What Is the Best Billing Frequency for Your SaaS Business

  • Written By:
    Ann Smarty
  • Published On:
    November 16th, 2021
  • Read Time:
    5 Mins
  • Category:
    Billing

When planning and setting up a SaaS business, there’s always a question of which payment model to choose.

Most SaaS businesses choose a subscription payment model.

An ability to predict and gradually grow your recurring revenue accounts for the ever-growing popularity of the subscription business model.

But what’s the best billing frequency when it comes to a subscription-based business?

Types of Subscription Billing Frequencies

Here are different subscription billing frequencies you can choose from:

Annual Billing

Annual billing is gaining popularity among SaaS businesses because it is easier to manage.

Generally speaking, the longer the subscription billing period is, the longer the customers tend to be with you.

Higher Customer Lifetime Value (CLV) is the strongest advantage of annual billing.

While annual billing means most of your customers will remain with you for a longer period of time, this also means that your customers will often forget about their subscription, as there’s the whole year between each two payments.

Plus, when customers pay annually, they may forget about their accounts, so there may be many inactive clients.

Another disadvantage of this method is that it usually requires a substantial amount of money to start, so onboarding and converting clients becomes pretty challenging.

The good news is, annual billing can be supplemented with a monthly billing option which is what PayKickstart is doing:

PayKickstart offers both monthly and annual billing while offering two months free to those customers who opt in for a yearly payment cycle

Monthly Billing

Monthly billing is the most popular subscription billing frequency. It requires less commitment from customers which means it is easier to sell.

Lower barrier to entry is the strongest advantage of monthly billing.

Besides, monthly interactions with customers make it easier to keep them active. Every month they are reminded of your business when they receive a payment notification. This helps business owners re-engage inactive clients.

On the other hand, monthly billing results in higher churn than annual billing, so it makes sense to combine the two by providing some type of discount to annual plan buyers while still giving an option to opt in for a monthly subscription.

Further reading: Annual vs. Monthly Subscription Billing 

Quarterly Billing

In an effort to strike some balance between charging customers too often and charging them too frequently, some SaaS customers have started to give a quarterly billing option.

Bi-Weekly and Weekly Billing

These billing frequencies are not very common, so customers tend to get easily overwhelmed by invoices that come more often than they would expect. 

This could result in higher churn and cancellations.

Daily Billing

This type is not very frequent as it only works for products with a very short customer lifecycle which is not very common in the SaaS industry.

This type of billing results in lots of micro-transactions which bring additional expenses, like payment processing charges. And obviously, the more often you bill, the more your customers are willing to cancel, so this type of billing results in a high churn.

Further reading:

Setting up Your Billing Frequency Using PayKickstart

Using PayKickstart dashboard, you can edit your payment settings under the “product details” section. Here, you are able to choose a one-time or recurring payment.

In case you receive the recurring option, you will be able to select your recurring frequency, recurring period, and number of payments:

Setting up your billing frequency using PayKickstart

Additionally PayKickstart comes with a powerful subscription relationship management suite of tools which includes:

An ability to integrate subscription payments through Stripe and PayPal:

PayPal subscription payment integration

This enables SaaS companies to offer their subscription customers some flexibility to choose a payment method that would work for them (which includes credit card processing, PayPal subscriptions and even using PayPal credit to pay for their plans).

Notifying customers of an expiring trial

In order to enroll more of your trial users into using your paid plans, PayKickstart sends out trial expiration reminders that include instructions on how they can upgrade to avoid losing any data.

Notifying your currently paying customers of an approaching payment

To avoid surprising your customers with automated charges, PayKickstart automates approaching payment notifications.

You can enable this notification in the Product settings (Campaigns -> Edit Product). You can set how many days before the charge the email should be sent out.

Subscription billing reminder helps minimize refunds and chargebacks

Recovering your customers’ failed payments

The most frequent reason for SaaS churn is payment failures that happen due to card expiration and failed security checks. PayKickstart sends out three failed payment alerts prior to canceling an account:

PayKickstart will send three failed payment notifications prior to canceling an account

Saving voluntary cancellations

No matter how great your product is, there will always be customers willing to cancel their accounts for you. PayKickstart offers a cancellation saving feature that will help you:

  • Identify the reasons behind cancellations (to allow you to adjust your strategy accordingly)
  • Save those accounts by offering them an alternative solution instead of canceling (like switching to a less expensive plan, offering a coupon or changing their subscription billing strategy):
PayKickstart’s Cancellation Saver will suggest your customer an alternative solution to avoid canceling

All of these options will help you identify your SaaS business best billing frequency as well as manage your recurring subscribers to collect feedback and minimize churn.

Conclusion

Choosing your best billing frequency for your SaaS business may require some time: Look at your competitors and listen to your customers before making a decision.

In most cases, using the most popular payment frequency is the safest way to go. Once you know your customers a little better, you will be able to add more options based on the feedback you will be able to collect. Good luck!

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Ann Smarty

Ann Smarty is the Brand Manager at Internet Marketing Ninjas, as well as co-founder of Viral Content Bee. Ann has been into Internet Marketing for over a decade, she is the former Editor-in-Chief of Search Engine Journal and contributor to prominent search and social blogs including Small Biz Trends and Mashable. Ann is also the frequent speaker at Pubcon and the host of a weekly Twitter chat #vcbuzz

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