SOFTRAX Billing

Consumption and Usage-Based Billing Software

Consumption or usage-based business models have become an increasingly popular monetization channel, especially for SaaS companies. The SOFTRAX Revenue Management System (RMS) is designed for the successful deployment of billing systems to meet the most complex consumption or usage-based pricing models. With SOFTRAX RMS, companies can rest assured that the value metrics and terms of customer use are tied to the billing system, so that contracts are monitored, forecasting is seamless, and the risk of lost revenue is minimized.

Regardless of whether the consumption or usage-based billing is measuring, or metering, the number of clicks, downloads, API calls, access points, processing units used such as MB or KB, or any measurable event, SOFTRAX RMS automates processes so that contract and billing alignment are seamless. For contracts, SOFTRAX RMS maintains details, including usage metrics such as minimums, maximums, and overages, with easy access.

Video Transcript

Usage billing, also known as consumption or metered billing, is a recurring billing model where your customers pay for products and services based on their usage. The amount customers pay varies depending on how much they consume in their billing period. You track each customers’ usage and calculate the amount to invoice based on the terms of their contract. For example, you may charge by number of transactions performed, volume of data transferred, time a service used, or the number of users or devices connected. You may offer tier pricing where customers pay a price for each unit in a tier. Or you may offer cumulative (or volume) pricing, where customers pay a price for their total number of units consumed. You may also charge a minimum, a maximum, or overage charges, which can change from contract to contract.

How you recognize revenue for usage billing can become quite challenging because amounts billed vary each month. And because each customer’s profile is different. The ASC 606 and IFRS 15 guidance require that you estimate the consumption that will occur in the year and that you maintain variable consideration. For example, one customer who changes tiers within a billing period as their usage grows may earn a discount. And another customer may cut down their usage and fall to a different pricing tier. One customer may have a pre-paid plan that draws down and rolls over to the next period. While another has a post-paid plan invoiced in arrears. To be compliant with the ASC 606 and IFRS 15 revenue recognition standards, your back-office accounting team must correctly track and recognize revenue. This becomes especially challenging if you bundle training or implementation costs with the pay-per-usage service. You may then need to unbundle these costs and perform allocations against standalone selling price, or SSP.  

An even bigger challenge of usage billing is that to perform allocations, you must know the total contract value, or TCV. However, on day 1 of the contract, the value of the usage billing line item is 0 because no consumption has occurred yet. You must estimate what the usage will be over the year to determine the value to use in the allocation calculation. You may also have to deal with contract modifications and need to adjust the consideration to be recognized. If you’re still using multiple spreadsheets, multiple vendors, and expensive customizations, it’s time to use one solution that reconciles total order value, usage billing, and revenue recognition. 

The SOFTRAX Revenue Management System, or RMS, generates invoices for your usage-based billing and automates the revenue recognition. Our powerful policy-driven automation enables you to recognize revenue as usage occurs. In SOFTRAX RMS, you configure usage billing with price books, which determine your tiers and pricing rules. Your customers’ order details are imported into SOFTRAX RMS and billing and revenue recognition schedules are automatically created. Regular usage records are also imported and through automation with your price book, the amount to invoice is calculated.

As more usage records are loaded, the amounts to invoice are automatically updated. And previously calculated amounts are analyzed to account for tier price differences. You then generate and distribute invoices for your usage-based subscriptions. And through our powerful policy-driven automation, revenue recognition is automatically calculated.

RMS automatically calculates the remaining total contract value based on the actual usage that was billed. If contract combinations or modifications are needed throughout the life of the contract, RMS performs prospective reallocations of revenue or cumulative catchups as appropriate. You can also manage material rights and handle variable consideration. At any time, you can view a history of usage and amounts billed.

Because RMS stores data for the order, billing, AND the revenue recognition, usage-based billing is automatically reconciled with revenue recognition. You can easily understand how much of the full order value was billed, how much revenue was recognized, and amounts remaining in unbilled or deferred revenue.

Are you ready to explore how YOU can use SOFTRAX RMS for your billing and revenue recognition? Contact us at sales@softrax.com to schedule a 30-minute consultation.

Automate and Innovate All Consumption and Usage-Based Billing

SOFTRAX RMS is a billing platform that  simplifies consumption or usage-based billing by using tiered and cumulative price model options in which the calculated fee can be based on metric quantities consumed or monetary amounts incurred, such as per-unit pricing. Concepts such as minimums, maximums, aggregate quantities, and more are layered into the pricing and invoicing to ensure full coverage for companies’ advanced needs. In addition, with SOFTRAX RMS, businesses gain simple to complex pricing capabilities to support flat fee, transaction-based, user count-based, unit-based, tiered, volume, and usage pricing strategies, giving them flexibility in how they charge customers.

Download the SOFTRAX RMS Billing Data Sheet to learn more.

The Right Billing Solution for Consumption and Usage-Based Pricing

CONSUMPTION AND USAGE-BASED BILLING IN ONE APPLICATION

SOFTRAX RMS allows a company to easily deploy and manage all aspects of a consumption or usage-based billing contract’s pricing, terms, invoice schedules/billing cycles, invoice generation, terms, and invoice presentation.

DYNAMIC SUBSCRIPTION MANAGEMENT

SOFTRAX RMS provides robust all-in-one invoice management features and functions to support the entire subscription lifecycle by handling invoicing processes for new customers, upgrading existing customers, and renewing agreements with existing customers.

