5 usage-based billing models – and why they break down outside your ERP

Summary (TL;DR)

• Usage-based billing is becoming a go-to model for growth – but it often adds billing, recognition and compliance complexity behind the scenes.
• Disconnected systems, spreadsheet workarounds and third-party tools can introduce risk – from revenue leakage to reporting delays and audit issues.
• Common usage-based billing models include: pay-as-you-go, minimum commit + overage, prepaid drawdown, hybrid subscription + usage and flat-fee unlimited usage.
• Based on what we’ve seen, finance teams managing these models inside NetSuite – not around it – tend to close faster, reduce risk and scale more confidently.

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The operational reality behind usage-based billing

SaaS businesses looking to offer more flexibility to customers are finding new ways to monetize through usage-based billing (UBB) models. These strategies can introduce operational friction for accounting teams, especially when ERP workflows are stitched together with manual workarounds, disconnected CRM data or layered-on third-party tools.

When finance is already managing high customer volumes, nuanced revenue schedules and evolving compliance requirements like ASC 606 and IFRS 15), additional usage layers often compound the effort. Audit prep becomes harder when usage logic isn’t clearly mapped or easily traceable. The impact doesn’t always show up right away – but over time, it tends to surface in delayed close timelines, harder-to-explain variances and more time spent reconciling fragmented data.

This article breaks down five common usage-based billing models and shows where finance teams often hit operational limits – especially when billing happens outside the ERP.

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The hidden risk finance teams face when usage-based billing lives outside their ERP

In our work with customers and ERP implementation partners, it's common to see finance teams managing multiple usage-based billing models – sometimes without realizing just how many are in play. Overages, per-user charges, minimums, credits, drawdowns – different names, same outcome: billing tied directly to actual usage.

A company might start with a pay-as-you-go model, then gradually layer in:

• Credits for enterprise agreements
• Base fees with usage-based add-ons
• Minimum usage thresholds
• AI-powered features billed on consumption – often layered onto one of your existing models

At that point, they’re no longer using one billing model – they’re using four. 

Each layer brings its own rules, logic and edge cases. While sales and product teams often drive these changes, it’s finance that has to operationalize them – often with spreadsheets, manual reconciliation or loosely connected tools. That setup might hold in the early stages, but as billing models evolve and customer volumes grow, the risk of delay, error and audit friction increases.

From what we’ve seen, the tipping point comes when basic questions get harder to answer:

Which invoices follow which logic? Is revenue being recognized under ASC 606 or IFRS 15? When billing, recognition and reporting aren't fully aligned, gaps emerge. Timelines slip. Audit prep takes longer than it should. Confidence in reporting weakens.

What makes this harder is that usage data often lives outside the ERP – in product systems, spreadsheets or disconnected billing engines. That separation creates risk in four key areas:

• Timing: Usage data is often reviewed only after it’s invoiced – making it harder to catch discrepancies before revenue is booked or close timelines slip.
• Accuracy: When billing logic depends on manual entry or disconnected rules, even small inconsistencies can snowball into reporting gaps or customer disputes.
• Auditability: When usage, billing and recognition don’t share a system of record, proving ASC 606 or IFRS 15 compliance becomes harder.
• Revenue integrity: Missed usage, unbilled overages, or misaligned thresholds can lead to revenue leakage that’s difficult to trace. And when forecasts are off, it can affect everything from board reporting to investor confidence.

“We’re looking for companies that have pricing models that support long-term growth and investor confidence. If you have high customer churn or revenue unpredictability, that’s a red flag.” – Ira Golub, VP at Bregal Sagemount

What’s helped many of the teams we’ve worked with is bringing usage-based billing inside the ERP – integrated with systems like CRM or CPQ, with no handoffs between spreadsheets or third-party tools. With that structure in place, data flows more cleanly, audit trails stay intact and reporting becomes easier to trust. In some cases, teams have reduced billing cycles by 80% and revenue recognition effort by 70% – not just by automating, but by eliminating the fragility caused by disconnected systems.

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Common usage-based billing models – and what they mean for finance operations in ERP

Depending on the nature of a company’s usage-based services, it’s not unusual to see several billing models in play at once. Each one can offer flexibility for customers and revenue opportunities for the business – but also introduces operational complexity, particularly when billing workflows aren’t fully embedded within the ERP.

1. Pay-as-you-go

Often the most straightforward usage-based model, pay-as-you-go bills customers in arrears based on actual usage – typically measured through metrics like API calls, transactions or user sessions. It’s frequently used as the entry point after a freemium tier, which can drive high volumes of lower-spend customers and lead to a more variable pattern of adoption, renewal and churn.

On paper, the model seems simple – no tiering, no pre-commitment, just billing for what was used. But operationally, it’s rarely that clean. Since usage is usually tracked within the product itself, billing often takes place outside the ERP, assembled across spreadsheets, CRM exports, basic integrations or third-party tools. That fragmentation can introduce recognition errors, reconciliation gaps and timeline delays.

