Common usage-based billing errors and how to solve them

Kshitij Grover

For usage-based software companies, getting billing right has never been more critical both for the bottom line and to maintain customer trust. For these businesses, accuracy requires understanding how issues can be dealt with at any stage of the billing lifecycle. When errors occur, correcting them quickly is equally critical.

That’s why it helps to have a plan in place before something goes wrong. In this post, we’ll share three categories of the most common billing errors and how to address them.

Error #1: Incorrect reporting of usage data

For many SaaS companies, usage data is the basis for all invoice calculations. Your events might help your billing system calculate the number of active users, cloud storage, or how many tasks your customer is running. Whether your billing platform offers metered (an aggregate value) or usage-based (raw events) billing, the final amount charged is a reflection of the data entered into the system.

Why it happens

Usage reporters, just like all software, are prone to bugs. You may inadvertently begin reporting incorrectly scaled values, or make a breaking change to the semantics of your event properties. When your reporting system incurs downtime, some events may be dropped. Even when your reporting system is working as intended, a misbehaving dependency can cause malformed events to be reported.

The fix: usage amendments

Orb provides an API for you to amend usage events directly rather than simply reflecting the change at the invoice level. With Orb, you can run an amendment for a specified timeframe, or pick and choose specific events to edit. This has several benefits beyond issuing the correct bill to your customer:

1. Amendments promote greater transparency, maintaining your ability to reinstate the correct usage trends and to provide a detailed usage view to your customers. The amendment can often remain completely opaque to your customer, and internal reporting hiccups don’t undermine your customer relationship.

2. Orb’s amendment workflow ensures that your change is correct by automatically recalculating your invoice on the basis of new events. Instead of accounting for the amended period in a separate spreadsheet and manually applying the difference, amendments in Orb are seamlessly taken into account.

3. It’s critical to be able to audit original and newly applied events. Orb’s amendment functionality never deletes the underlying data, protecting the data consistency you can rely on in your billing process.

Error #2: Incorrectly configured plans

In a high velocity sales environment, managing pricing negotiations and price books can become complex—especially when factoring in discounts, contract ramps, and compensatory credits. Your sales team has to manage one-off deals for enterprise customers and ensure that renewals reflect previously agreed upon prices.

Why it happens

When these price changes or billing constraints aren’t passed along to the billing system—either from time lapses or dropped communication between departments—customers end up with an inaccurate invoice. These billing errors can lead to revenue leakage, erode trust and customer loyalty, or simply an entangled mess of corrections months down the line.

The fixes: subscription changes and invoice edits

In Orb, a customer is subscribed to a plan, which corresponds to a collection of line items on the invoice. Orb allows you to schedule plan changes so that your customer’s pricing information is correct for subsequent billing periods. If there’s an adjustment or fee that’s unaccounted for in the current invoice, Orb also allows you to edit draft invoices directly. With Orb you can adjust specific invoice amounts, update percentage discounts, or change minimum charges. Learn more about Orb’s invoicing capabilities here.

Error #3: Invoice issued with errors

Why it happens

Whether it’s a data issue, a customer misconfiguration, or a problem with manual data entry, fixes can often take place fluidly when the billing cycle is still active. However, there comes a time when an invoice has already been issued before a mistake has been identified. Since an issued invoice is treated as a frozen resource and cannot be edited, different recourse is needed.

The fixes: voiding invoices, customer balance, and refunds

You’ll first want to communicate clearly to your customer that the invoice has been issued in error. Not only does this ensure that your customer doesn’t pay an incorrect amount, it’s also critical for downstream reporting workflows in Orb. If the invoice was recently issued and hasn’t been paid, Orb allows invoices to be marked as ‘void’, preventing any further payment action on the invoice.

There are several ways in which Orb allows you to further remedy the situation, depending on the source of the problem:

1. If you’d like to grant the customer some credit as compensation, Orb supports a ledger-based customer balance. This balance can then be used for subsequent invoices for the customer’s subscription.

2. You may also choose to initiate a refund from the payment gateway in the case that the payment for the invoice has already been processed. Since Orb integrates deeply with payment solutions like Stripe, you’ll see the refund reflected directly on the Orb invoice, centralizing your view of related actions on the invoice.

3. In case the customer’s payment method is no longer chargeable or has insufficient funds, Orb features a payment retry schedule that intelligently retries when it detects that your customer’s payment method has been updated via the payment gateway.

Address issues efficiently and transparently

Recovery from billing error is a critical strength for businesses, and these common billing mistakes can be quickly resolved. At Orb, we’ve made it easy to identify, isolate, and resolve typical usage-based billing issues, helping you keep both your customers and your RevOps teams satisfied.

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

December 28, 2022

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