In December, I started offering yearly billing to WiseCash users.
Why? I see lots of bloggers mention how useful it is for SaaS services to offer yearly billing from a cash flow perspective. And that’s perfectly understandable. After all, if you have the money now rather than later you can focus on innovating in your product.
But, strangely enough for a cash flow forecasting app, the cash flow wasn’t the main reason I began offering yearly billing. What was it then?
Annual billing offers serenity for both me, as a Founder, but most especially for my users. Read on for more details.
Credit card declines are a massive pain for everyone
Credit card declines are frustrating for you and for your users (yes, even if you use some “dunning” management).
The problem is that declines can crop up for a number of reasons, not just due to the expected event of an expiring credit card. Sometimes declines show up because the card user has hit a weekly limit, or temporarily doesn’t have enough money available, or just due to random errors beyond our control.
It’s frustrating for your users to get that unexpected email and then have to determine why they experienced a decline, and it’s frustrating for you to realize you didn’t net the subscription fees you were expecting.
Annual billing means 12 fewer opportunities per year for a credit card decline. This translates to less frustrations for you and your customers, a better product experience and much less hand-holding for everyone!
Less accounting for everyone
Imagine 12 invoices per year, per customer. If you have only 50 customers, that already adds up to 600 PDF documents!
Even if you use CSV reports, there is still more work and more risks of errors for you and your accountant when you have to reconcile the data to close your fiscal year.
Similarly, your users stack up quite a bit of receipts. If they do reconcile their bank data on a regular basis, one bill instead of 12 reduces their paperwork and data entry.
Dividing the number by 12 reduces the silly paperwork for everyone. Yay!
Before going yearly billing, your SaaS customers will have to project themselves into the future. Is your app worth it to them? Will they truly stick with it?
I’ve written here before about why I’m a big fan of long-term relationships in business. Not only are good quality, long-term relationships good for your cash flow, they mean fewer administrative tasks. You can focus more on building and improving your product, and your customers don’t have to spend as much time choosing new business tools.
Yearly billing is another opportunity to build these enriching long-term relationships.
Fewer transaction fees for everyone
No matter if you bill in USD, EUR, you will usually have customers who operate with a different currency. Many times a currency exchange means additional fees. Reducing the number of transactions from 12 per year to one per year can cut down on these fees, saving your customer money.
For you, as an app builder, this may cut down on a small percentage of fees involving your billing system, too. Fewer transactions are a win/win when it comes to currency exchange and foreign transaction fees.
Cheaper for customers!
It’s worth it to offer your customers an incentive to enroll in annual billing. I offered WiseCash customers one month free. Well, one month free - who wouldn’t want one month free? I’m glad I can offer them a little extra advantage.
There are tax advantages for your customers
I offered my annual billing plan in December, when many of my customers were searching for ways to make business expenses that would translate into tax deductions. WiseCash is designed to help our users better manage their cash flow and make more money, so it was gratifying to see many of them take advantage of annual billing.
You could start manually, today
My billing provider support yearly plans, but I kept delaying this because there was a bit of work required to integrate that in the application.
Then HoneyBadger sent their December email to push for yearly billing, and this got me thinking.
Then came my “aha” moment: even with very little time, I could “manually” ask my users to subscribe annually rather than implement annual billing in Recurly right away.
Ultimately I just emailed all my customers, and also put a plug on the sign-in page, then replied manually to users who wanted more information.
I used the Recurly back-end to preview the price and make the switch, and will implement that in the app itself when I have a bit more time.
Today 14% of my users are already on the yearly plan. Not bad!
Do you offer yearly billing? Tell me a little about your results in the comments.
Thanks for sharing this article around!
Still managing your business cash-flow in a spreadsheet?
That must hurt, right?
WiseCash helps you rule your finances with an iron fist,
without having to labor a spreadsheet!