Rather than rely on their accounting systems for billing, most ASPs build their own billing module in-house, essentially making it an integrated component of their online service. This enables the online service to send email-based invoices and enable customers to view their invoices online.

However, the billing module can quickly become a development project in and of itself, especially if the ASP wishes to include advanced pricing features such as custom pricing, introductory pricing, free trials, volume discount pricing, or bundling deals. Non-pricing features include affiliate and cobrand commissions, sales force commissions, automated billing, and billing-centric reporting.

It is not the core competency of the ASP to build a billing system. They are simply doing it for lack of a better alternative or rather becb>Accounting & Billing are not the same thing

Accounting and billing are completely separate functions. Accounting systems are primarily designed for generating financial statements and reports. Billing is about generating customer invoices based on their products and pricing; delivering invoices and receipts; charging customers via credit card, bank ACH transaction, or e-check; and tracking unpaid invoices.

Many accounting systems do in fact include the ability to geneate an invoice. Some even include recurring billing features. However, because it is not their primary purpose, accounting systems do not offer the depth of functionality that a best-of-breed billing system can provide.

It's hard to argue with success

Several prominent Internet companies have already proven the value of using a billing software provider. Both Yahoo and Google currently outsource their billing to third parties, even though both originally built their own billing modules in-house. Meanwhile, ebay rebuilt their billing software in spring 2004 and had many well-publicized problems, including sellers being charged triple-charged or not being charged at all and then being told their account was delinquent. This illustrates that building a billing system in-house is not as simple and straightforward as it seems.

Make no mistake - Billing is a Product! It is not just a feature of your system. This includes how you present your bills to customers; integration with your accounting, CRM and other systems; and the reporting tools to analyze your usage and billing trends. But like your CRM, database and accounting software, it is a product that you can now buy from a vendor focused on developing billing solutions instead of building it yourself. The ASP industry has matured, and there is no longer a need to build the entire infrastructure yourself.

>> Continue to Billing is a product, not an expense.