Variable metrics in SaaS: how to describe it in your SaaS agreements?

Usage-based billing is a common practice in SaaS models. Many SaaS companies choose this pricing method to align their revenues with the actual use of the service by their customers. But be careful: without specific clauses, variable billing can quickly become a source of disputes.

A vague agreement deprives the SaaS company of any leverage to justify an increase in the invoice. On the other hand, a clear contractual framework protects you and avoids endless discussions with your customers.

Why a vague clause is not enough

Let's take a frequent example:
“In case of excess use, additional fees will be applied.”

On paper, the wording seems simple. In practice, it is inapplicable. The customer disputes, refuses to pay, and you have no solid legal means to demand the additional bill. Worse: you risk permanently damaging the business relationship.

The problem is twofold:

• the customer did not anticipate the overrun in his budget,
• the SaaS company does not have any specific criteria to demonstrate the surplus.

Precisely define the billing metric in SaaS

The first step is choosing and clearly defining the billing metric. Depending on your SaaS, this can be:

• the number of active users,
• the volume of data stored,
• the number of API calls,
• storage or processing capacity.

The contract must indicate in black and white what constitutes an overrun.

Explain the billing mechanism

A customer should know when and how they will be charged for overage. Several options are possible:

• at the end of the contract period,
• at the time of the observed overrun,
• as soon as a predefined threshold is crossed.

Again, nothing should be implied.

Anticipate follow-up and communication

A poorly communicated overrun can be costly for the SaaS company. Imagine a customer who receives an unexpected bill of several thousand euros: he will dispute, or worse, he will go elsewhere.

To avoid this scenario, your contracts should include a clear information mechanism:

• automatic alerts integrated into the user account,
• real-time email notification,
• Otherwise, quick contact by an account manager.

Informing the customer at the time of the overrun — or just after — is already too late. Upstream transparency is essential to maintain a healthy relationship.

Provide a blockage in case of overtaking

Some SaaS companies choose a stricter approach: automatically block access to functionality as soon as use exceeds the contractual threshold.

This mechanism avoids any dispute over billing, but it is not always technically or commercially possible. In some SaaS, interrupting the service would be too penalizing for the user.

Blocking can be a solution, but only if it's compatible with the customer experience.

Turning excess useinto business opportunities

A customer who exceeds their thresholds is often a customer that grows and uses your solution more. Rather than a problem, it's an opportunity.

Provided that excess useis well anticipated and managed, you can use it as a growth driver:

• offer an upgrade,
• offer adapted pricing,
• build customer loyalty through total transparency.

On the other hand, unexpected billing, perceived as abusive, is one of the most frequent reasons for leaving for the competition.

Conclusion

Variable billing is an effective model for aligning the value created and the value invoiced. But it only works if it is precisely contractualized.

Define your metrics, explain your billing methods, organize follow-up and provide a clear framework.