The risks of building your own billing software
As your recurring billing business model grows and scales, your IT team will inevitably have to choose whether to build or buy billing software. Budget restrictions and other factors lead many businesses to develop their own homegrown solution, but this could actually be much more costly in the long run.
With the rapid pace of innovations like AI and the increase of usage-based pricing models, an in-house solution can quickly become a burden on both engineering and IT teams, causing negative downstream impacts on finance, marketing, and more—not to mention how it puts the brakes on business agility and innovation.
With the right recurring billing solution, your IT team can quickly adapt to new pricing, billing, payments, accounting, and integration requirements—becoming integral to business strategy and enabling continuous innovation.
With the wrong system, IT becomes an order taker and a growth bottleneck.
If you’re thinking about subscription billing management, be sure you understand the system requirements and the risks.
In this guide, we’ll dive into the three biggest risks of building a homegrown subscription billing platform—and the impact of this decision for IT leaders, engineers, and the entire business.
Risk #1: Delayed time-to-market and lost opportunities
It’s impossible for any company to anticipate all future go-to-market needs, but as you’re weighing your technology options, here are just a few important considerations:
- What pricing models will you need to support in the future?
- How will you collect and iterate on customer data to fine-tune your mix of models?
- How will you identify key value metrics in order to stay customer centric?
- How will you solve for churn, launch multiple editions, or experiment with usage models?
- Will you extend your product line organically or via acquisitions?
- What’s your plan for going (or supporting) international?
The downside of a quick fix
Today, you might build just for what you need, hard coding a custom system on top of your ERP, but that hinders scalability and agility, preventing future growth and adaptation to new market demands. What starts as a “quick fix” can quickly morph into an engineering time suck, pulling much-needed development resources from your core product into creating a billing system.
Missed growth opportunities
With engineers struggling to keep up with new requirements as your business matures and new capabilities and products are added, this will negatively impact your time to market. Why have engineers focus on internal IT when they could—and should—be focusing on the core product?
Hard-coding recurring pricing into your solution hinders business agility and offers just a fraction of the capabilities you’ll need to grow your business.
Limited support for new business models
With the explosion of generative AI (GenAI) technologies, SaaS executives and product leaders are increasingly turning to hybrid business models, incorporating usage-based charges into their recurring billing models. This creates brand new challenges for engineering and finance teams.
Development teams often face the challenge of allocating valuable engineering resources to develop and maintain internal metering and rating systems for usage-based billing. This effort can quickly escalate, requiring a dedicated team to manage the complexities and ongoing changes.
Instead of driving innovation and strategic initiatives, your engineers become bogged down with maintaining these homegrown systems, handling frequent pricing adjustments, and managing usage data escalations. This not only diverts focus from core business objectives but also increases the risk of errors and inefficiencies.
Investing in a robust, pre-built billing platform can free up your engineering talent to focus on what truly matters—innovation and growth—while ensuring accurate and efficient billing operations.
“Technology is an enabler of agility. Even if your processes and people are in the right place, if you don’t have the right technology, you’ll always have problems being agile. Technology is crucial for agile transformations.”
– Cem Yöndem, VP of Digital Customer Relationship Management and IT Platforms, Schneider Electric
Risk #2: Error-prone financial reporting
As an IT leader, being a good partner to the finance department will always be a huge priority. It’s imperative for the finance team to get accurate numbers for accounting and audit purposes. But building homegrown billing software that can ingest and report financial data accurately is very hard to do, and it becomes even more complicated with subscriptions.
General ledger requirements
With recurring billing, you’re dealing with complex changes such as renewals, upgrades, pauses, and time-based accounting, all requiring accurate and real-time financial data. This means you need a subledger that can group and calculate the right charges and then generate journal entries that can be understood by your general ledger. Requirements include storing accounting codes that match every charge or running a trial balance report to ensure your numbers tie out.
Finance needs to close and lock accounting periods quickly for audit and compliance purposes.
ERP fails
You may think you can retrofit your ERP to manage these challenges, but unfortunately, this approach rarely works.
You want to ensure customers get billed correctly, stay in compliance, and have the financial accuracy your CFO needs for board reports. A homegrown billing platform isn’t robust enough to manage all this, and if the system is a bust, the downstream impacts on your finance team are overwhelming and can lead to errors and, ultimately, to revenue leakage.
“Data is the biggest challenge. We frequently observe that upstream systems inadequately capture the data required for the revenue accounting process and often will inconsistently use the data that is captured upstream. This leads to manual interventions by the revenue accountants to collect, validate and correct the upstream data in order to accurately perform revenue accounting. The lack of systems expertise for the contract-to-revenue process is a frequent obstacle in improving data quality and automating the revenue accounting process.”
