The five biggest challenges in SaaS billing in 2025

SaaS business models have developed significantly in recent years, with more companies expanding internationally and adopting alternate revenue models, such as usage-based pricing. This creates several challenges for FP&A teams, who must design billing processes that support their organizations’ go-to-market. 

1. Recognizing revenue from bundled offerings

Many high-growth SaaS businesses are bundling multiple products and services into packages for customers. For example, a $100k contract may include recurring software licenses, one-time implementation services, and ongoing training and support hours. To recognize this revenue in accordance with ASC 606/IFRS 15 guidelines, FP&A teams must determine which components of the bundle constitute separate performance obligations. Failure to do so can increase auditory scrutiny. 

Additionally, FP&A teams must clearly allocate the transaction value across bundle components, factoring for proportionate discounting across multiple elements. GTM teams can certainly get creative when it comes to designing discounts that get deals over the line. To recognize revenue accurately, FP&A must list a stand-alone selling price for each item, and specify how discounts impact items within the bundle.

2. Handling modifications, proration and mid-cycle changes

These challenges can grow exponentially when customers change their subscriptions during a contract period. Modification events, such as customer expansions and contractions, require FP&A teams to redetermine how aspects of the contract are recognized, and to calculate proration. While few contract modifications are detrimental on their own, a high volume of modifications in a short period of time (such as end of quarter) can overwhelm manual accounting processes and increase error rate. 

3. Supporting usage-based pricing models

More and more SaaS businesses are beginning to offer usage-based pricing, which allows customers to pay based on how much they use a platform or service. Platform usage is tracked by specified consumption metrics, often API calls, storage used, data processed, active users, or transactions. According to OpenView Partners' The State of Usage-Based Pricing, by 2023, over 61% of SaaS companies had adopted some form of usage-based pricing, up from 34% in 2020.

Transitioning to usage-based pricing can create billing complexity for FP&A teams. Instead of tracking software licenses on monthly or annual billing cycles, FP&A must track and store granular product usage in real time, and translate usage data into billable metrics and invoices. This creates the need for a robust metering infrastructure alongside the billing system, equipped with reliable data pipelines and storage solutions. At the same time, FP&A teams need to design processes for forecasting revenue based on these highly-variable billing structures. 

4. Supporting global payment regulations and tax compliance across domestic and international billing

International markets are adopting SaaS at an increasing rate. The percentage of organizations worldwide that have implemented SaaS technology increased from 71% in 2018 to 95% by 2023 (source). More SaaS businesses are expanding globally to capitalize on this growth. But while international expansion unlocks significant revenue opportunities, it also introduces billing complexities related to payment regulations and tax compliance. 

To start, FP&A teams must navigate the expanding patchwork of digital services taxes, which are taxes on revenue generated from digital services within a country's borders, regardless of whether the service provider has a physical presence there. At the same time, teams have to track VAT requirements across the countries in which they operate, which can vary based on where goods are “consumed” and how the business is registered. 

SaaS organizations must also comply with payment security and processing regulations, which vary globally. Certain regions, such as the EU, have stricter standards for the level of consent and communication required for recurring billing. Additionally, some countries, such as Russia, require SaaS businesses to store payment data locally even if based abroad.

To support these international requirements, FP&A teams must design billing processes that manage global processes while also solving for region-specific requirements. Finance leaders in particular must find the balance between automated processes and manual compliance costs, and consider the trade-off between developing processes in-house and outsourcing regional services. 

5. Offering a modern customer billing experience

Many businesses are beginning to desire a more self-service experience from the SaaS vendors they partner with, and the billing experience is no exception. Modern SaaS customers expect to be able to update payment information, download payment history, and monitor usage within an accessible interface. Inability to do so can impact customer trust. 

To meet customer expectations, FP&A teams must provide customers with sophisticated, transparent, and frictionless billing experiences. This can include collaborating with Product to design self-service billing management and real-time usage dashboards. Teams can also build trust by supporting flexible payment methods (particularly for international customers) and ensuring clear communication throughout the billing process. 

What should your SaaS billing process look like in 2025?

Given these challenges, FP&A teams must build billing processes that support compliance and scalability while also providing a seamless payment experience. 

Payment processing

A core component of any SaaS business’s billing architecture is payment processing. Payment processing encompasses the automated workflows for securely capturing, authorizing, and settling customer payments, as well as related functions such as payment retries, refunds, and reconciliation.

To support today’s billing needs, modern payment processing systems are favoring a modular approach, separating functions such as metering, rating, invoicing, and revenue recognition into different microservices. This allows FP&A teams to adapt individual components as business needs change, without disrupting the entire billing ecosystem. 

For organizations transitioning to a modular approach, it’s important to prioritize systems with comprehensive API connectivity for financial system integration, and robust data pipelines for analytics and financial reporting. 

SaaS organizations eyeing international expansion must design a payment architecture that can handle multiple currencies and diverse payment methods while also complying with international tax regulations.

