already have an accounting package?
On the front lines here at Zuora, this is a question that comes up from time to time when speaking with prospective client CFOs and COOs. Maybe you’re asking yourself the same thing. Put simply, accounting and billing systems manage two different worlds in the business; so an effective accounting system doesn’t guarantee an effective billing system. Just how are billing and accounting systems different?
- Accounting systems record revenues and expenses after they happen. A recurring billing system is where your product catalog, customer subscriptions, and all change orders and amendments are housed. This is where you group features into various packages and rates plans, allowing you to offer customers the level of service they want at a price they can handle, based upon their individual needs.
- The accounting world revolves around debits and credits and requires business events to work around it. Billing, on the other hand, is built around the business events that drive the flow into accounting: customer acquisition, provisioning, pricing, usage tracking, calculations, invoice generation, collections, etc.
- An accounting system stores the charge after it has been billed; whereas a billing system looks at the customer’s subscriptions, including all change orders and amendments, and calculates what the bill should be, e.g. prorations, upgrades, downgrades, etc.
- Accounting will generate a balance sheet, but falls short when it comes to generating key subscription metrics like MRR, churn, renewals, etc.
So, let me pose the question:
How important are money and growth to you, right now?
The answer you give to that question indicates whether or not you should invest in a subscription management platform on top of the accounting package you already have.
If you said, “It’s about cash. Darn it! It’s about fueling the growth of my company by enabling my product, marketing, and sales teams to position and capture as much market share as humanly possible – right now, today! And, I want a system I can leverage in the day to day operational complexities of my business.”
Then, I would respond, “You need a recurring billing system.” Actually, I would say, “You need Zuora.”
A recurring billing system, correction – a recurring billing system that is flexible, scalable and integrated, handles the tough stuff – change orders, proration, billing in advance and arrears, usage-based billing. The hard part of subscriptions is where the value is. Go for that if you want to make money!
You might not see it yet – actually you might not feel it yet, but it’s there. The pain you’ll experience when your customers want to upgrade, downgrade, pay with a briefcase full of cash (not a credit card), or pay you monthly not annually. Or your sales team wants to discount, and you want to empower them, but without fostering rampant pricing inconsistencies. Or your marketing team wants to offer all kinds of pricing and packaging scenarios to see what the market will respond to… without involving your IT department.
The way that subscription businesses grow is by understanding how the different segments of the market want to buy from you and then selling to them in those ways. It’s NOT about a lot of products but it IS about a lot of pricing and packaging options.
Totally not a surprise when I’ve hung up the phone or left a client meeting in which my client tells me that his customer said one of two things: “You’re charging how much??” or “Your price isn’t high enough for a company like ours.” Both of them have money, so sell to them in the ways they want to buy. This is what a powerful recurring billing system (read: Zuora) can do for you.