Billing errors can cause a nightmare for your SaaS business. Because most SaaS use a self-serve model, it’s important that every step of your billing process functions efficiently and flawlessly. Otherwise, you could cause your customers to churn, even if they don’t really want to leave.
In this post, we look at the most common (and disastrous) SaaS billing mistakes to avoid.
Mistake #1: Complicating Your Pricing Model
A big part of your success depends on finding the right pricing model. But don’t let that scare you. For the majority of SaaS, the best pricing model is usually the simplest.
Whether you go with freemium, usage, flat fee, or some other option, it’s best to keep your pricing plans simple. Your customers should understand exactly what they’re getting for their money.
This is why you should limit your pricing plans.
If you’re asking your prospective customers to choose from more than five pricing plans, you’re asking way too much. Offering too many options will make it harder for your customers to decide on the right plan. This leads to more frustration, open tickets, more refunds, and more churn.
Simplifying your pricing can help you avoid future billing issues.
To learn more about pricing models, check out this post: 6 Saas Pricing Models: Which Should You Choose?
Mistake #2: Not Planning for Failed Payments
Failed payments are the leading cause of unintentional churn. And, even worse, your customer may be completely unaware that their payment has failed until you notify them.
What do you do when your customer’s payment fails?
Here’s the worst way you can respond: Immediately denying access to your service until the payment is resolved. Failed payments can be caused by theft, loss, cancellations, expirations, and changes within a company.
Your first response should be to inform the customer of the failed payment immediately. With Stunning, you can notify your customer in three important ways:
- In-app – Reach your customer while they’re engaged with your app. This allows your customer to respond with valid credit card details in real time.
- Via SMS – If you have your customer’s cell phone number, we can send out a quick text to notify them of a failed payment. SMS messages can reach your customer faster and have a higher open rate. If you don’t have your customer’s cell phone number, we can help you collect them.
- Through email – Email is the tried-and-true form of reaching SaaS customers when there’s a billing problem. Send a dunning email (or a series of emails with customized content) to ensure that you get paid.
Speaking of email, Stunning also offers Smart Retries, a feature that automatically and intelligently attempts to collect payment when you have the best chance of recovery. Smart Retries will continue to retry failed payments over the course of 21 days.
Mistake #3: Not Preventing Failed Payments Before They Happen
Of course, you don’t have to wait until after payment has failed before you react. If you know that a credit card is due to expire, you can start reaching out to your customers before you process their payments.
When you use Stunning, we’ll attempt to automatically update your customers’ credit card billing information.
If that’s not possible, we’ll send out pre-dunning emails to your customers shortly before their credit cards expire. In these emails, we’ll provide a link for your customers to follow to directly update their billing information.
Mistake #4: Not Providing Advance Notice Before Billing
A billing best practice is to notify your customers of an impending charge before you charge them. Even if you have an agreement to charge once a month every month, it’s a good practice to send a head’s up email, text, or in-app message to your customers when you’re about to process a payment.
This practice is even more important to follow if you’re renewing a plan but at a higher rate. In any healthy SaaS, prices rise. You don’t need to apologize for increasing your pricing, but you do need to let the customer know.
Having an open line of communication and being transparent in your billing practices will build trust with your customers. You’re not trying to trick your customers, and implementing this practice will prove it.
Afraid that a customer will leave when presented with a bill prior to charging? Don’t be. The customer who wants to leave when they see the bill doesn’t actually see the benefit of your service, anyway. You won’t lose your best customers (those who benefit from your service) by showing them the bill before you process payment.
However, you will reduce the number of refunds you would’ve issued.
Also, consider offering options to upgrade or downgrade the service in these emails.
Mistake #5: Not Upselling
Sure, you’ve made a sale, but can you get even more?
Research says yes. This study shows that the average SaaS can generate 16% of its revenue by upselling alone.
Your current customers are more likely to buy from you since they’ve already purchased from you in the past. In fact, they’re more likely to buy the premium offering now that they’ve seen your product at work.
The moral of the story: Alway upsell. In your payment receipts, offer additional services or the next plan up. Don’t waste this opportunity to promote your other services, especially if you believe that the customer will benefit.
But don’t just say “upgrade,” do this:
- Offer a guarantee – Whether you offer a limited trial or a money-back offer, reduce the risk for the customer.
- Provide testimonials – Social proof, in the form of customer reviews and recommendations, can lead a customer to upgrade.
- Show urgency – Include a special, expiring offer that encourages the customer to act immediately.
Mistake #6: Not Providing Incentives to Stay
Do you know what’s infuriating? Paying more for a product when a new customer can get it for less. SaaS often lure in new customers with attractive discounts, but what about the loyal customers? Do you remember to provide incentives for them, too?
While it may not be good business sense to issue discounts non-stop, it is good to reward customer loyalty or prompt payment. For example, consider offering a 5% or 10% discount for accounts who pay in full or annually. The best time to offer this incentive is when it’s time to bill your monthly client. When a customer already has their wallet open, it’s easier to persuade them to pay a little more, especially if they’re getting a bargain.
Similarly, you can offer discounts for referrals.
Make it part of your billing process to always ask for more while positioning it as a win for your customer.
Mistake #7: Making Unsubscribing Hard to Do
Sure, you don’t want your customer to leave, but sometimes, it’s inevitable. Don’t make it difficult for your churning customer to unsubscribe if the time comes. Leave a good impression by making the process both pleasant and professional. Who knows — they may return one day, or they may refer others to your service.
Be clear about how much is owed and when the billing cycle actually ends. Ensure that customers are not accidentally billed after they’ve canceled. Also, ask the customer if you can continue to send them emails periodically. Staying top of mind can improve your odds of regaining them as a customer, eventually.
Before you go, don’t miss these related posts:
- Best Practices for SaaS Subscription Renewal
- How to Win Back Canceled Customers
- Your Guide to Reducing Cart Abandonment