What is IoT billing? Before answering that, we need to understand what the Internet of Things (IoT) is. In one of our previously written articles, we explained everything about the Internet of Things. This time we will discuss about IoT billing, challenges, and keys to solving them.
The connection between our smart devices and everything else is referred to as the Internet of Things (IoT). From the moment we wake up and grab our phones to the moment we lay back in bed and ask Alexa to turn off the lights, we are indeed vastly connected.
It is predicted that there will be an increase in IoT Devices from the current 8.4 Billion devices to over 22 billion devices by 2020. These Devices gather and spread data to improve the quality of our lives by creating efficient and near-perfect experiences.
Some suggest that by the year 2025, the IoT Device industry will be worth up to $11 trillion globally. As expected, technology is outpacing every other business out there. Companies that are unable to keep up with the challenge of this technological advancement risk failure.
One of the numerous challenges introduced by these innovations is effective IoT Billing for monetization. Today, businesses are forced to makes changes to their billing systems to adjust accordingly.
A New Kind of Billing In the Age of IoT
Charges, Bills, Invoices, Dunning, Collections, Account records, Product Statements, etc. all make up the billing system. These aspects of business have conventionally been a particular area for experts. However, to benefit from IoT, conventional billing systems have to be integrated into all aspects of companies. Billing systems also need to make room for progressive and challenging pricing structures and business models.
IoT may present some difficulties in billing, but the opportunities it creates are far greater than its problems. For a long time, transactions were simple and straight to the point: buyers purchased products, and upfront payment made, end of sale. The transaction will remain closed until the buyer needs that product again. This method of business transaction is fast becoming history.
Below are four significant challenges of IoT Billing and their possible solutions. These solutions can lead to the sustainable growth of any business that employs them.
Financial Structure of IoT and Fragmented Businesses
Devices gather an unimaginable amount of data. If this data is consolidated correctly and studied, it can provide infinite and profitable intelligence. Sadly, businesses that are stuck in the archaic billing systems are unable to make the best of opportunities that may result from the data gathered by IoT.
Information in these businesses has to be manually consolidated. That leads to several problems such as waste of time and resources, errors, loss of essential details of customer relationships.
The old-fashioned method of gathering, updating, and studying data quickly becomes a barrier to business growth.
An example of a business that is taking advantage of its data to create progress in all aspects of its operation is Click and Grow. Click and Grow is a company that specializes in providing smart gardening devices. It operates a subscription service to plant pods that are connected and paired with its smart devices. These devices are commonly sold to both vendors and customers.
These devices steadily gather information to enable the customer to enjoy seamless home gardening. The data collected by the devices are used to control nutrients, light, and water levels that go into the garden. These plant necessities are tracked from an app that is linked to the user’s computer or phone. In the case of Click and Grow, there is a constant communication between:
- The IoT device and the various tasks it performs.
- The device and its producers.
- The business, its vendors, and end-users.
- The device and final users.
If no system effectively collects and manages information, the business will experience difficulties in competitiveness and growth. Replacing management technologies, multiple IoT billing, information with an integrated system can provide centralized communication and management.
The clarity of data supplied results in flexibility in making adjustments and business decisions based on steady market demands and patterns. It also points out new business opportunities to create new products for a new market. The data collected by this device provides details of how best to package the product and sell to customers. It also gives insight on how to improve the product and make the necessary changes to serve its users best.
The Click and Grow App keep records of the lifestyles of each customer’s plant. This way, it can correctly target new offers and ads. The ads encourage unsubscribed customers to replace their plants when needed. It is also able to make the product available for subscribing customers at the right time.
The data recorded can also be used to figure out when there is a need for a new product. It also displays when there is a need for improvement or increase in production and distribution of a product.
Complicated Value Chain in the IoT System
With IoT, the business process is no longer a simple seller, buyer, and product relationship. It goes as far as connecting the vendors, manufacturers, resellers, and end-users. These connections to business channels create a complex chain. Customer service, revenue generation, and billing, which happen regularly, are collected into one system in a structured way.
This form enables transmission of information back to manufacturers, operators, and service providers. In addition, information gathered through this interrelation could pass customer intelligence to the sellers.
For instance, Sonos and several other vendors make and sell smart speakers, thereby creating a network of transactions. Users then connect to the device through a dedicated Sonos app and stream content from a variety of streaming partners – all of whom are also individually acquiring and storing data based on the kind of content been streamed by users, in addition to offering regular billing. Here, streaming options and updated features are in sync between Sonos and the device.
A Revenue Management System must effectively manage the flow created by this complex chain. That should be done in such a way that billing is supported at all transaction level.