Subscription and usage management

Subscription and usage management systems are rapidly evolving, as more SaaS businesses are transitioning to usage-based pricing or adopting a hybrid subscription/usage-based model. 

Organizations offering a traditional subscription model must design a process that can support multi-dimensional subscription structures, such as parent-child account relationships. It should also be able to track and enforce subscription contracts from initial creation through renewals, amendments, and termination throughout the entire customer journey, while also keeping a clear audit trail. Many teams leverage Subscription Management Platforms to automate these workflows, which are built to handle multi-tiered subscription modeling, flexible billing, and trial-to-paid conversion management. Some leading solutions to consider in 2025 are Chargebee, Stripe, and Recurly. 

SaaS businesses operating on a usage-based pricing model have different challenges to solve. The foundation of a usage management architecture is a robust metering system. The system should be able to track consumption events in real-time, aggregate them into billable metrics, detect anomalies, and maintain granular historical data. Some leading providers in 2025 are Amberflo, Usage.ai, and Metronome. 

On top of this, modern usage management systems must be able to support complex pricing models, including tiered structures, volume discounts, and personalized rates. Finally, the system must also be able to provide customers with real-time usage tracking, threshold alerts, predictive charge forecasts to help them understand their consumption habits and optimize spend.

Many organizations are adopting a hybrid subscription/usage-based pricing structure. In such cases, FP&A teams must design an architecture that allows them to handle a combination of subscription and usage-based elements, sometimes within the same customer relationship. They will also need a clear process for transitioning customers from one payment method to another while recognizing revenue consistently. 

Billing communication

Billing transparency is becoming increasingly important for SaaS customers. To meet customer expectations, SaaS organizations must design a billing communication architecture that supports both proactive billing notifications and self-service functionality. 

FP&A teams can keep customers informed by automating billing communications, such as invoices, payment confirmations, and usage alerts across multiple channels. And this doesn’t need to be manual, in fact it shouldn’t. Teams can increase communication scalability by leveraging a CRM that provides a template-driven communication system and can dynamically tailor billing communications to customer segments, optimizes format for different devices, and supports multiple languages and currencies. Leading examples include Salesforce, Hubspot, and Braze. Advanced organizations will also use these solutions to track delivery, open rates, and response patterns for billing communications.

SaaS organizations, particularly those offering freemium sign-up experience, may also find that customers desire self-service access to billing information in addition to communication. For example, customers may want to manage their plan, update payment information, and change account permissions without having to engage the vendor. For SaaS organizations offering usage-based pricing, it’s imperative to provide customers with an accessible interface for usage monitoring, threshold tracking, and predictive forecasting so that they can manage credits responsibly. 

Dunning management

As SaaS businesses scale their customer base, occasional failed payments are inevitable. Dunning management is the process of rectifying failed payments through automated retry attempts and customer communications to maximize payment recovery.

At the same time, FP&A must ensure that they’re handling failed payments in a way that minimizes service disruptions and preserves customer relationships. Modern teams are leveraging systems that determine optimal payment retry schedules based on payment failure reason codes, customer payment history, account value, and processor-specific success patterns. Leading providers for dunning solutions in 2025 are Chargebee, Recurly, and Zuora. Beyond technology, it’s important to communicate with customers appropriately throughout the dunning process, delivering payment failure alerts through escalating channels based on urgency and providing multiple resolution pathways.

It’s helpful to provide customers with an accessible interface in which they can update payment information, select alternative payment methods, and split payments so that they can resolve payment issues without consuming support resources. 

How to measure the success of your billing process

Your billing process should not be set in stone. Rather, it should evolve periodically based on how well it’s supporting your organization’s needs. 

It’s important to evaluate billing success across several dimensions. To assess how billing is contributing to financial health, you can measure revenue leakage rate, average time it takes to collect payment after invoicing (Days Sales Outstanding), and failed payment recovery rate. To assess how billing is impacting the customer experience, you can measure billing ticket volume, and self-service utilization rate. Leading FP&A teams will also collect satisfaction scores specifically related to the billing experience. Finally, to assess the operational efficiency of your billing process, you can measure invoice accuracy rate, time to invoice, and revenue recognition cycle time. 

This information should also be distilled into several core insights for executive stakeholders. To report on revenue performance, FP&A teams should present MRR/ARR figures, with a breakdown of new sales vs. expansions. They should also share how much of this revenue has been recognized vs. how much has been booked. 

Organizations transitioning to a different pricing model will want to include revenue per customer by billing model (subscription vs. usage) in their executive reporting, noting expansion patterns and payment behavior. Finally, FP&A teams can leverage billing data to provide forward-looking analysis, such as leading indicators from billing data that predict retention/churn. 

Billing processes are a critical component of the financial and accounting workflow, as they allow the business to translate customer value into revenue at scale. For high-growth SaaS businesses, billing processes are too complex to handle manually. The foundation of an effective billing workflow is the network of interconnected tools and systems that enable FP&A teams to automate processes, aggregate data, and surface insights.