Billing and revenue management for businesses: Tools and strategies

Did you know that businesses lose an estimated 1-5% of their realized EBITA each year due to billing errors? That's revenue that could be going straight to your bottom line.

In this article, we'll look into the world of billing and revenue management (BRM). We’ll explore the tools and strategies that can help you optimize your revenue cycle and much more. 

You'll also learn:

• The core components of a BRM system
• Key strategies for optimizing your billing processes
• How to select and customize the right BRM solution for your business
• Common challenges in BRM and how to overcome them
• Industry-specific insights into BRM for SaaS, telecom, e-commerce, and professional services

Let’s begin by defining BRM and why it’s important. 

What is billing and revenue management?

Billing and revenue management (BRM) is the lifeblood of any successful business. It encompasses all the activities, processes, and systems that businesses use to manage the entire billing cycle. 

It includes everything from setting up pricing plans and generating invoices to collecting payments and reconciling accounts.

In its simplest form, the meaning of revenue management boils down to this: It's about understanding and predicting the money a company makes from its products or services.

Why is billing and revenue management so important?

BRM is key for maintaining a healthy cash flow and guaranteeing the financial stability of any organization. Why? Because it helps businesses:

• Bill accurately: BRM systems help ensure that customers are charged correctly for the products or services they get. No more billing errors or lost revenue.
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• Track revenue: BRM provides a clear picture of a company's revenue streams. It makes it easier to identify trends, track performance, and make informed decisions.
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• Maintain cash flow: By automating billing and payment processes, BRM helps confirm that businesses get paid on time. This confirmation is crucial for maintaining a healthy cash flow.

Remember: BRM plays a critical role in many other sectors. Think healthcare, education, software, and utilities. We’ll get into industry-specific examples in a later section.

Benefits of effective billing and revenue management for businesses

Advantages that businesses get from robust billing and revenue management include:

• Improved compliance: A good BRM system helps confirm adherence to financial regulations and standards, such as ASC 606, which governs revenue recognition. 
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  ‍For usage-based billing, ASC 606 requires firms to recognize revenue only when the performance obligation is satisfied. A BRM system simplifies the process by tracking usage in real-time and automating accurate revenue recognition.

• Reduced revenue leakage: Accurate tracking and invoicing is a financial boon. It helps businesses minimize revenue leakage and make sure they collect every dollar they're owed. 
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• A much better customer experience: Timely and transparent billing processes keep customers happy. They are more likely to stick around and become loyal advocates for your brand.
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• Support for scalable growth: As your business grows, your billing processes can become more complex. BRM systems automate these processes. They make it easier to handle increased transaction volumes and scale your operations. 
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• Increased efficiency and productivity: By automating tasks, BRM frees up time and resources. Automation allows your team to focus on more strategic initiatives.
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• Better cash flow: Prompt and accurate invoicing leads to faster payments. In turn, it also improves cash flow and strengthens your financial position. A healthy cash flow is the fuel that keeps your business running smoothly.

Remember: Investing in effective billing management is an investment in the future of your business. 

Core components of billing and revenue management systems

Here's a breakdown of the core elements you'll typically find in a BRM system:

• Billing automation: BRM systems automate recurring and usage-based billing. They help reduce manual intervention and the risk of errors. They can handle everything from invoices and payments to reminders and subscription management.
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• Revenue recognition: BRM systems confirm that revenue is recognized under standards like ASC 606. 
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• Data integration: BRM systems integrate data from various sources. Think of your CRM, ERP, and other business apps. They help create a single source of truth for all your customer and financial data. 
  
  CRM billing integration, for example, allows you to track customer interactions and billing history in one place.

• Analytics and reporting: BRM systems provide robust analytics and reporting capabilities. They give you insights into revenue performance, customer behavior, and key performance indicators. 

Key strategies for optimizing billing and revenue management

We’ll now share some key strategies to help you get the most out of your billing and revenue management system. Let’s take a closer look: 

Key strategy 1: Align billing models with customer value

Pricing models often focus on cost-plus or competitor-based pricing. However, a more effective approach is to align your billing models with the value you deliver to customers. 

