The three benefits of transparent billing practices

Kshitij Grover

In San Francisco, electricity and gas are provided by the Pacific Gas & Electric Company (PG&E), a legacy utilities firm founded well over a century ago.  However, the level of detail and granularity included in their bills is far beyond that of more modern organizations, including many cutting-edge hypergrowth startups.

While many consumers consider their electricity bill “boring,” these documents actually hit the trifecta of usability: they’re digestible, detailed, and dynamic.

These “boring” bills hit the trifecta of usability: they’re digestible, detailed, and dynamic.

A typical PG&E bill, for example, offers a high degree of transparency. Each invoice begins with a summary of the consumer’s energy usage and their final amount owed, then provides a breakdown of the exact kilowatt hours used and when. Each statement contains a graph showing usage by day and another that summarizes the individual’s monthly billing history. It even includes a helpful glossary of terms.

These bills also reflect usage-based changes. If an individual turns on their air conditioning on a hot day, for example, they’ll receive a larger bill. If that same person avoids usage during peak hours, they are charged less. The bill reflects true usage rather than an average or fixed amount. 

SaaS bills, however, typically do not include this level of detail or transparency. In this regard, these organizations could stand to improve by following the example of their legacy counterparts. 

What tech and software companies can learn from utilities

At their core, utility providers like PG&E are similar to other, more “modern” businesses. They want to meet their customers’ needs, solve their problems, and offer excellent service. Providing transparent billing helps them do all three.

Using the detailed information in their electricity bills, PG&E’s consumers can make data-driven decisions around their own energy use. For example, they might lower their overall bill by:

  • Avoiding peak pricing periods
  • Changing their behavior to reduce energy consumption
  • Identifying usage trends and correlating them to specific behaviors
  • Comparing their usage to the “norm” or “average” and adjusting as necessary

SaaS customers who need to optimize their OPEX spend can do so by avoiding unnecessary high-cost events and recognizing trends. However, they often don’t get the actionable insights they need to do so. That’s why adopting transparent billing practices, like those exemplified by utility companies, offers the potential to be a major differentiator.

Benefits of transparent billing practices

What does “transparent billing” look like for a software company? One increasingly-common option is usage-based billing. As the name implies, customers are charged based on what they use (data, storage, events, etc.) rather than by seats, licenses, or other fixed fees.

Those that take advantage of usage-based pricing (and other transparent billing practices) don’t simply stand out from the competition; they offer their users three critical benefits that have the added effect of boosting loyalty and brand image. Let’s go through each in more detail.

1. Accuracy/trust

Billing is a mission-critical business function. Customers want assurances that it’s being handled correctly every time. By basing billing on real-time usage data, every cost is accounted for – and visible to the customer. This is true even in the most complex pricing situations, reducing the risk of potentially costly errors.

Accurate, detailed invoices also promote higher levels of trust. Users have full clarity around each line item, making the product’s value to their business both clear and measurable. With accurate and transparent data, your product's ROI is clear, aiding the overall business relationship for future contract renewals or referrals.

2. Fewer support issues

Anyone who has been surprised by a large bill knows that it can be frustrating and negative experience. B2B customers who see a costlier-than-expected line item on their invoice experience these feelings as well. If they think the charge was made in error, their next step is likely to send in a support ticket or customer service inquiry.

Consider how many support tickets the average software provider receives around billing. Each of those messages needs to be reviewed, addressed, and responded to, consuming the customer success and finance teams' time.

With transparent pricing, however, every charge is clearly outlined in the invoice, reducing the number of support tickets received and freeing up CS and finance teams to focus on more pressing issues. 

3. Predictive capabilities

Usage-based billing gives customers far more information than traditional approaches, which can then be used to predict future costs, recognize trends, and pinpoint outliers. This type of billing allows for a greater degree of optimization and more levers to pull when looking to reduce expenses. With access to granular usage data, teams can better predict ups and downs with regard to costs and plan accordingly, protecting them from sudden shortfalls.

In today’s data-based software product environment, iteration is a given. Transparent, usage-based billing offers customers the opportunity to experiment with their own pricing structure and understand how those adjustments will affect their overall costs.

A better way to bill

By offering full transparency around costs and charges, software companies build trust and encourage long-term partnerships. In addition, they provide their customers with the data they need to make their own business decisions—a true benefit at any stage of growth.

To learn more about how Orb can support your usage-based billing model, schedule a demo.  

August 17, 2022
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