What is SaaS Calendar Billing?

The calendar billing model is a “revenue-recurring” type wherein a company charges all its customers on the same billing date, regardless of when each signed up. It appears to influence the cash flow forecast for the finance team and accounts receivable processes.

The money-making flow of this model runs on synchronization and transparency. Key features include:

• The Same Unit Billing Date: All customers get an invoice on the same day.
• Proration Is Done Automatically: The system works out the amount to be charged for the “gap” days between signup and the first billing date.
• Facturatie: Customers with multiple seats or add-ons typically receive a single, consolidated bill.
• Batch Payments: Payment gateways process transactions in large batches at scheduled times.

While calendar billing prescribes a single universal date for all customers, anniversary billing is the exact opposite; each customer is charged on the exact date when they originally subscribed to the service. Therefore, if User A starts on June 12th and User B on June 23rd, they will be billed on those dates respectively every month.

•   Anniversary billing, in contrast to calendar billing, typically does not result in a consistent billing day. Instead, it generates a continuous stream of individual transactions.
•   Calendar billing proration is a “must” for the first partial month; anniversary billing proration is generally a non-issue.
•   Consolidating invoices into a single batch may present a different accounting workload than processing numerous invoices with varying dates.

The finance department’s ability to dedicate a specific period to resolving failed payments may be contingent on operating a standard billing cycle with simultaneous invoice generation. Alternatively, payment recovery processes may be necessary, potentially requiring regular monitoring by the finance department throughout the year.

•   It aligns revenue with the standard calendar month.
•   Using a consistent “Billed on the 1st of every month” billing date on all invoices, rather than varying dates, may impact the number of payment cycle inquiries directed to the sales team.
•   The occurrence of billing as a single event may correlate with fewer administrative touchpoints and a possible impact on overheads.

The initial step involves evaluating a departure from the anniversary-based plan; selection of a calendar-based anchor may be required. The calendar anchor is the day of the month (e.g., the 1st) when the cycle restarts. You will also need an invoicing system, such as Stripe, Chargebee, or Recurly, that can handle the “Billing Cycle Anchor” setup.

1. Choose the Anchor Date: What day of the month is your typical customer’s accounting cycle aligned with?
2. Set up Proration Logic: Will you bill prorated customers upfront or wait for the first full cycle?
3. Modifying Terms of Service: Customers should be informed of this change to avoid potential confusion regarding invoice discrepancies.
4. Integrate with Ledger: Ensure your ERP is set up to handle a massive data upload on the anchor ​‍​‌‍​‍‌​‍​‌‍​‍‌date.

Calendar​‍​‌‍​‍‌​‍​‌‍​‍‌ billing is not just a simple billing method; it significantly changes other financial processes.

•       Proratering: As most customers don’t become members on the first of the month, the software should assess the daily price and bill only for the days the customer is present during the first month.
•       Aanmaningen: Payment decline rates in dunning can be influenced by the chosen payment processing approach. This knowledge may influence the effectiveness of the customer support team’s follow-up activities.
•     Omzetverantwoording: According to ASC 606 regulations, businesses should report revenue as they earn it. Calendar billing indicates that service duration and financial reporting period occur at the same time.

Although calendar billing can be advantageous, one consideration is the potential for technical failures of the betalingsverwerker to affect monthly income during billing periods.

•   The influx of billing-related queries to customer representatives may vary, with potential concentrations at certain times.
•   It takes a very powerful API system to handle 100,000 billing transactions in an hour, whereas doing the same over 30 days is less demanding.
•   Matching payment dates to salary dates has been identified as a potential area of interest for some customers, though the feature is not presently implemented.