Billings

Billings Meaning

In a SaaS (Software as a Service) business, billings are the total amount of money a company has charged its customers over a certain period. This is regardless of when the company will actually receive the revenue from these charges. Gross billings are the total cash billed to customers before any fees or costs are deducted.

Billings Example

If a SaaS company signs a 3-year contract with a customer for $1,000 per month, the billings for the first year would be $12,000 (12 months at $1,000 each). Remember, billings and bookings are different. Billings are the actual cash the company will get from customers, while bookings show the total value of the contracts the company has signed.

Importance of Billings in SaaS

Billings are important because they show the real cash flow coming into the business. Unlike revenue, which is counted bit by bit as the service is provided, billings show the full amount customers are being charged and will pay. This cash flow is essential for keeping the company running and growing. By keeping track of billings, SaaS companies can:

• Manage Cash Flow: Knowing how much money is coming in helps the company plan its finances better.
• Make Smart Decisions: Information from billings can help decide where to invest, who to hire, and how to grow, while keeping cash flow in mind.
• Show Financial Health: Sharing billing information gives investors and analysts a clear picture of how the company is doing financially in the near term.

Increasing Billings

SaaS companies can use several methods to boost their billings:

• Offer Annual or Multi-Year Deals: Give customers a discount for paying upfront for a longer contract. This increases total billings.
• Upsell and Cross-Sell: Encourage current customers to upgrade their plans or buy additional products and services to increase billings.
• Keep Customers Happy: Happy customers stay longer, providing a steady flow of billings over time. Reducing churn (the number of customers who leave) and keeping customers engaged is crucial.
• Raise Prices: If possible, increase prices without driving customers away to boost billings.

By using these strategies, SaaS companies can grow their billings and improve their financial health.