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5 Payment ledger benefits for SaaS & subscription businesses

ProfitWell Apr 20 2022

SaaS and subscription businesses no longer depend on spreadsheet records. They rely on sophisticated, highly integrated software platforms to gather real-time payment data from various sources and present it in an appealing and easily understood format. However, an old-fashioned notebook might still be helpful for new clients, those with a high likelihood to churn, or a few with declined payments.

Whether you're manually reporting or using software to do it for you, a payment ledger is a valuable report that provides insights into the financial health of your business. This post will discuss the benefits of keeping a payment ledger and the kind of information it typically contains.

What is a payment ledger? 

A payment ledger is a business bookkeeping tool to record and track payments meant for specific purposes. Companies use them for special events and daily activities that record money owed to the company. A payment ledger also helps meet your company's obligation to contractors before due dates.

For instance, a property manager may have a tenant ledger. Using this type of ledger allows the manager to see who needs a reminder and when rent payments are due. The same property manager can keep a different ledger for expenses such as mortgage and maintenance. 

5 benefits of a payment ledger for SaaS & subscription businesses 

Payment ledgers assist you in keeping track of all customer payments and taking appropriate action when needed. If a customer's credit card has failed before, you will probably pay more attention when their subscription is due. The following are other benefits that using a payment ledger provides:

1. Document financial performance 

A payment ledger can tell anyone with access to it whether the company is profitable or not. Lenders use rent ledgers to determine whether they should extend credit to landlords. From the information in a tenant ledger, one can see total monthly rent, a company's financial health, and overall ability to repay a loan facility.  

2. Detect discrepancies 

Evaluating your bank statement is enough to help you reconcile differences between the shown and actual balance for a small business. But as the company grows and you're making hundreds or thousands of transactions daily, you need help to ensure you do not miss any payments. It is easy to keep track of discrepancies with a ledger.

3. Discover payment issues 

Issues with payment systems can affect your relationship with clients if not discovered and solved. For example, a customer may have paid and is expecting their service to begin, but your systems are not reflecting this update. Using a payment ledger, you can discover whether only one gateway is experiencing this issue or if there is a more widespread problem. Once discovering what the problem is, you should take necessary actions to remedy the situation and inform customers about what's happening. 

4. Prevent payment delays 

Payment delays for some gateways can affect your bottom line through accrued charges. For example, suppose you already have an overdraft or overdue loan payment, but there are no funds in your account to settle it. You will have to pay late payment fees in addition to your regular payments. Over time, the fees can add up while also hurting your credibility with the banking institution. But with the help of a payment ledger, you can be made aware of these issues and make alternative arrangements. 

5. Improve financial performance 

You can tell how much money you have coming in, how much you need to pay out, and when it's due with the help of a payment ledger. Also, you can better tell if your company is profitable and, if not, which accounts are problematic. Are your customers making delayed payments or getting cancelled credit card alerts? By evaluating your clients' payment history, you can make decisions to improve your company's overall performance. 

What is included on a payment ledger? 

Payment ledgers can be brief and include only basic information or detailed depending on the organization's needs. If you need information for further data analysis, you may need to go beyond the basics. Here is some information you may find in typical ledger entries. 

Client information 

All payment ledgers should have client details, including names, addresses, and any other relevant information you may need for business purposes. The needs of a landlord may differ from those of a community fundraising project. 

Payment information 

Payment information may include the following: 

  • Payment date 

The date when the payment is initially due and also the date when it is finally paid out.

  • Payment type 

If your organization has multi-payment channels, you should indicate the mode of payment used in the transaction (e.g., PayPal, credit card, bank transfer). The data gathered here will help you know whether any charged fees for particular payment methods are worth it or whether it makes more sense to drop some options.

  • Payment status 

It's good to indicate the status of a transaction, particularly when it's past the due date. The payment ledger can indicate whether it was completed, paid, failed, or a refund was given. Based on this information, you can monitor your company's churn rate and come up with a better strategy for recovering lost payments.

Associated transactions 

Sometimes, you may want to know how much business a particular client brings you. By including other transactions made by the same client, you can easily calculate your monthly recurring revenue (MRR). 

Customer group 

For organizations hoping to use information for data analysis, it is prudent to segment customers into groups that make sense for your industry. You can segment based on a variety of characteristics, including nationality, pricing tier, or company size.

Transaction number 

If you lose a link to an entry in your payment ledger, it may be difficult to track down pertinent information when you need it. Assigning a transaction number to each ledger entry makes tracking easy. 

Notes 

When you need to enhance customer experiences through emails, personalization is everything. A personal note specific to the customer in question will help you deliver an extra experiential touch. This also helps if you need a reminder about the client in the future. 

ProfitWell Retain 

Prevent churn and recover failed credit card payments with ProfitWell Retain. We leverage data to determine the best times to retry declined credit cards with a 5%-10% increased recovery rate. Through targeted offers, we bring back cancelled customers. Our software helps you retain customers and improve your bottom line through science-backed data. 

Payment ledger FAQs 

What does it mean to keep a ledger? 

Payment ledgers are like a diary or accounting journal that businesses use to track incoming or outgoing financial transactions.

What are some examples of a ledger? 

Some examples of ledger accounts are cash, revenue, accounts receivable, inventory, fixed assets, accounts payable, debt, salaries and wages, and office expenses. 

What is a ledger balance? 

Ledger balances refer to the balance of your bank account at the close of the day after all transactions are processed. It is usually the same as the opening balance the following morning. 

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