Consider using value-based or outcome-based pricing. Here, customers pay for the results they achieve rather than just the resources consumed. 

Examples of such metrics could include revenue growth for sales enablement software, reduced churn rates for customer retention platforms, or uptime improvements for IT infrastructure services. 

This approach creates a win-win situation where customers are happy to pay for the value they receive.

Key strategy 2: Leverage analytics to monitor performance

Use analytics to monitor your performance. They can help spot trends in revenue streams and pinpoint areas for improvement. Analyze metrics such as monthly recurring revenue (MRR), customer churn rate, and average revenue per user (ARPU).

Doing so helps you gain a deeper understanding of your financial health. These insights can help you tweak your pricing, improve customer retention, and drive revenue growth.

Key strategy 3: Make your billing more transparent

Clear and transparent billing is critical for building trust with your customers. Communicate with customers about any changes in pricing, billing cycles, or payment methods. 

Provide detailed invoices that are easy to understand. Also, offer multiple channels for customers to access their billing information and get support. By fostering transparency, you can reduce billing disputes and keep customers returning. 

Key strategy 4: Invest in scalability

As your business grows, your billing needs will evolve. Choose systems that can scale with your business and handle increasing transaction volumes. The key thing here is it should do so without compromising performance. 

Cloud-based BRM solutions are particularly well-suited for scalability. They can easily adapt to changing needs and accommodate growth. 

How to select and customize a BRM system

Choosing the right billing and revenue management system is a crucial decision for any business. You want to make sure it's sturdy, adaptable, and built to last. Here's a guide to help you through the process:

Prepare for BRM implementation

Before diving into the selection process, take some time to assess your needs and goals. What are your pain points with your current billing processes? What features are non-negotiables for your business? What are your growth projections? 

Clearly define your requirements. This way,  you can narrow down your options and choose a BRM system that aligns with your business objectives.

Choose the right BRM system

With a plethora of BRM solutions available, it's important to know what to look for. Compare features such as billing automation capabilities and revenue recognition compliance. Make sure they have data integration options and analytics and reporting functionalities. 

Consider factors such as scalability, security, agility, and ease of use. As we said in the previous section, think about your long-term needs and choose a system that can grow with your business.

Customize your BRM system

Most BRM systems offer some degree of customization to fit your unique workflows. Explore options for integrating with your existing CRM, ERP, and other business applications. 

Look for features that allow you to configure billing rules. Look for those that let you create custom invoices and generate personalized reports. You also want to make sure it can integrate with your operations and support your specific billing and revenue management needs.  

Challenges in billing and revenue management

Even with the best tools and strategies, billing and revenue management can present some hurdles. However, with careful planning and proactive measures, these challenges can be overcome. Here are some common obstacles and potential solutions:

Having to solve integration issues

Many businesses struggle with integrating their billing and revenue management system with others. Think systems like CRM, ERP, and accounting software. These data silos can create inefficiencies, hinder data visibility, and lead to errors.

• Solution: Look for BRM systems that offer integration capabilities with your current tech stack. Prioritize solutions with open APIs and pre-built connectors to popular business applications. 

Keeping up with stringent compliance requirements

The regulatory landscape is constantly evolving. There are always new tax laws, accounting standards, and data protection policies emerging. Staying compliant can be a moving target for businesses. 

• Solution: Choose a BRM system that is designed with compliance in mind. Look for features that automate tax calculations and guarantee adherence to accounting standards. Make sure they also support data privacy regulations. 
  
  Remember to regularly update your system. It also helps to stay informed about the latest regulatory changes to avoid penalties and maintain compliance.

Meeting the needs of a diverse customer base

Customers have different billing preferences and expectations. Some may prefer paper invoices, while others opt for online statements. Some may require customized pricing plans, while others may have unique payment schedules. 

The ugly truth is that catering to these diverse needs can be a logistical challenge.

• Solution: Implement a BRM system that offers vast customization options. Provide customers with multiple billing and payment options. Consider online portals, automated payments, and paper invoices. 
  
