Billing is the revenue engine of every SaaS platform. It is also the feature most likely to be underestimated during project scoping. What appears straightforward on the surface, charge users a monthly fee for access, becomes remarkably complex once you account for multiple pricing tiers, usage-based billing, proration, failed payments, tax compliance, and the dozens of edge cases that arise when real money is involved.
For agencies building SaaS platforms for their clients, getting billing right is non-negotiable. A billing system that loses revenue through incorrect calculations, frustrates users with confusing invoices, or fails to handle payment retries reliably will undermine every other feature on the platform. This guide covers the technical decisions and implementation patterns that produce billing systems capable of handling real-world complexity.
Choosing a Payment Processor
The payment processor is the foundation of the billing system. For most SaaS platforms, Stripe is the default choice and for good reason. Its API is comprehensive, well-documented, and purpose-built for subscription billing. Stripe handles payment method storage, recurring charge processing, invoice generation, tax calculation, and webhook-based event notifications through a single integration.
Alternatives like Braintree, Paddle, and Chargebee serve specific niches. Paddle and Chargebee act as merchant of record, handling tax compliance and remittance on behalf of the platform, which simplifies international sales. Braintree integrates well with PayPal-heavy markets. The choice depends on the client’s target market, tax compliance requirements, and whether they prefer to be the merchant of record or delegate that responsibility.
Regardless of the processor, the architecture should abstract the payment provider behind an interface. This abstraction allows switching providers or supporting multiple providers without rewriting the billing logic. Laravel Cashier provides this abstraction for Stripe and Paddle, handling the most common subscription operations through a clean, expressive API.
Subscription Models and Pricing Architecture
SaaS pricing models fall into several categories, and the billing system must support whichever model the client’s business requires.
Flat-Rate Pricing
The simplest model: every customer pays the same monthly or annual fee for full access. This is the easiest to implement because there are no usage calculations or tier-based feature gating. It works well for platforms with a homogeneous user base where usage patterns are relatively uniform. The billing system needs to handle subscription creation, renewal, cancellation, and payment failure, but little else.
Tiered Pricing
Multiple pricing tiers with different feature sets and usage limits. This is the most common SaaS pricing model because it allows the platform to serve different market segments with appropriate price points. The billing system must enforce tier-based feature access, handle upgrades and downgrades with proration, and track usage against tier limits. Middleware that checks the tenant’s subscription tier before allowing access to gated features ensures enforcement is consistent across the application.
Usage-Based Pricing
Charges based on actual consumption: API calls, storage used, emails sent, or transactions processed. Usage-based billing is technically the most complex because it requires accurate metering of consumption, aggregation over billing periods, and the ability to calculate charges based on variable usage. Stripe’s metered billing APIs support this model, but the metering infrastructure, the system that tracks and reports usage, must be built within the application.
Hybrid Pricing
A base subscription fee plus usage-based charges above included allowances. This model combines the revenue predictability of subscription pricing with the scalability of usage-based pricing. It is increasingly popular for platforms that provide both access to features and consumption of resources. Implementation requires both subscription management and usage metering working together, with the billing system calculating the total charge based on the base fee plus any overage.
Handling Subscription Lifecycle Events
Subscription management is fundamentally event-driven. Subscriptions are created, upgraded, downgraded, paused, canceled, and reactivated. Each event triggers business logic that must execute reliably. Webhooks from the payment processor are the mechanism for receiving these events, and handling them correctly is critical for billing accuracy.
Upgrades and Downgrades
When a tenant changes their subscription tier, the billing system must calculate proration: charging or crediting the difference for the remaining billing period. Stripe handles proration calculations automatically, but the application must update the tenant’s feature access immediately upon upgrade and at the end of the current period for downgrades. This asymmetry, instant upgrades with deferred downgrades, is the expected behavior that users are accustomed to from consumer SaaS products.
Cancellation and Grace Periods
Cancellation should not immediately revoke access. The standard pattern is to cancel at the end of the current billing period, allowing the tenant to use the platform for the time they have already paid for. Implement a grace period that displays a cancellation notice in the UI and offers a reactivation option. Many SaaS platforms recover 10 to 15 percent of cancellations during the grace period simply by making reactivation easy and reminding users what they will lose.
Trial Periods
Free trials are a standard acquisition strategy for SaaS platforms. The billing system must track trial start and end dates, send reminder notifications before the trial expires, and automatically convert to a paid subscription or restrict access when the trial ends. Decide whether trials require payment method collection upfront. Requiring a card reduces trial signups but dramatically increases conversion rates because the transition to paid is frictionless.
