Usage-Based Billing Software for Optimized Revenue

Using a tiered pricing model can be a game-changer for businesses that offer subscription-based services, with some companies seeing a 30% increase in revenue by implementing this approach.

By accurately tracking usage, businesses can offer customized pricing plans that reward customers for their loyalty and encourage them to use their services more extensively.

A well-designed usage-based billing system can help reduce churn rates by providing customers with a more transparent and fair pricing structure.

This approach can also help businesses identify areas where they can optimize their pricing and revenue streams, leading to increased profitability.

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Usage-based billing allows users to pay only for what they use, making it a fair and cost-effective option.

SaaS companies often implement usage-based billing due to their ability to measure service or product utilization.

This model is especially useful for companies with large customer bases and diverse services, as it caters to everyone's needs.

A clear unit of measurement is crucial in SaaS usage-based pricing, but many companies struggle to define it, leading to the inclusion of additional dimensions like value metrics.

Value metrics represent a group of factors that affect pricing models, making them a vital component of usage-based billing.

Consider reading: Saas Billing Software

Billing is a way for companies to charge their customers for the services they use. There are different billing models available, and one of them is usage-based billing, which allows users to pay only for what they use.

Usage-based billing is a simple concept, where users only pay for the resources they consume. For example, with so many different billing models available, it’s not uncommon for us to hear the question: what is usage-based billing? Simply put, usage-based billing allows users to pay only for what they use.

In essence, billing is a way for companies to generate revenue from their customers.

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The Usage-Based Billing Model is a strategy that empowers businesses to establish a "pay for what you use" approach. This model is ideal for businesses whose customers' consumption levels vary.

Under this model, customers are billed at the end of each billing cycle or subscription term based on their specific usage. This ensures fairness and flexibility in the billing process.

The model prevents overcharging by charging customers only for what they have used. It encourages customer satisfaction and loyalty by aligning price directly with value.

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Implementing usage-based billing requires careful consideration of various factors. Companies need to determine their value metrics to determine the billing model.

To keep your customer base and revenue stable, you'll want to have a specific number of heavy users. This will help maintain a balance between customer retention and revenue growth.

You'll also need to develop a quality metered billing system that can monitor customer usage and convert it to readable details for creating invoices. This system will be the backbone of your usage-based billing setup.

Zoho Billing can help with the setup process, allowing you to configure one-time offerings, base subscription plans, and per-unit charges for usage. This makes it easy to accommodate all your predefined meter charges.

Implementing usage-based billing may look simple, but it requires careful consideration of various factors. You need to determine your value metrics to determine the billing model, and have a specific number of heavy users to keep your customer base and revenue stable.

To implement metered pricing structures, you can use per-unit pricing, overages, tiered pricing, volume pricing, package pricing, or credits. For example, per-unit pricing is ideal when pricing variations are tied to the number of units, such as users, items, messages, or licenses.

To set up your usage-based billing, you can configure one-time offerings, base subscription plans, and per-unit charges for usage as Zoho Billing accommodates all your predefined meter charges. You can also use preconfigured templates for common recurring billing models or configure the usage parameters yourself.

To simplify usage-based billing, you can use a platform that offers streamlined features, such as onboarding and configuration, automation and real-time processing, customization and scalability, ongoing optimization, and customer-centric features. For example, BillingPlatform's pay-as-you-go models help SaaS and Cloud Services companies improve customer satisfaction by aligning their costs with actual usage.

Here are the four crucial steps for implementing usage-based pricing:

1. Determine your value metrics to determine the billing model

2. Have a specific number of heavy users to keep your customer base and revenue stable

3. Develop a quality metered billing system that can monitor customer usage and convert it to readable details for creating invoices

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4. Make the transition as smooth as possible by aligning all departments in your company

You can charge for your captured metered revenue with integrations to multiple payment gateways online. For example, BillingPlatform enables Sydney Airport to manage and bill for everything from airline movement, parking, retail, and more.

To transform usage data into revenue, you can use built-in mediation, which can stream, batch, or upload metered consumption data. You can also use data mediation to process aggregate blocks or discrete units.

To unleash unlimited growth with enterprise scalability, you can use a platform that supports diverse billing models, global operations, and high transaction volumes. For example, BillingPlatform's scalability can handle high volumes of transactions, such as millions of sensor data uploads from IoT providers.

Offering free trials can be a great way to let customers test out your usage-based subscription before committing to a paid plan.

The usage incurred during the free trial period will not be billed until the end of the billing cycle.

To make things clear to your customers, consider including a note in your terms of service that explains how the free trial period works.

