We’re entering a golden age of business innovation. But while artificial intelligence (AI), the blockchain, virtual reality (VR), the metaverse, and other innovative technologies take most of the plaudits, there’s arguably another exciting development taking place: the rise of customer-centric digital business models.
Today’s consumers expect to have payment model choices and personalized experiences that can evolve and change over time. They’re more willing to engage in long-term contracts, so long as they’re flexible and consumer-centric. As it always has been, consumers want choices.
However, not all companies can adopt innovative digital business models and offer choices to their customers. Take usage-based business models (AKA usage-based pricing, pay-per-use, or consumption pricing), for example, where customers pay according to how much of a service or product they use. It has become tremendously more popular in recent years across software, mobility, and more.
Benefits of usage-based pricing
This model has two major benefits: pricing is logical and customer-centric, and it drives increased revenues. Unfortunately, there’s a caveat. Companies that use traditional ERP software will soon realize these tools are completely unprepared for their usage-based billing needs.
Fortunately, there’s a solution: specialized monetization and billing software. Let’s explain why ERP systems alone can’t support usage-based billing and why companies should enhance their ERP with specialized software built for this very purpose.
3 usage-based billing processes impossible with only an ERP system
ERP and traditional billing systems are fantastic at what they do—hence why the global ERP market was valued at a staggering $50.84bn in 2021. But you can’t use these tools for all your billing needs across all potential billing models.
Think of it like this: compasses helped explorers unearth previously unknown continents, but you wouldn’t trust a compass to navigate through a busy city center during rush hour.
Companies that try to use ERP systems to support their usage-based billing needs quickly run into three insurmountable hurdles.
Quick summary of the usage-based billing processes that are challenges ERP systems face:
- Using Usage data to power automated billing and payment management
- Making quick changes to billing processes and adapting to customer expectations
- Creating a unified view of a customer and the order-to-cash process
1. Leveraging usage data in the order-to-cash process
Companies that adopt usage-based business models require ongoing access to a wealth of data to make the business model work: which of their features are most used or abandoned, how contracts and usage evolve, which prices customers are willing to pay, what customers churn and why, what usage-data to use for billing, and much, much more.
Most importantly, they need to track which metric they are actually using to charge their customers, and then incorporate that into their order-to-cash process.
Put simply, usage-based business models require usage data—that much is obvious. Usage data is essentially statistics and metrics of a consumer’s account activity. It can be anything from the number of logins to a software to how much color ink a rented printer uses.
The examples get even more expansive: manufacturing companies that follow this model use thousands of separate IoT devices to generate millions of data points daily. This data is passed to the IoT platform before being sent to the monetization software, where the data is converted into billable items and then processed into customized invoices.
Usage-based pricing with IoT data is an incredible area of growth in the manufacturing sector, for both IoT device manufacturers, and those who use those devices to manufacture things like cars, computers, or medical devices.
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Usage data is essentially statistics and metrics of a consumer’s activity.
The result is that in the world of usage-based billing, no two invoices look the same—even if they’re for the same customers. Imagine you’re an e-charging company that charges customers based on how often they charge their vehicle.
One week, a customer might travel 20 miles and not need a charge at all. The next week, however, they drive across Germany and need to recharge several times along the way. What happens if they drive from Germany into Italy, and charge there? How does the billing process change?
Companies operating on a flexible, usage-based model need a billing system that can keep up, seamlessly handling a complex array of processes and cases. If the customer in the above example is billed whenever they charge their car, the system needs to send out different bills based on completely different usage data, every time. This of course needs to be directly connected to the company’s general ledger system to enable financial reporting.
However, if they bill monthly, their e-charging provider must collate all the month’s charging data into a single invoice. And that’s not all. Perhaps the customer uses the service every week for a month straight, which means they’re eligible for a 10% loyalty discount.
Or maybe the provider has to add a blocking fee because the customer occupied a charging station for too long, or the electricity price unit differs between day and night. Or what if they do go to Italy and use the charging service, with tax rates, and e-invoicing requirements?
It’s easy to see how this can get complex very quickly. ERP and traditional G/L systems are too rigid to handle this level of complexity. What’s more, if you serve multiple global markets, this poses a raft of new billing, accounting, payments, and compliance challenges.
And that’s not all. Companies don’t just have to create ever-changing invoices—they also need to accommodate ever-changing customer relationships. This further muddies the waters.
2. Adapting on the go to changing customer relationships
While offering customers flexibility usually boosts sales, it also unleashes a new level of complexity. ERP systems are built for standardization and efficiency. They’re great at what they do: handling repeat processes and maintaining compliant systems.