Payment Failure and Dunning
Payment failures are inevitable in any subscription business. Credit cards expire, bank accounts have insufficient funds, and payment processors occasionally decline transactions for fraud prevention. A robust dunning process, the automated system for recovering failed payments, directly impacts revenue retention.
Stripe’s Smart Retries automatically attempt to process failed payments at optimal times based on machine learning models that predict when a retry is most likely to succeed. Beyond automatic retries, the application should send email notifications to the account owner when a payment fails, providing clear instructions for updating their payment method. Display in-app banners warning of billing issues before access is restricted.
Define a clear escalation timeline: first retry after 3 days, second retry after 7 days, warning of impending suspension at 14 days, and account suspension at 21 days. This timeline balances revenue recovery with customer experience. Suspending too quickly frustrates customers who had a temporary payment issue. Waiting too long extends the period of unpaid service.
Invoice Generation and Tax Compliance
Every SaaS platform needs to generate invoices that comply with the tax regulations of the jurisdictions where its customers are located. This is straightforward for platforms serving a single country but becomes complex for platforms with international customers. US-based platforms must handle state sales tax. Platforms selling to EU customers must comply with VAT requirements. Global platforms face a patchwork of tax rules that vary by jurisdiction.
Stripe Tax automates tax calculation and collection for most scenarios. For platforms with complex tax requirements, dedicated tax compliance services like Avalara or TaxJar integrate with payment processors to handle calculation, collection, and filing. Build the invoice generation system to include all legally required elements: seller and buyer information, tax identification numbers, line items with tax rates, and payment terms. Store invoices as immutable records that can be accessed by tenants through their account dashboard.
The Billing Dashboard
Every SaaS platform needs a self-service billing dashboard where tenants can manage their subscription without contacting support. This dashboard should include current plan details and usage metrics, the ability to upgrade, downgrade, or cancel the subscription, payment method management with the option to add, update, or remove cards, invoice history with downloadable PDF invoices, and billing contact information management.
The dashboard reduces support volume and gives tenants control over their account. Stripe’s Customer Portal provides a pre-built, hosted version of this dashboard that can be customized with the platform’s branding. For platforms that need more control over the experience, building a custom billing dashboard using Stripe’s API provides full flexibility while maintaining the reliability of Stripe’s backend.
Webhook Security and Reliability
Webhooks are the communication channel between the payment processor and the application. Every billing event, from successful payments to subscription changes to dispute notifications, arrives as a webhook. Handling them securely and reliably is critical.
Verify webhook signatures on every incoming request to confirm it originated from the payment processor. Stripe signs every webhook with a secret that only the application and Stripe know, making it computationally infeasible for an attacker to forge webhook events. Process webhooks idempotently, meaning that processing the same event multiple times produces the same result. Payment processors may send the same event more than once, and the application must handle duplicates gracefully.
Queue webhook processing rather than handling events synchronously in the HTTP request. This prevents webhook timeouts when processing takes longer than the processor’s timeout window and provides natural retry capabilities if processing fails. Log every webhook event with its payload and processing result for debugging and audit purposes.
Revenue Analytics and Reporting
The billing system should produce the metrics that SaaS businesses live by: Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), churn rate, average revenue per user (ARPU), lifetime value (LTV), and customer acquisition cost (CAC). These metrics inform business decisions about pricing, marketing spend, and product development priorities.
Build a revenue dashboard for the platform admin that tracks these metrics over time. MRR is particularly important because it captures the current health of the subscription business in a single number. Track MRR movements by category: new MRR from new customers, expansion MRR from upgrades, contraction MRR from downgrades, and churned MRR from cancellations. This decomposition reveals whether growth is driven by acquisition, expansion, or both, and where revenue is leaking.
Testing Billing Systems
Billing code requires more rigorous testing than most application features because errors have direct financial consequences. Stripe provides a comprehensive test mode with test card numbers that simulate various scenarios: successful payments, declined cards, insufficient funds, expired cards, and disputed charges. Build automated tests that exercise every billing path: subscription creation, upgrades, downgrades, cancellations, payment failures, retries, and webhook processing.
Test proration calculations with specific attention to edge cases around billing period boundaries. Test currency handling if the platform supports multiple currencies. Test tax calculation for different jurisdictions. And test the dunning flow end-to-end: simulate a payment failure, verify the retry schedule executes correctly, confirm notification emails are sent, and validate that access is restricted on schedule.
Billing is where technical implementation meets business model. The decisions made in the billing system’s architecture determine how effectively the platform can monetize its value, retain customers through payment disruptions, and provide the financial transparency that SaaS businesses need to make informed decisions. For agencies delivering SaaS platforms, ensuring their development partner has deep experience with subscription billing systems is as important as any other technical evaluation criterion.