Strategy & Best Practices

5 Reasons Why Your Startup Shouldn't Have to Worry About Billing

By Fivos Constantinou / October 23, 2011

We’ve seen this story before: you are a startup with a small team but an exciting new product. Your beta users love your product and you are finally in a position to start offering a paid version. The question comes up: How do you start collecting payments from your customers? Should you come up with your own billing solution or outsource it to someone else? Drawing from our experiences here at AppDirect and our interactions with many developers over the last few months, we can give you some good reasons why you should think twice before attempting to solve the billing problem yourself.

1. It’s complicated!

Implementing a billing system is a complex task. You first need to set up a merchant account and integrate with a payment gateway so you can start processing credit card payments. That’s just the easy part, though. Being able to accept an online payment is only the beginning, especially if you have recurring subscriptions. You’ll need a system to manage your subscriptions, generate invoices and process payments on a recurring basis. There’s a lot of complex scenarios that you’ll need to have in mind: How do you handle upgrades/downgrades? What do you do if a customer cancels their subscription in the middle of billing cycle? How do you deal with disputes and give refunds? Those are only few examples and you’ll discover plenty more corner cases as you dig in deeper.

2. It’s not your core competency

After reading #1, you might think “but we have a talented team and we are already solving some complex problems!”. Granted, that’s probably a prerequisite for a start-up to succeed but it doesn’t necessarily mean that billing is a problem you need to solve. At AppDirect we strongly believe that it’s important for a start-up to focus on its core competencies and allocate resources to the tasks that are the most important for its business to succeed. Billing might be a requirement but implementing it yourself doesn’t necessarily add value to your product. On the contrary, putting a lot of resources into implementing a billing solution can prevent you from working on features that would have a bigger effect on your product’s success.

3. You need to be flexible enough to scale

Your billing requirements might be simple enough in the beginning but a growing business has growing demands. Your billing solution will need to be flexible enough to scale as you are adding more features to your product and your billing needs become more complicated. Adding more editions, providing subscription options of varying durations (e.g. monthly, yearly), offering discounts or creating a bundle of services are examples of changes in your business that need to be handled by your billing system. Coming up with a quick solution to your billing needs might sneak up on you in the future.

4. You have to worry about Payment Card Industry Compliance

Once you start processing credit cards on more thing you’ll have to worry about is complying with Payment Card Industry (PCI) standards. You’ll need a secure infrastructure to host your billing solution as well as secure flows for transferring financial information. Verifying that your solution adheres to PCI standards is a long process, which will take up time and resources that are perhaps best allocated to tasks that will add more value to your product.

5. You will need more than just a billing system

Billing data can be a very useful tool in analyzing your sales operation. Hence your billing system should become a key part of your customer relationship management operation. Not only will you want to process payments and manage subscriptions, but you will probably want to get useful reports out of your data as well. This represents another engineering project on its own.

Thus, Billing operations are very painful processes that could make you divert from your core business while being the catalyst of more complicated issues if not handled properly. At AppDirect, we understand the challenges of having a proper billing engine for a start-up and offer several services to answer that need:

• Flexible pricing plans. We designed our system with the goal of supporting any pricing plan we’ve seen. Through our developer UI you can easily define your pricing plan with a number of different options. You can have pricing plans with different subscription durations, such as one-time, monthly, quarterly or yearly. We support flat rate, per item or tiered pricing. You can also have free editions or free trials.
• Flexible payment options. We offer customers the option to pay with any major credit card or check out through PayPal
• A billing API which allows you to submit arbitrary charges based on customer usage.
• Detailed reports of your customer’s subscriptions, invoices and payments
• An agile team that’s constantly working to improve our solution based on your feedback!

Integrating with AppDirect would not only leverage the visibility of your application and increase your audience of potential customers, but would also give you the opportunity to benefit from a solid billing engine developed especially for your needs. Give your business a new momentum and join us on AppDirect now!