Where pay-as-you-go models often become more complex:

• Usage-to-invoice complexity: Even though the pricing is simple, stitching together usage data across systems – especially when CRM, product and ERP are only loosely connected – often creates manual overhead. Finance teams may spend hours verifying records, aligning contract terms with usage and ensuring payments are tracked accurately. These inefficiencies tend to carry through into recognition and reporting.
• Volatility and churn: Pay-as-you-go models often correlate with higher churn – particularly in early-stage or product-led growth companies where switching costs are low. While this flexibility can help drive customer acquisition, it also introduces variability in revenue that makes forecasting and recognition more difficult without tightly aligned systems.
• Scaling challenges: As usage volume grows, so does the effort required to manage billing and rev rec workflows at speed. Many teams try to keep up by adding headcount or bolting on tools to handle usage aggregation or invoice generation. But unless those tools are fully integrated within the ERP, each new step adds friction and audit risk.

Pay-as-you-go can be an effective way to launch usage-based pricing – especially when pricing needs to remain simple. But based on what we’ve seen, when billing lives outside the ERP, even this model can surface early gaps in billing accuracy, cash flow visibility and downstream forecasting.

Basic integrations may help initially, but they don’t always scale cleanly. As usage volume and reporting demands grow, those patchwork setups tend to slow down the close and complicate audits.

“Pay-as-you-go is the foundation of all other billing models. If a team isn’t operationally capable of billing and pricing on a pay-as-you-go model, they probably aren’t ready to navigate the additional complexities that come with more challenging models.” – Brad Mortimore, Vice President, Strategic Accounts at Zone & Co

2. Minimum commit + overage

In this model, customers commit to a baseline level of usage at a fixed cost – whether they fully use that commitment or not. Any usage beyond the baseline is billed at a defined overage rate.

For example, a customer might be billed a $2,000/month minimum, plus a per-unit charge for any usage over that threshold. Because it includes a floor of recurring revenue, this model tends to reduce cash flow volatility compared to pure pay-as-you-go. But based on what we’ve seen, it can introduce new operational complexity – particularly when layered with tiered pricing or discounts negotiated during the sales process.

Where this model tends to challenge finance teams:

• Billing logic complexity: It’s common for minimum commit + overage structures to be paired with volume tiers, custom rates or bundled SKUs. While these can help drive expansion revenue, they also require billing systems that can support multiple thresholds and rates without increasing manual effort or introducing compliance risk. When billing logic spans product, sales and finance systems without full alignment, accuracy and timeliness can suffer.
• Customer alignment and reconciliation pressure: If the logic behind minimum thresholds and overages isn’t clearly communicated or consistently applied, billing disputes may surface – especially at renewal or after periods of rapid usage change. Finance teams often step in to reconcile those discrepancies, adding pressure to already-tight close timelines.

When billing for minimums and overages happens outside the ERP, reconciliation challenges and timeline slips tend to increase – especially as deal structures evolve.

3. Prepaid drawdown

In this model, customers pay upfront to access a defined amount of usage – typically through a credit-based system. As usage occurs, their balance is drawn down at pre-set rates. Once the balance is depleted, they purchase additional credits to continue.

For example, a customer might pay $5,000 for 100 credits, use them over time and pay for more when they run out.

On the surface, prepaid drawdown models offer simplicity and predictability. But in practice, they can create operational complexity – particularly for finance teams managing revenue recognition, credit expiration and system alignment across tools.

Where prepaid drawdown models tend to introduce challenges:

• Breakage and expiration logic: When customers don’t fully use their balance before expiration, breakage occurs. Depending on how credits are tracked and cleared, this can complicate revenue recognition and make it harder to reconcile deferred revenue accurately. If the ERP doesn’t support expiration rules natively, custom logic or manual workarounds often fill the gap.
• Expectation management: Customers sometimes assume unused credits will carry over or convert into future discounts. If billing configurations don’t match those expectations – or if expiration timing isn’t clearly visible – disputes or escalations may follow. Finance and RevOps teams are often pulled in to resolve the disconnect.
• Recognition consistency: Under ASC 606 or IFRS 15, revenue must align with how value is delivered – which can be difficult when credits are consumed at varying rates or expire unused. In environments where billing isn’t handled natively in the ERP, recognition logic often requires custom rules, increasing the risk of inconsistency or audit friction.

“We look at revenue recognition closely. If your usage-based pricing isn’t structured in a way that aligns with ASC 606 or IFRS 15, that’s a problem. It creates reporting risk, which is something investors won’t tolerate.” – Ira Golub, VP at Bregal Sagemount

4. Hybrid subscriptions + usage

This model blends a fixed recurring subscription with additional usage-based charges – often tied to premium features, thresholds or overages. Many companies move toward hybrid pricing as they scale, especially when customer behavior or value delivery no longer fits a single model.

Hybrid structures offer flexibility for customers while creating opportunities to balance predictable revenue with variable growth. But from a finance perspective, they also introduce operational challenges – especially when billing systems aren’t fully aligned.