However, when customer relationships change rapidly, it’s important to have a tool that can instantly accommodate this change of direction. In the modern world, rapid adaptation is a clear competitive advantage.
Customers might sign up for additional add-ons, increase or decrease the number of seats on their plan, or switch from a monthly to a quarterly billing plan. Enabling self-service and a significant increase in consumer freedom and choice isn’t something ERPs are equipped to handle.
It’s not something they’re meant to handle. Even if IT teams do manage to painstakingly tweak the system to accommodate these types of requests, this will be such a time-consuming, stress-inducing process that it’s simply not worth it.
It’s basically going to be the software version of a Rube-Goldberg machine: a patchwork system that accomplishes a simple task in an indirect and overly complicated way.
Companies shouldn’t have to fight their existing tools to provide customers with flexible billing options. Instead, they should add monetization software specifically designed for this purpose to their ERP system before integrating these tools to reduce complexity. Unfortunately, uniting separate systems is often easier said than done.
3. Combining disparate systems to gain a uniformed view of the customer
It’s nearly impossible to gain a centralized customer view when grappling with disconnected IoT platforms, ERP solutions, and billing systems. The reason for wanting a centralized view is obvious: save time.
ERPs were built to track products, but in the usage-based economy, companies must instead track customer relationships. However, it’s impossible to be customer-centric if you can’t even keep track of who your customers are.
Nitrobox enables usage-based billing
Flexibility and agility are some of a company’s key competitive advantages. And since traditional ERPs can’t support customized billing models, Nitrobox’s founders decided to develop an intelligent solution that can—and that companies can easily integrate into an existing IT infrastructure.
Nitrobox is an innovative, flexible, state-of-the-art order-to-cash platform that supports a range of complex business models: usage-based, recurring, transactional, and hybrid, among others. It easily connects to companies’ existing IT system landscape via API, enabling a fast time-to-market. Here’s how it works.
1. How Nitrobox leverages usage data to power smart billing and payments
Unlike ERP systems, Nitrobox is built to turn usage data into billable data and accurate invoices. IoT devices collect usage data, send it to their IoT platforms, before finally reaching the company’s billing and monetization software (Nitrobox). The Nitrobox platform then converts this into billable data and creates accurate invoices which are ready to be sent out to customers automatically through billing automation.
Above is an example of the process of transferring IoT-gathered usage-data into the Nitrobox system, communicating payment data with a bank, and invoicing the customer on behalf of the manufacturer.
But what if a company operates globally and has to comply with a range of different invoicing requirements? Nitrobox has got that covered, too. The platform handles over 80 global markets, with easy-to-set-up tax, compliance, and invoicing configurations. It rapidly adapts to changing regulatory and tax requirements, automatically ensuring ongoing compliance with minimal hassle.
2. How Nitrobox adapts on the go to changing customer relationships
Flexibility is at the core of everything that Nitrobox does. If a customer decides to sign up, cancel, upgrade, or downgrade their plan, these changes are instantly updated within the system.
Companies can give their customers the flexibility to decide how much they spend and accommodate this flexibility within their billing and monetization software.
3. How Nitrobox unites disparate systems
Nitrobox blends the best qualities of customer relationship management (CRM) software, enterprise resource planning (ERP) solutions, and billing, accounting, and payments management tools.
Integrating Nitrobox with an existing IT architecture via APIs is a quick and simple process. It provides an all-in-one platform that works seamlessly with existing tech stacks, uniting everything under a single source of truth.
An overview diagram of the Nitrobox platform, showing common integrators and payment gateways
The Nitrobox Webportal, a cloud-based billing and monetization platform, allows you to manage your plans, customers, contracts, invoices, and payments in real time from a single source of truth.
But Nitrobox does far more than convert data, enable billing, and send out invoices alone.
The platform also offers payment management capabilities that allow businesses to effortlessly configure digital payments at scale. Manage recurring, transactional, pay-per-use, or other digital-first revenues from record to report, thanks to its accounting and taxes functionality. Power reliable subledger reporting, generating custom, high-level reports in configurable dashboards.
In short, it’s a smart subledger that plays the finished subledger back into the general ledger.
It’s time you use the right tools for the job
If you’re struggling to make your ERP system work for usage-based billing, that’s hardly surprising—these systems weren’t built to handle this level of complexity and flexibility.
Fortunately, Nitrobox is.
The Nitrobox Platform is a flexible international billing and monetization software that seamlessly handles a range of digital business models—including usage-based, subscription, transactional, or hybrid—for global markets. If you’re launching an international usage-based business, it’s exactly what you need.
Book your demo with Nitrobox today.