– Jeff Johnson, Executive Director, Ernst & Young LLP
Risk #3: Costly maintenance for integrations and compliance
Last but not least in the hearts and minds of every IT leader: cost, integrations, and compliance. Your subscription management and recurring billing software is integral to your existing tech stack, which means you will need to build and maintain all of the integrations to your ecosystem. This is resource-intensive—and difficult.
IT ecosystem integration
It’s not just your CRM and ERP; your system will need to seamlessly integrate with tax engines, payment gateways, data hubs, AI-based analytics, and more to ensure a cohesive IT ecosystem. As your company expands to new markets, this means building and maintaining even more gateways. Plus, there’s your CRM, CPQ, ERP, GL, partner portal, provisioning, web portal, data hub, and more.
Your subscription management system needs to seamlessly integrate with your entire IT ecosystem.
The tip of the iceberg
Engineers often recognize the need to automate pricing options, but that’s just the tip of the iceberg. They never anticipate dealing with currencies, tax models, support for dozens of payment methods (Apple Pay, Amazon Pay, etc.), revenue recognition rules, audit controls, quoting for the sales force or partner channel, invoice presentment standards, invoice numbering standards, strange use cases like early renewals, contract renegotiations, etc.
Plugging into your ecosystem takes a lot of time. Every time you want to add a gateway or portal, that’s an additional cost.
Thousands of validation flows
Even an integration between your homegrown solution and your ERP won’t be easy with middleware. Because of the sensitivity of getting financial data correct, you’ll have to build over 1,000 validation flows that need to be updated regularly to prevent account imbalance.
On top of that, your billing solution and an ERP won’t speak the same language, meaning you will have to map hundreds of fields with formatting differences to your ERP for line item accounting. Not doing these things will result in incorrect records and duplicate data, impacting financial reporting.
PCI compliance
Beyond integrations, you must also address PCI compliance, data privacy regulations, and security standards to mitigate risks such as fines, data breaches, and loss of customer trust. If you’re building a homegrown billing solution that will hold sensitive customer data, you must be PCI compliant.
To achieve PCI compliance, you need security architects and tech ops engineers, strong infrastructure like encryption appliances, and web and application firewalls. You also need a mature security program that covers application, network, host-based, and data security with strong policies and procedures in place.
Finally, to get certification, you’ll have to go through assessments and annual audits, meaning you’ll need to hire auditors and have compliance managers. All of this can easily add up quickly.
“The automatic integration between Zuora Billing and Zuora Revenue means we don’t have to heavily customize or build our own integration, which is always time-consuming and costly — in addition to the learning curve of all the complexities involved.”
– Chris Coutinho, Director of Order to Cash, Nutanix
Finding billing software for the long term
Building and maintaining a homegrown billing solution has great risks that will ultimately hinder growth. And these risks will cost you. With your solution, you’ll need engineers working on business capabilities like pricing, packaging, and order management, another group on platform services like payment gateways and user controls, and yet another team on infrastructure like security and scalability.
Not only does it take years to get this up and running, but you’ll need resources to maintain it. Plus, you’ll have to pay for additional hosting. Meanwhile, you could be focusing all these resources on your core product and creating value for your end-user.
Instead of a homegrown billing solution, IT leaders at leading companies seek a comprehensive and flexible billing platform that supports a holistic approach, referred to as Total Monetization.
This strategy involves creating value through a dynamic mix of prices, packages, and models, supporting the efficient monetization of that mix from offer to revenue recognition, and evolving the mix to capture the full spectrum of changing customer demand.
By adopting a Total Monetization approach, IT leaders can ensure their recurring billing solution is not just a cost center but a strategic enabler of recurring growth.
Hear from technology leaders across industries
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| “We partnered with Zuora to help scale up our growth strategy. We love their codeless product catalog which gives us the agility to package and go-to-market with a robust set of compliance offerings.”
– Shrav Mehta, Founder and CEO, Secureframe |
“We work with a significant amount of data and were confident Zuora could help both with monetizing usage data and the revenue recognition complexities that come with it. More importantly however, not only did we find the platform but the guidance on subscription best practices, this was a key differentiator in the way Zuora worked, which ensured we were successful during the implementation.”
– Kevin Cornwall, Former CIO, AVEVA |
“The Zuora tool allows us to harness the information about all of our customers in the financial realm that then informs how we should optimize. It’s more than just a billing platform for us. It’s data, it’s customer experience, it’s future proofing the revenue streams that we’ve built with these customers.”
– Lise-Ann Brennan, Director of Technology for Subscriptions, The Telegraph |