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Tracking and rating customer usage is a crucial step in usage-based billing. You need to determine who used the services, when, for how long, and how much.

This process is called mediation, and it involves collecting data from different servers and in different formats. Transparency is key, so customers should be able to view their usage in near real-time.

Customers expect to receive notifications about approaching their plan's limits, so it's essential to set up a system that sends timely alerts. This helps prevent unexpected charges and keeps customers informed.

Rating engines compute charges for various billing models, including flat-rate, volume, tiered, and stair step billing. They can also be combined with flat-rate subscriptions, percentage billing, and one-time charges.

Usage-based billing offers numerous benefits, especially for low- and mid-volume customers who prefer paying for what they used. This approach also allows users to track their usage data and upgrade if necessary, providing transparency.

Implementing usage-based billing can lead to significant revenue growth by optimizing customer success and upsell opportunities. Many companies have seen this positive impact.

Value-aligned pricing is a key benefit of usage-based billing, enabling pricing strategies that reflect customer usage for a fair, value-focused model.

With usage-based billing, customers can pay for what they used, making it a more appealing option for low- and mid-volume customers. This approach also allows users to keep track of their usage data and upgrade if necessary.

Implementing usage-based billing can lead to significant revenue growth for companies that use this model. This is because it enables good optimization when it comes to customer success and upsell opportunities.

Value-aligned pricing is a key benefit of usage-based billing, enabling pricing strategies that reflect customer usage for a fair, value-focused model.

With usage-based billing, customers can choose from a range of options that combine usage-based billing with base fees and add-ons. This versatility in plan creation makes it an attractive option for businesses.

Customers appreciate transparency in billing, and usage-based billing provides just that. Automating billing calculations and providing clear, actionable usage data helps customers and finance teams understand what they pay for.

By clearly showing customers what they pay for, businesses can reduce churn and simplify billing. This customer-centric approach to billing aligns price with value and makes it more appealing to customers.

Implementing a consumption-based model can be tricky, especially if you offer a wide range of products and services with different options, making it hard to determine the right value metrics.

Forecasting overall revenue can be a challenge because usage varies greatly.

You may struggle to implement this monetization model if you have a complex product lineup, which can lead to difficulties in determining the right value metrics.

The unpredictability of usage makes it difficult to forecast overall revenue, which can be a significant challenge for businesses.

Monetizing every aspect of your product or service usage can be a game-changer. By monetizing clicks, API calls, and bandwidth use, you can increase revenue streams.

Reducing the risk of manual errors is crucial for operational efficiency. Lowering administrative overhead can also help you save time and resources.

By implementing usage-based billing software, you can automate these processes and make the most of your product or service usage.

Revenue Optimization is all about making the most of every aspect of your product or service usage. You can monetize every click, API call, and even bandwidth use.

Monetizing usage patterns can be a game-changer for businesses. By doing so, you can tap into new revenue streams and increase your overall earnings.

A robust reporting system is key to monitoring usage patterns and preventing billing surprises. This helps you stay on top of customer behavior and make data-driven decisions.

Analyzing metered usage impact on revenue is crucial for informed business decisions. Zoho Billing's reporting system provides unparalleled insights into customer behavior.

Operational Efficiency is key to reducing administrative overhead and minimizing the risk of manual errors. This can be achieved by automating tasks and streamlining processes.

By reducing the risk of manual errors, you can save time and resources that would otherwise be spent on correcting mistakes. Manual errors can be costly and time-consuming to fix.

Operational Efficiency also helps to lower administrative overhead, allowing your team to focus on higher-value tasks. This can lead to increased productivity and improved overall performance.

Automating tasks and streamlining processes can help to reduce the administrative burden, freeing up your team to focus on more strategic work.

Tiered pricing is a pricing model where customers are charged at different rates based on their usage. For example, a plan might charge $10 per unit for the first 100 units, $7 per unit for the next 150 units, and so on.

You can create a usage-based plan with a mix of Usage Based Add-Ons, Item Add-Ons, and Add-Ons. Recurly always requires a plan fee, but you can set it to 0 if you want a strictly usage plan.

To create a usage-based plan, you can add-ons with different pricing models, such as "Price per Unit" or "Percentage of an Amount". You can also define tiers and prices for each tier.

The price per unit charged can be up to 9 decimal places, and the percentage taken of the monetary amount of usage tracked can be up to 4 decimal places.

Here's an example of how to create a tiered pricing plan:

This plan would charge $10 per unit for the first 100 units, and $7 per unit for the next 150 units. The customer would pay a total of $2,050 for 250 units.