Where hybrid models often become complex:

• Billing across multiple dimensions: Charging for both subscriptions and variable usage can quickly complicate billing logic – particularly when contracts vary by customer. Without a unified view into how usage is tracked, priced and invoiced, finance teams often manage hybrid billing with manual adjustments or reconciliation outside the ERP. That work tends to increase pressure around invoicing accuracy and month-end close.
• Expectations vs. invoice clarity: Hybrid models sometimes include legacy pricing, promotional bundles or custom thresholds – which can make invoices harder to interpret. When charges don’t align cleanly with what customers expect, billing disputes and support escalations can become more common.

“Hybrid models are a really strong way to structure pricing. They offer the flexibility of usage-based pricing while maintaining the revenue stability investors want. That’s why they’ve become so popular in recent years.” – Rob Litterst, PricingSaaS

Hybrid pricing works best when finance has full visibility across the billing chain – from how usage is measured, to how it’s priced, invoiced and recognized. But when pieces of that workflow live in spreadsheets or disconnected systems, that flexibility can turn into friction – especially when closing the books or preparing for audit.

5. Flat fee unlimited usage

Unlike the other models in this list, flat-fee unlimited usage isn’t technically usage-based – customers pay a recurring flat rate for unrestricted access to a product or service.

Still, many businesses blend it into broader hybrid structures to offer pricing simplicity and predictable spend for customers. Operationally, it’s often one of the more straightforward models to manage – but that doesn’t mean it’s without its challenges:

• Hidden complexity at scale: While flat-fee pricing is easier to manage on its own, it’s rarely used in isolation. When layered alongside other billing models – such as overages or prepaid drawdowns – it can introduce blind spots in forecasting, margin analysis or pricing strategy. Without visibility into actual usage patterns, finance teams may find it harder to support renewals, model customer behavior or adjust pricing in line with value delivered.
• Margin pressure and reconciliation friction: When multiple billing models coexist without clear system alignment, the effort to reconcile charges, analyze profitability and maintain reporting accuracy increases. Even for flat-fee components, margin tracking can become more difficult when processes rely on spreadsheets, siloed usage data or manual reporting logic.

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How NetSuite-embedded automation solves usage-based billing challenges for finance teams

From what we’ve seen, finance teams managing usage-based billing at scale tend to run into fewer issues when billing is fully embedded in the ERP – not handled through external tools or partial integrations. In NetSuite, embedded billing engines offer a direct way to automate invoicing, recognition and reporting without relying on disconnected workflows. Everything happens in one system, with fewer handoffs and less manual intervention.

So, what can an ERP-embedded automation for usage billing do for you? 

• Faster revenue recognition: In teams we’ve worked with, rev rec time has been cut from several hours to just over one hour per month using embedded billing automation inside NetSuite.
• Stronger compliance: When usage billing is handled entirely within NetSuite, revenue can be consistently aligned with ASC 606 and IFRS 15 standards. This helps reduce manual intervention and builds confidence in audit readiness.
• More capacity to scale: With embedded automation, finance operations are better equipped for rapid growth, pricing evolution or acquisition activity – without relying on workaround-heavy processes.
• Cleaner data across billing and rev rec: When handling billing inside you ERP, you can track multiple revenue streams, subscription changes and contract amendments – without bouncing between systems or third-party tools.

“Even after 12 months of using ZoneBilling, I am still surprised every day by the level of visibility that the reporting capabilities give me, whether it’s a saved search or something else.” – Sandro De Ciccio, VP Controller at Power Factors

Want to see what that looks like in practice? Book a demo of ZoneBilling to see how your usage-based billing can run natively in NetSuite without spreadsheets, uploads or billing delays. Not ready to talk to sales? Take a self-guided product tour and see how the tool handles real billing scenarios inside your NetSuite environment.

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FAQs

What are the differences of subscription billing vs. usage-based billing?

The difference between subscription billing and usage-based billing lies in how customers are charged. Subscription billing charges a fixed recurring fee for access to a product or service, while usage-based billing charges customers based on their actual consumption. Some companies use hybrid models that combine both approaches.

Can NetSuite handle usage-based billing natively?

NetSuite includes native billing capabilities, but it has limited support for complex usage-based billing. Many companies use embedded billing engines within NetSuite (like ZoneBilling) to automate usage tracking, invoicing and revenue recognition without relying on third-party integrations.

Why does usage-based billing fail without ERP integration?

If you handle usage-based billing outside your ERP, you won’t have full control over timing, accuracy, auditability or revenue integrity. As your business grows, these issues will inevitably get worse – even if your data ultimately ends up in your ERP.

What should I look for in a billing engine for usage-based pricing?

When choosing a billing engine for usage-based pricing, look for features that automate revenue recognition, support complex pricing models and integrate natively with your ERP. The engine should improve billing accuracy, reduce manual effort and support compliance with standards like ASC 606 or IFRS 15.

What are some common usage-based pricing models?

Common usage-based pricing models include pay-as-you-go, minimum commit + overage, prepaid drawdown, hybrid subscription + usage and flat fee unlimited usage. Many companies combine multiple models depending on their product mix and customer needs.