Outdated billing systems are unable to create such systemic flow, as explained above. Consequently, there is a break in customer relationship data. To fix this problem, older systems may end up acquiring data warehouses to store customer information. The warehouse will slowly become a dumping ground. That is because manually accessing all that data and trying to enter them in Excel is both exhausting and time-consuming.
Customers expect the best up-to-date services from a business. Therefore, an outdated billing system will be mostly dissatisfying and stressful for most customers. It is vital for billing systems to meet the customer’s expectations if the business intends to retain customers.
There is also the problem of creating several systems for vendors who operate several points sells as this can slowly become a chain of disjointed information.
A solution to avoiding several systems from multiple points vendors is to employ the services of just one vendor. This vendor should be one who can provide comprehensive IoT solutions for the ecosystem’s billing and financial management requirements.
Outdated Billing Solutions Cannot Hold up Against Pricing Demands of IoT
Subscription-based products benefit the sellers with the predictability of purchases and rewards customer loyalty. Monetization models and pricing structures set up by IoT are fast pushing out the billing structures of businesses that are not IoT based.
Customers have options and will demand a more suitable purchase experience. That includes how they are billed and how their invoices are sent to them. Customers now steadily appreciate and want the comfort of hybrid pricing options. To thrive in the saturated IoT market, businesses need to be flexible and alert. There must be active follow up on the trends for creative discounting to rival competitors, bundled offerings, and new pricing.
Also, legacy-based billing systems commonly only address a section of the IoT billing issue, such as project management, subscriptions, expense management, and one-time purchases. This one-sided approach is ineffective. Also, customers typically purchase the services mentioned above from multiple vendors in a single order.
Another notable growing trend is usage-based billing. Businesses that employ it increase their revenue on the IoT ecosystem. This billing method was previously only adopted by utility companies. As customers would prefer to pay for what they actually used, it is fast spreading into other industries.
This billing model further frees the consumer to use products, knowing that they are billed according to what they consume. This eliminates the possibility of unnecessary charges. Businesses also use the data collated from usage-based billing to allocate their resources appropriately to their heavy consumers.
The usage-based billing model also creates situations where customers who could not afford a product or service pay as they use. Recurring billing makes it possible for purchase costs to be paid off over time.
Businesses that adopt the legacy billing systems the system is mainly inflexible and unable to keep up with the ever-changing usage requirements. Flexible systems are often more suited to modern monetization methods.
Uniformity Demands Increases Complexity in IoT Billing
Whether knowingly or accidentally, the wrong declaration of revenue can both prompt legal sanction and restating of income. Business executives are wary of taking this risk. Therefore, it is pertinent that businesses are careful with their revenue recognition.
According to ASC 606, subscription businesses cannot record their revenue until the value is delivered. The standards for revenue recognition create complexity for IoT billing concerning accounting for revenue from subscription-related services. Revenue recognition categorizes payment as earned/recognized or deferred.
The billing system a business uses should account for deferred revenue. It should make sure that the income is not recorded prematurely. This is because billing and revenue are recognized and recorded gradually daily. Conversely, it should not be accepted until the end of the billing period to avoid record errors.
Point old billing systems cannot maintain the dynamic requirements of the ASC. They don’t have the required data for accurate revenue recognition of a completed transaction. And, as systems change over time, they are unable to keep up and record accurate data.
Due to this lapse in the system, businesses that run point billing systems have two alternatives. They could audit their orders and subscriptions manually – This method is also risky and prone to mistakes. Alternatively, they can opt to buy a different point revenue recognition system – this option is both expensive and hard to integrate. The manual methods are also risky and prone to mistakes.
Billing systems need to be able to stay updated on the changes made during a customer’s IoT subscription phase. These records may include:
- Free trial periods
Leaving these changes to manual entry may result in errors in revenue recognition.
A modern and effective billing system will automate the revenue recognition process with high accuracy. This allows the business to focus on growth. For example, Tridens Monetization, a modern recurring billing system, is designed based on a powerful ledger-based platform. Also, it allows control of revenue recognition at the product stage. It also allows one to earn immediate one-time fees or over a fixed period.
Streamlining IoT Billing Is A Necessary Business Strategy
All IoT Billing issues possess a mutual divide between businesses and essential data. This is data that companies can take advantage of. The information can be used in managing a business’s pricing structure versus the pricing demand in the market. Furthermore, they can be used in managing end-to-end billing chains and modern accounting standards.
Appropriate partnerships and technologies will make it possible for businesses to:
- Grow, familiarize with, and increase their competitive advantages irrespective of market changes.
- Make use of all the intelligence gathered to manage the customer journey and exploit IoT.
- Correctly and swiftly collect and analyze data.
- Edit their billing processes as needed.
The fundamental solution to billing difficulties rests on implementing modern billing systems. These systems must be in alignment with holistic business necessities. It must also enable the seamless exchange of data between different technology and business mechanism.