Custom logic can be aligned to customer value through easy-to-implement APIs that automate invoices for metered bills, allowing businesses to add line items, collect payments, or email invoices.

Zoho Billing offers these APIs to help businesses reach their full potential.

Built-in mediation enables effortless monetization of usage-based pricing and billing, transforming data from any source into revenue.

Sydney Airport uses BillingPlatform to manage and bill for various services, including airline movement, parking, and retail.

BillingPlatform's built-in data mediation engine seamlessly monetizes usage-based billing offerings, transforming data from any source into revenue.

This engine allows businesses to automate invoice processing, eliminating delays caused by manual processes.

You can easily charge for captured metered revenue with integrations to multiple payment gateways online.

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You can create measured units to track and report usage across multiple add-ons and plans, and any changes to them will instantly update your plan and subscriptions. Measured units are mandatory for all usage add-ons and will only be visible to subscribers for price per unit usage add-ons.

You can create measured units while forming a usage-based add-on in a plan or by visiting the "Measured Units" page under the Configuration section of your Admin Console. To delete a measured unit, you'll need to remove it from all plans before deletion on the Measured Units page.

To charge customers for usage-based add-ons, you have two calculation methods: "Cumulative" and "Last Recorded". The "Cumulative" method takes each individual amount of usage recorded throughout the duration of a given billing period and multiplies the aggregated total usage by unit price to calculate the subtotal charge.

Measured Units are a crucial part of tracking and reporting usage-based add-ons. They can be created while forming a usage-based add-on in a plan or by visiting the "Measured Units" page under the Configuration section of your Admin Console.

To create a measured unit, you can visit the "Measured Units" page under the Configuration section of your Admin Console. This page allows you to manage all your measured units in one place.

Any changes to a measured unit will instantly update your plan and any subscriptions. This means that you don't have to worry about manually updating your plans every time you make a change to a measured unit.

A measured unit can be deleted only if it isn't used in a plan. This is to prevent accidental deletion of a measured unit that is currently in use. If a measured unit is being used in a plan, you'll need to remove it from all plans before you can delete it.

Here are the key things to know about measured units:

Measured units are also used to track and report on the same type of usage across multiple add-ons and plans. This makes it easier to manage your usage-based add-ons and get a clear picture of your usage data.

To log usage, you'll need to use the Usage API. This API allows you to log usage amounts in whole integers or decimal quantities. However, support for decimal quantities is only available for usage-based add-ons and requires Recurly Support to enable the feature on your Recurly instance.

Exports from Zoho Billing will include tier_type but not detailed tiers pricing information. This means you won't get specific pricing details for each tier.

Support for Decimal Usage Quantities

Some integration partners, like Xero and QuickBooks Online, offer support for decimal usage quantities, but the level of support varies.

Custom Logic for Metered Bills

Zoho Billing's APIs can help automate invoices for metered bills, making it easy to add line items, collect payments, or send invoices via email.

The transactions report in your usage based billing software will include your usage-based add-on revenue, giving you a clear picture of your earnings.

The MRR report, on the other hand, will not account for usage-based add-on revenue, so you'll need to rely on the transactions report for a complete view of your revenue.

There are currently no additional reports dedicated to usage-based add-ons, so you'll need to get creative with your reporting.

You can export data about usage add-ons and usage records for simple analysis, and two key exports are the Subscriptions Add-Ons Export and Subscriptions Usage Export.

The Subscriptions Usage Records export provides individual usage records logged for your customer's usage-based subscription add-ons, which is useful for financial reporting and product analysis.

Reporting is a crucial aspect of understanding your business's performance. The transactions report will include your usage-based add-on revenue.

If you're looking to track your MRR (Monthly Recurring Revenue), you'll need to know that the MRR report will not account for usage-based add-on revenue. This means you'll have to look elsewhere for a comprehensive view of your revenue.

Currently, there are no additional reports dedicated to usage-based add-ons. This is something to keep in mind when planning your reporting strategy.

Data export is a crucial aspect of reporting and analysis. You can export data about usage add-ons and usage records.

For simple analysis, two key exports are available: Subscriptions Add-Ons Export and Subscriptions Usage Export. These exports provide a wealth of information to help you make informed decisions.

The Subscriptions Usage Records export is particularly useful, offering individual usage records logged for your customer's usage-based subscription add-ons. This data is essential for financial reporting, product analysis, and marketing analysis.

These templates provide complete support for usage-based add-ons, making it easy to track and analyze customer usage patterns. This information can be used to optimize your product offerings and marketing strategies.

Managing notifications is a crucial aspect of using usage-based billing software. You'll want to stay on top of changes made to your usage records.

