Why An Automated Billing System Is Critical For Startup Growth
Your time is too valuable to waste on data entry. If you’ve spent some time here on Lola’s blog, you'll know that we’re big fans of automation. When software can take over repetitive tasks for your team, your human resources are free to focus on strategic projects. An automated billing system should be a non-negotiable part of every startup’s finance tech stack.
What is an automated billing system?
An automated billing system automates many of the tasks done by your accounts receivable team, order management, and even your sales deal desk if you have one. This software creates invoices, sends them to customers, and tracks payments.
These solutions can be used for anything from sending simple annual contracts, to managing recurring subscription billing. Automated billing systems are ideal for startups with subscription business models, like SaaS software providers.
Here’s a rundown of how the billing automation process works:
- The customer signs a contract.
- The customer’s information is passed into a billing system. Either manually, or via an integration, this information typically includes the customer’s contact info, billing address, contract term, payment frequency, payment amount, payment method, and net payment terms.
- The recurring billing system creates a schedule of invoices and follow-ups.
- The customer is invoiced, and either automatically billed, or provided a payment portal directly in the invoice. Payment status is tracked in real-time, with follow-ups as needed.
- The system records all transactions, per your revenue recognition rules, to your accounting software.
Why your startup needs an automated billing system
Finance teams are often bogged down by the traditional way of doing things, which extends to the billing process. Here’s why your startup needs to modernize its approach with an automated billing solution.
Make cash flow more predictable
Late payments make it even more difficult to hit monthly cash burn targets than it already is.
If you are running a subscription business, billing software allows you to automatically charge your customers’ credit cards or bank accounts, and send them bills the same day. This can be used for any variety of payment terms, including annual renewals (if you have added an auto-renewal clause into your terms). If a customer has negotiated net payment terms on every invoice, a billing system can automate the follow up process. Your finance team can choose to be notified only after multiple automated follow-ups for payment.
In many ways, automatic payment collection also makes for a better customer experience for busy customers.
Save time on invoicing and follow up
Sending out invoices is a repetitive task that can take up a lot of time. Following up on late payments, as mentioned before, is inevitable. Even at an early stage company with a few customers, these tasks are a drain on your team’s limited resources. Even worse, these tasks always come up during the financial close process. Leveraging software to automate this admin will give your team the time to perform the rest of their tasks right.
Automated billing platforms reduce the chance of human error in the billing system. It’s easy for anyone to forget to send one in a hundred emails, or forget to attach an invoice. The more customers you gain, the more mistakes you’re bound to make. Implementing billing software might pay for itself sooner than you think.
The bottom line: An automated billing system is a non-negotiable part of every startup’s automated accounting tech stack
Switching from a manual billing process to an automated billing system ensures that your company is ready to scale. It helps you get paid faster, frees your finance team up for strategic projects, and reduces expensive mistakes. If integrated with your accounting software, and paired with an expense management platform, you can gain remarkable visibility and control over your total spend.