CLEAR VISION INTO SUBSCRIPTION DATA

With SOFTRAX RMS, companies can gain valuable insights into usage, recurring billing, revenue recognition, and other scenarios associated with the consumption and usage-based billing deployments.

Next Level Reporting and Analytics

SOFTRAX RMS offers a complete view of all consumption and usage-based billing metrics through data-driven dashboards with real-time notification abilities. The platform allows customizations to capture activity from add-ons, apps, and payment gateways. SOFTRAX RMS also allows visibility into net dollar retention and its components as well as MRR and ARR in revenue recognition.

Consumption and Usage-Based Billing for SaaS

Many software companies are expanding from subscription billing to consumption and usage-based billing, especially for SaaS offerings. These expanded billing models are a way to reduce churn by giving customers options with how they purchase a product or service through an offering. SOFTRAX RMS manages the switch from subscription to consumption or usage-based billing, supporting simple and complex usage measurement, real-time notifications, and reconciling usage with accurate billing and revenue recognition processes.

Manage all Aspects of Consumption Billing and Usage-Based Billing in One Application

SaaS Cloud

Cloud-Based Solution

SOFTRAX RMS is a cloud-based, multi-tenant, SaaS billing solution that addresses usage and consumption-based pricing plans via rules/policy-based automation.

Easy Contract Management

Contract details are the key to successful consumption and usage-based billing models, and SOFTRAX RMS organizes and maintains these details, allowing for changes such as credits, voids, pause and resume, product additions and subtractions, and upticks and downticks.

Seamless Integration Capabilities

An intuitive, performant, API-first integration and workflow module allows for simple or highly complex integrations with source (ERP, SFA, CRM, time tracking, fulfillment, and many more) and target (GL accounting systems) with ease. Additionally, with readily available REST APIs, companies can choose to establish direct connections using their existing integration technologies and tools.

Compliance with ASC 606 / IFRS 15

Consumption billing can be complicated for ASC 606 / IFRS 15. The billing model frequently triggers the need to follow the variable consideration portion of the guidance, which requires the company to estimate either the expected value method or the most likely amount for usage. SOFTRAX RMS handles all aspects of ASC 606 / IFRS 15 compliance, including variable consideration.

Scalable Billing Automation

SOFTRAX RMS scales to meet all phases of a company’s usage and consumption billing journey, supporting all pricing models, including fee-and usage-based. In addition, SOFTRAX RMS allows for future-proofing to handle any new pricing plans, packaging approaches, distribution channels, invoice template/presentation approaches, international growth, and M&A activities as a business evolves over time.

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Highly Configurable

SOFTRAX RMS provides a rules/policy-based approach to automate the complex consumption and usage-based billing needs. These rules/policies will drive pricing, payment terms, invoice schedules, invoice formats, and the type of invoicing that will be applied to each product and service included in a customer’s contract. Accounting and finance teams control the setup and maintenance of these key rules/policies via highly intuitive user experiences.

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A Variety of Pricing Models

SOFTRAX RMS allows companies to innovate on pricing approaches to easily configure new pricing models, or update existing pricing models, leveraging an array of pricing approaches such as flat fee, per user, per unit, tiered pricing, cumulative pricing, minimums, maximums, overages, using aggregate values, and many more pricing options. As customer usage of a company’s product or service grows and evolves over time, consumption and usage-based billing processes in SOFTRAX RMS will easily keep pace and ensure customer success, optimize cash flows, and promote customer retention via accurate and timely invoices.

What Clients Say About Our Usage-Based and Consumption Billing Software Solution

FAQ

Usage-based billing, or consumption billing, is a billing model in which customers are charged for a product or service based on their actual usage or consumption. This model is commonly used in various industries, including telecommunications, utilities, cloud computing, and SaaS. Learn more here: What is Consumption Billing?

Usage-based or consumption billing software allows a customer to pay for what is used of a product or service. This allows:

Flexibility: This billing model provides customers with flexibility, as they are only charged for what they use. It is particularly advantageous for businesses with varying or unpredictable usage patterns.

Cost Control: Customers can manage their costs by controlling their consumption. They can scale up or down based on their needs, which can be cost-effective for them.

Elastic Scaling: Services offered through usage-based billing are often scalable. Customers can easily adjust their consumption and costs, making it suitable for cloud services, software, and other scalable products.

These terms relate to billing, but they have differences in definition in addition to differences depending on the industry using the billing model:

Consumption Billing: In general, this refers to customers being charged by the amount of resources or services they consume. This billing is common in utilities (electricity or water use), cloud computing (data usage), or telecommunications (data usage for calls / connectivity).

Usage-Based Billing: Similar to consumption billing, usage-based billing charges customers based on their usage of a service or resource, but usage-based can imply more granular measurement techniques or more complex pricing.

Metered Billing: In this model, the amount charged is typically determined with the help of a meter or monitoring system.

Pay-As-You-Go Billing: This billing model allows customers to pay for services or resources as they use them, without committing to a long-term contract or fixed subscription fee.

SOFTRAX RMS supports simple to the most complex consumption or usage-based pricing models. SOFTRAX RMS automates the tracking and measurement of consumption or usage-based billing KPIs, which include clicks, downloads, API calls, access points, processing units used such as MB or KB, or any measurable event.

SOFTRAX RMS offers the industry’s only solution that can handle the complexities of usage-based or consumption billing with revenue recognition and accounting requirements. Customers get a single view and management that gives an improved customer experience for their customers.

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