Companies always struggle to maintain a health fund flow with an emphasis to hurry-up the receipts and delay the disbursements. A creative billing structure should help, but a customer should be careful that a friendly billing should not be at the cost of long-term cost impact/TCO.
Front-end Billing vs. back-end Billing
A billing deal could range from a totally up-front billing to a low ‘up-front +installment payments over few years’. Essentially the vendor will build the cost of money therein, and one has to be careful that interest charged is not exorbitant.
Volume driven vs. user driven vs. one time cost
This is linked to licensing. The licensing cost can be billed in terms of user based license OR volume driven license. Business volume driven license cost is the cost using business volume as a variable.
The variable can be the number of transactions processed, OR number of customers lying in the data-base. However, the business volume driven OR user based licenses are not an un-ending climb. Over later years, as the volumes and users go high, the license cost needs to increase at a lesser pace compared to the business volumes.
Billing Structure
This is for the markets where the foreign exchange is limited and there is lot of paperwork for dollar payments. For Example – though it has eased a lot, some time back in India, paying to a vendor in dollars was an issue.
Extent of leveraging Economies of scale
As mentioned in volume driven billing, one has to see, that with increasing usage the total cost of ownership/license fee per unit of usage comes down substantially.
PLEASE REFER COMMERCIAL EVALUATION MATRIX Execution-MiHPractice Tool to enable an effective COMMERCIAL & CONTRACTUAL Evaluation for a tool/solution provider.
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