No matter how well your pricing model resonates with your customers right now, it’s no match for the passage of time. Market conditions are always changing, which means companies need to adopt new pricing models if they want to remain successful. A recent example is the rise of usage-based pricing, even among companies who thought they'd never move away from subscription-based pricing.

The fact change is necessary doesn't make it any easier for the teams that actually have to make it happen. Engineering and finance face a tough choice: they can build and maintain a homegrown billing engine, or purchase a third-party billing solution. But both options have problems.

Many companies have decided that third-party solutions won’t cut it for two specific reasons: 

1. Vendors traditionally optimize billing software for a single pricing model, in a time where it’s now very common for companies to offer two or more pricing models. While this can be nominally solved by implementing multiple billing engines, fragmented billing infrastructure brings its own problems.
2. Vendor billing engines are not well-equipped to handle custom use cases (like subscription-based pricing with an initial one-time fee, for example).

In light of vendor challenges, the pressure of an evolving use case often pushes companies to create their own billing engine. And it is absolutely possible to go that route, provided you are willing to dedicate a team of engineers full-time to build and maintain this system. But it’s far from a surefire success. Stories from companies that actually do this range from fairly positive, to fairly negative, to quickly realizing a custom system just wasn’t going to work for them. 

"It’s not surprising that many companies consider building their own billing engine, rather than adding multiple vendor solutions together." 

This isn’t to say that a custom engine is automatically the right or wrong move to make - but you do have to consider the long-term costs and sustainability of this route.

If you implement your own billing software, you will need a dedicated group of engineers to build and maintain it. This is hardly a surprise, but it’s worth recognizing that the mandatory time investment doesn’t drop after the system is first implemented — in fact, it may get worse.

Given the precision required for billing engines to function properly, the implementation process requires an extreme degree of scrutiny. Engineers need to continually check, for example, that the timeframes of their billing schedules are internally consistent with what the customer has purchased. In other words, customers need to be consistently billed weekly, monthly, or yearly both in the initial sale and across mid-term changes, renewals, and upsells. And properly setting up proration is often difficult because there are so many possible variations to accommodate for (and made even more complicated by the presence of free trials).

Once the system is set up, new challenges emerge. As sales teams offer new pricing and bundling to customers, each offer creates new SKUs in the system. In turn, the finance team needs to manage and reconcile a large catalog of SKUs, and engineering needs to make sure the billing engine can support all of them. And finally, as time passes, custom billing engines also gain the burden of becoming an “expertise sink” — a small number of experts know everything about the system, and adding more staff to help requires catching up with an increasingly deep backlog of system-specific knowledge.

"As time passes, bringing on new engineers to help with a billing engine requires catching up with an increasingly deep backlog of system-specific knowledge."

Even with a team of dedicated engineers to maintain the billing engine, it will likely stop meeting your needs, because your revenue model will eventually change. And dealing with this will require either greater time investment or reduced agility. 

If you choose to rehaul your current billing engine to accommodate for new pricing models, this demands even more time from your engineers, and runs the risk of taking your entire billing system offline if something goes wrong. And even if nothing goes wrong, there is now a larger and more complex system to maintain, further increasing demands on the engineering team.

The other option is to add a third-party billing engine to your custom billing engine — but this is likely what you implemented custom software to avoid in the first place. Fragmented billing engines often do a poor job of communicating with each other and with a CRM like Salesforce, denying go-to-market teams the critical insights needed for decision-making. For example, the direct sales team won’t be able to easily determine when customers brought to the company by PLG are ready to be upsold into enterprise pricing.

Even if a custom billing engine needed no maintenance and could adapt to any pricing model at the drop of a hat, there would still be a major problem. Namely, without a unified data model, the output of a CPQ — an order with tiered pricing and discounts across multiple accounts — does not map to what billing engines need as an input to create accurate invoices. This means the act of “translating” between the two systems has historically been manual, error-prone, and inefficient.

In order to prevent these gaps, both the CPQ and billing engine would need to reduce their functionality to a lowest common denominator. And this may end up limiting the finance team from using some of the most advanced features of their custom billing engine.

The only way to truly resolve these challenges is to use CPQ and billing systems that have the same data model, since a fully integrated data flow guarantees that nothing will be lost in translation.

Companies that build their own custom billing software may believe that no vendor solutions can support their bespoke use case, but that’s not accurate. Nue’s Everything Billing solution addresses and resolves the pitfall of both custom billing engines and the majority of third-party solutions:

So before you take the plunge with custom billing software, consider that Everything Billing may be a better way to meet your long term goals of creating a flexible and agile go-to-market motion. If you’re looking to learn more about modern billing needs, discover what to prioritize in B2B billing software or request a demo here.