  Offer tiered pricing plans and custom billing options to cater to different customer segments. By accommodating diverse customer needs, you can keep them happy and reduce churn.

Providing data accuracy in a sea of information

Inaccurate data can lead to billing errors, revenue leakage, and reporting discrepancies. Maintaining data accuracy is paramount for effective billing and revenue management.

• Solution: Implement a BRM system that acts as a single source of truth for all usage and billing data. With Orb’s Rev Graph architecture, you can ingest all raw event data into one unified system, delivering perfect data accuracy and a complete audit trail for every calculation. 
  
  By eliminating data fragmentation and automating validation processes, Orb helps prevent errors, reduce manual effort, and build trust with customers. Plus, this unified approach improves financial reporting and enables informed decision-making.

Industry-specific insights

Billing and revenue management plays a vital role in various industries. Each has its own unique set of challenges and requirements. Let's explore how BRM is applied in different sectors:  

SaaS companies: Embracing usage-based pricing

In SaaS, usage-based pricing is transforming billing. Instead of fixed subscriptions, customers are increasingly charged based on the use of the software.  

This model aligns billing with customer value and provides greater flexibility. However, it also requires BRM systems that can track usage, calculate variable charges, and handle pricing tiers well.  

Note: For more on this industry, check out our guide to SaaS revenue management.

Telecommunications: Managing high-volume transactions in real time

Telecom companies usually must handle high transaction volumes with real-time billing needs. Customers expect to be charged instantly for calls, data usage, and other services. 

BRM systems in telecom must be able to process massive amounts of data. They should also guarantee accurate billing in real time and manage pricing plans with various bundles and discounts.  

E-commerce: Adapting to seasonal demand and diverse payment methods

E-commerce businesses must contend with fluctuating seasonal demand and many payment preferences. BRM systems need to be scalable to handle peak transaction volumes. They should also offer a variety of payment gateways to cater to various customer preferences.

They also need to support features such as discounts, promotions, and loyalty programs. These help drive sales and improve customer engagement.  

Professional services: Tailoring billing to project milestones

Professional services firms often bill clients based on project milestones or completed work. BRM systems in this sector need to be flexible enough to accommodate different billing models. Think time and materials, fixed-fee, or value-based pricing. 

They also need to track project progress, manage invoices tied to milestones, and provide detailed reports to clients.  

Orb can help build your billing and revenue management system

We've explored why billing and revenue management is so important across industries. But, to truly harness the power of BRM, you need a billing platform that can help you bill users accurately.

That's where Orb comes in.

Orb is a done-for-you billing platform with greater extensibility. It’s designed to handle your billing, allowing you to fully realize the potential of your revenue model. Here's how Orb can elevate your billing and revenue management:

• Effortless data integration: Orb integrates with your existing tools and data sources. Think popular options like S3 and Segment, as well as Orb’s flexible REST API. You can track usage data for reporting and create invoices without disrupting operations.
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• Customizable usage tracking: Orb lets you define and track the specific usage metrics that align with your business model. Whether it's API calls or data storage, Orb provides the flexibility to track what matters most.
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• Adaptable pricing models for pricing agility: Orb supports a wide array of pricing models. We cover everything from granular per-unit charges to tiered pricing based on usage levels. Our intuitive Plan Builder allows you to design and implement these models without coding. 
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• Automated billing operations: Orb simplifies your entire billing workflow. We automate tasks like usage tracking, calculations, invoicing, payments, and adjustments. We help you save time and resources while minimizing the risk of errors.
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• Billing transparency for greater accuracy: Orb provides clear and detailed invoices. We help you give your customers full visibility into their charges. Build trust and reduce billing disputes with transparent and accurate billing practices.
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• Real-time insights and reporting: Orb offers robust reporting and analytics capabilities. We provide insights into revenue performance, customer behavior, and key metrics. Make data-driven decisions to optimize your pricing and drive revenue growth.

Learn how a partnership with Orb can take your billing and revenue management to the next level. Make sure to also check out our flexible pricing options to find a plan that works for you.