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RFazzo

CEO

Executive
Valued Contributor
Personal Narrative
+4

SaaS Annual Contracts Advice

Anyone able to advise on best practice for invoicing annual "per active user" based contracts in SaaS?


More around the initial invoice, is it best practise to bill minimum qty amount for 1 year with additional users prorated to the following year's invoice? Or take the max potential users in year 1, bill for the full amount in advance, and credit any unused licences in the following year?


I'm struggling with over charging the customer and a reduction in revenue year 2 VS underbilling now and not maximising the cash through the door for year 1

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TennisandSales
Politicker
4
Head Of Sales
with things like this you have to think about what is best for the client?
Most ppl do NOT like to pay for things they are not using, and in this environment, ppl would rather NOT spend money, then get a credit in the future.

I would give them the option honestly, but if you dont want to do that i would have the minimum qty option be the default.

it could be a win for your company too, because its new biz so thats good, and then next year if they use more users then it will be another increase rather than a decrease in revenue.
Maximas
Tycoon
1
Senior Sales Executive
Perfect Points!
SoccerandSales
Big Shot
4
Account Executive
I am of the mentality that if you can demonstrate to the customer you are doing what is in their best interest, it not only is more ethical but will help to forge a relationship to get more deals closed
CuriousFox
WR Officer
4
🦊
I am a believer of this mantra as well.
Pachacuti
Politicker
3
They call me Daddy, Sales Daddy
Under bill now.
RFazzo
Executive
2
CEO
Yes perfect @TennisandSales!!I'm aiming to do what's best for the customer. I just got myself twisted in an unnecessary loop haha
I guess I can discuss the options with the customer, I just don't want them to get a bang in year 2 when billing goes from a lovely 10 users to 50 hahaha
First time moving from monthly to annual btw, hence why needing advice
Sunbunny31
Politicker
2
Sr Sales Executive 🐰
Do you have a mechanism you can use to audit usage and compliance?
RFazzo
Executive
2
CEO
Yea @Sunbunny31, platform is fully integrated with Stripe so im confident on that side of things TY
Sunbunny31
Politicker
2
Sr Sales Executive 🐰
Following with Tennis - bill the minimum, but let them know when they are using more so it's not a shock when you do bill them. If you have terms in your contract to prorate an added user (maybe quarterly?) you can set yourself up to increase the revenue when it actually happens, rather than waiting for the annual renewal.
You'll build trust by not overbilling out of the gate, but you won't lose $$ by having to wait for the annual renewal.
Coastal_crusher
Politicker
2
Sales Director
^ this right here
Diablo
Politicker
2
Sr. AE
What’s best for them. We charge per user basis and if there’s an expansion, it’s prorated
RFazzo
Executive
1
CEO
You guys are awesome thanks very much
FoodForSales
Politicker
0
AE
I guess I would say "what would you want to happen to you?"
Justatitle
Big Shot
0
Account Executive
Is there any reason that you would not be able to bill for added users at a prorated amount for the year in which they added the users. IE. If they are 4 months into the agreement and add 3 users you bill them for the 3 additional users for 8 months of usage.

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