Recurly sends notifications to update your usage records when you zero-out the usage for a current cycle. This ensures you're always aware of the latest changes.

A new_usage_notification webhook will be sent to update your usage records when you refund a usage-based add-on. This notification lets you know what usage record was created.

If Recurly creates usage on your behalf in a refund, a new_usage_notification will be sent. This helps prevent any discrepancies in your records.

Here's a summary of the types of notifications you can expect:

All usage is logged through our Usage API, which is a reliable and efficient way to track usage-based add-ons.

For percentage of an amount usage-based add-ons, usage will be logged "in cents", which we will convert to a proper currency display depending on the currency of the subscription.

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You can store the usage event's ID in your own system using the optional custom field called "merchant_tag" in each usage record.

This allows you to use our API to provide auditable statements to your customers through your own UI.

Here are the key points to remember about logging usage:

All usage is logged through our Usage API, not the Admin Console.

Usage amounts can be positive or negative.

For percentage of an amount usage-based add-ons, usage will be logged "in cents", which we will convert to a proper currency display depending on the currency of the subscription.

Each usage record has an optional custom field called "merchant_tag" where you can store the usage event's ID in your own system, or whatever you like.

Here's a quick rundown of the key points:

Logging errors is a crucial step in identifying and fixing problems in your system. This can be done by using log levels, such as debug, info, warning, error, and critical.

A good logging strategy includes setting the correct log level for each type of message. This helps you focus on the most critical issues.

Error messages should be clear and concise, including relevant details like timestamps and error codes. This makes it easier to identify and diagnose problems.

Logging errors also helps you track the sequence of events leading up to an error. This can be done by including the request ID or transaction ID in the log message.

It's essential to review logs regularly to catch errors and fix them before they cause significant problems. This can be done by setting up alerts or notifications for critical errors.

A well-designed logging system can help you identify patterns and trends in errors, allowing you to take proactive measures to prevent them.

You can create a usage-based plan by adding usage-based add-ons, item add-ons, and add-ons to a plan. Recurly always requires a plan fee, but you can set it to 0 for a strictly usage plan.

To create a usage-based plan, you can create a new plan or edit an existing one. Add-ons are separated into Add Ons and Usage-Based Add Ons, with usage-based add-ons charging at the end of the billing cycle after the product or service has been provided.

Here's a breakdown of the key attributes for a usage-based add-on:

Usage-based add-ons will automatically show up on your Checkout or Hosted Payment Page for the plan, but their cost will not be included in the Order Total because all usage fees are charged at the end of the billing cycle.

To create a usage-based plan, you can create a new plan or edit an existing one. Add-ons are separated into Add Ons and Usage-Based Add Ons.

Add-ons are charged at the beginning of the billing cycle before the product or service has been provided. Usage-based add-ons, on the other hand, charge at the end of the billing cycle after the product or service has been provided.

You can create a plan with any mix of Usage Based Add-Ons, Item Add-Ons, and Add-Ons. Recurly always requires a plan fee, the "recurring charge", but you can always set that to 0 if you want a strictly usage plan.

Here are some key attributes to consider when creating a plan:

Changing a plan can be a bit tricky, especially when it comes to usage-based add-ons. Any edit to a measured unit will update your plan and any subscriptions immediately.

If you need to change a plan with usage-based add-ons, keep in mind that we will always charge for any unbilled usage at the old state of the subscription. Usage-based add-ons never prorate, which means you won't get a refund for unused units.

To make changes to a plan, you can visit the "Measured Units" page under the Configuration section of your Admin Console. You can also create a new measured unit from this page, or manage them through the API.

Remember to remove a measured unit from all plans before you delete it on the Measured Units page, as you can only delete it if it's not being used in a plan.

Canceling or terminating a plan can be a bit tricky, but we've got the lowdown.

Subscriptions with usage-based add-ons will always issue a final invoice with just those add-ons, even if the usage is zero.

If there's positive usage for the current cycle, you can choose to zero out the usage, which is useful if you have an upset customer and don't want to collect on their final usage.

A negative usage record will be created, and you'll get a new_usage_notification webhook to update your own usage records.

If you have Usage Corrections at the time of terminating, they won't be zeroed out and will be charged on the invoice.

Refunds in a terminate action will filter out usage-based fees from the previous invoice in the refund total, as those reflect the previous billing cycle, not money paid for the current cycle where products or services may not have been received.

Prepaid and metered structures offer a flexible pricing approach that can be tailored to meet the needs of your customers. This approach allows customers to pay for what they use, rather than a fixed monthly fee.

