Supply chain disruptions and major swings in customer buying behavior drove organizations of all kinds to suddenly shift their business models amid the pandemic.
While there are plenty of ways a business can shift its go-to-market strategy, one of the most prominent among the B2B ecosystem is to adjust billing and revenue strategies. These initiatives may have accelerated as a result of the pandemic, but interest in switching to an online, subscription, or usage-based model has been steadily growing for years amid enterprise digitization and the rise of the B2B service economy.
These business models aren’t new, either. But for organizations that have been operating on paper or are stepping into unfamiliar territory as they adjust their revenue collection strategies, the business model shift can be a daunting moment for the accounts receivable (AR) department.
BillingPlatform CEO Dennis Wall said there are strategies organizations should consider as they migrate into new business models. Taking the right path can be a make-or-break moment in a company’s digitization journey.
New Participants In Old Models
Subscription and usage-based billing models are a hot topic in B2B industries today, often described as more novel revenue strategies made possible by the elevating digitization of the enterprise.
But as Wall highlighted, it’s not the models themselves that are new, but the organizations adopting them.
“It’s not to say that subscription or usage-based billing is a brand-new concept, but they are new with respect to the industries that they’re now becoming integral to,” he said. “Magazines have been subscription billing for ever. There has been usage-based billing in the energy industry forever.”
What is new to the B2B ecosystem is the shift in sales strategies from a product offering to a service offering. Rather than selling a single piece of software, or a single machine part, B2B firms are discovering a massive opportunity to widen margins and drive revenue through billing based on how much that software is actually used, or a subscription for replacement parts when maintenance is necessary.
The challenge is overhauling back-office financial workflows, which have historically been built around that single-billing tactic, to be agile and automated enough to support a new model.
“It’s amazing how many large companies have been managing these types of processes manually, or with legacy systems that have been around for literally decades,” noted Wall.
Aligning AR With Data
One of the biggest challenges for AR departments, and billing workflows specifically, isn’t merely about supporting automated or recurring billing. It’s also about integrating troves of data that is external to the AR department, but nonetheless integral to triggering accurate billing workflows.
For example, having the capability of accessing data on a client’s use of a product is not inherent to AR, but it is necessary for firms deploying a usage-based billing model.
Unlocking the data that complements the billing process before an invoice is ever generated can be a major roadblock for firms, but with the right FinTech partners, Wall said businesses can migrate to new business models with greater ease. What’s more, organizations that are able to consolidate data onto a single portal (as BillingPlatform aims to do for its business customers) can provide greater historical insight into customer behavior, payment trends and other key business insights.
Application programming interface (API) connectivity and industry collaboration are important tools for the FinTech providers looking to support these business model shifts. For BillingPlatform, a new partnership with GoCardless focuses on completing the quote-to-cash cycle with ACH debit payment acceptance.
But as Wall noted, success in adjusting business models and billing strategies often begins well before any bill is ever generated, through aligning AR departments with key data on customer usage and contracts, and supporting a more flexible back-office to drive revenue and improve the customer experience.
Selected by EFXA