When to bill clients? (monthly subscription for SaaS)

Question

Hey there,
I have a SaaS product with a Freemium plan and a $30-monthly subscription.
When it comes to create invoices and bill clients on their credit card, is it better to:
1) bill ALL clients each month at a fixed date (ex: the 1st of each month)
2) bill clients on the day they turn "paying" (can be any day of the month)

If you can give some reasons why 1) or 2) is better, that would be awesome 🙏

Thanks!

Yogi · Accepted Answer

In the product, I developed, I chose the second option!

Because This helps me to maintain the perfect billing cycle for individual users!

In the first option think,

- What if the user started their subscription at the last date of the month?
- If the started at the mid of the month, the remaining 15 days the user remains unpaid

Correct me if I was wrong!

Here is the billing page of the product I developed https://taskord.com/patron

Paul Miller · Answer

I agree with @bigint If you bill them every 30 from their start date, they feel like they are getting their money's worth. It's too much of a pain for you to pro-rate and it is not easily understood by the customer. You want to make their experience with you as pleasant as possible.

Baptiste N · Answer

@harri_stapp thanks for you reply! Taking good notes out of this :)

Baptiste N · Answer

Thanks a lot @bigint! This definitely helps a lot!
Also thanks to @paul_miller4 and @ethar_alali for backing Bigfint's comment!

Harri Arain · Answer

We at the www.stafftimerapp.com, give 2 months free trial however we do not bill immediately as we want our customers to ask for extensions, we do not push them to buy a solution that is not cut out for them But we do bill them once they are satisfied and most of our clients opt for the premium package. Whereas there is no rule book regarding that it also depends upon the fact that if your product is stable.

Mr Ethar Alali · Answer

@bigint this gets my vote too! :)

Mr Ethar Alali · Answer

Check out @bigint's answer for the customer experience, which is spot on. Especially if they only get a day, or they get 10 days free, before then being charged. It's seen as a scam. However, I'll add your financials!

It's also a matter of cash-flow and debt interest, you see. Automating Continuous Payment Authority is easy these days (PayPal etc). Billing folk at the same date every month was only ever there to simplify admin. If it's automated, there is no need for it.

Also, you have to worry about the way it's seen. If you get paid up-front, there isn't a credit agreement. So one month free, then payment on the first day of "their" next 30-day period, no credit agreement (unless they commit to an annual subscription plan paid monthly). If you take it in arrears, then the first payment you'll actually get, is at the end of the second month, not the first. Taking it on the first and you've broken the contract you have with them (as in law, it hasn't been a free month). So you'd better have a plan to consider credit checking the individual and having a stop-loss mechanism off the back end. That option is a PITA! Because it's necessary to stop trolls and hacks.

So definitely consider the up-front subscription model, starting on the day after the day they subscribed, with 30 day free trial.

Best of luck!

When to bill clients? (monthly subscription for SaaS)

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