Per-unit pricing is ideal for pricing variations tied to the number of units, such as users, items, messages, or licenses. Overages are also a common practice, where customers are billed a base fee for their plan plus an overage charge if they exceed the specified limit.

Tiered pricing is another option, where multiple tiers or slabs are established to charge customers based on usage quantities per tier during each billing cycle. This can be enhanced with add-ons and overage provisions to provide flexibility.

Here are some prepaid and metered structure options:

Pay-as-you-go is a pricing model that charges customers only for what they use. This can be a big relief for customers who don't want to pay for something they might not use.

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With a pay-as-you-go pricing model, customers pay a fixed rate per unit, such as $0.99 per unit. For example, if a customer buys 12 units, they pay $11.88.

This model is great for customers who want to budget their expenses and avoid surprises on their bill. It's also a good option for businesses that want to offer flexible pricing to their customers.

Implementing metered structures can be a game-changer for your business, especially if you're looking to offer prepaid or pay-as-you-go services.

Metered pricing structures are essential for services where the value is directly tied to the usage, such as subscription services, tech companies, and API services.

The simplest and most common metered pricing model is per-unit pricing, where the price is directly connected to the number of units used, be it users, items, messages, or licenses.

Overages are another common practice, where customers are billed a base fee for their plan plus an overage charge if they exceed the specified limit.

Tiered pricing allows you to establish multiple tiers or slabs to charge customers based on usage quantities per tier during each billing cycle.

Volume pricing provides discounts on increased quantities, giving bulk purchasers a break at the end of the metered billing cycle.

Package pricing involves segmenting slabs based on specified package sizes, with defined costs, such as a 50MBPS download speed costing $45/month.

Credits can be offered to customers, allowing them to make upfront purchases that can be utilized for promotions, discounts, and more.

Here are some common metered pricing models:

Allowances, Rollovers, and Overages are key features of usage based billing software.

You can offer customers with lower consumption the flexibility to rollover credits to future periods. This helps them make the most of their subscription.

Allowances are a pricing model that includes a certain number of units or transactions per month as part of a fixed fee package.

Overages can be calculated based upon pre-negotiated discounts, standard price lists, or by applying premium surcharges.

Exceeding the fixed quantity of units included in a subscription plan triggers an overage charge, which is a base fee for the plan plus an additional charge for crossing the specified limit.

Rollovers of credits can be automated, but it's essential to track expiration dates to avoid any issues.

With Ordway's usage-based billing software, you can easily charge for your captured metered revenue with integrations to multiple payment gateways online.

You can display the actual formulas, calculations, rating tables, and inputs used to arrive at usage-based charges and overage fees on invoices, reducing customer billing inquiries and disputes.

The software supports all the popular discounting models as well as hybrid combinations of usage, subscription, and transaction pricing.

Here are the key features of Ordway's payment and invoicing system:

Invoice presentment is a crucial aspect of payment and invoicing. It's what makes or breaks the customer experience. Displaying detailed information on invoices can significantly reduce customer billing inquiries and disputes.

To achieve this, you can display the actual formulas, calculations, rating tables, and inputs used to arrive at usage-based charges and overage fees. This level of transparency is particularly useful for customers with complex billing scenarios.

For example, if you have a customer with a fixed price per unit usage-based add-on, you can refund all or a specific quantity amount. Refund performance works with decimal-based quantities the same as they do for whole-integer quantities.

Here are some key features to consider when implementing invoice presentment:

By providing this level of detail, you can give your customers the confidence to understand their invoices and reduce the likelihood of disputes.

You have the freedom to choose how you get paid, and it's as simple as easily charging for your captured metered revenue with integrations to multiple payment gateways online.

To start, you can use the API to make subscriptions to your usage-based plans, giving you flexibility and control.

Subscriptions can also be made through Checkout, Hosted Payment Page, or Admin Console, providing you with options to suit your needs.

The details of usage-based plans for Hosted Pages and Admin Console are outlined below, so you can plan accordingly.

You can take advantage of integrations to multiple payment gateways online, making it easy to get paid for your captured metered revenue.

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Custom logic aligned to customer value is crucial for any business, and usage based billing software can help you achieve this. Zoho Billing's APIs allow for easy automation of invoices for metered bills, making it simple to add line items as needed.

With Zoho Billing, you can collect payments via cards or bank transfers, giving your customers a range of options. This flexibility is a key aspect of custom logic aligned to customer value.

By automating invoices, you can free up time to focus on other aspects of your business, such as providing excellent customer service. This is especially important in usage based billing, where customers are often billed based on their actual usage.

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