Is Centralized or Decentralized Billing the Right Strategy for Your Platform?
by Marilyn Bunderson
Billing is not the most exciting part of running your business, it’s true. But it’s undeniably one of the most critical elements. It’s the bloodstream of your organization’s financial operations, quietly powering your day-to-day transactions and fundamentally shaping your organization.
If you're offering shipping as a service through a white-label solution (like Forge), choosing to use centralized or decentralized billing is more than just a technical decision; it’s a strategic choice that causes ripple effects throughout your entire platform. Each model offers unique advantages and sets distinct precedents for how you interact with your customers and manage your finances.
Choosing the right billing strategy will influence your customers’ experience and impact operational efficiency. This article will lay out the differences and benefits of centralized and decentralized billing systems, helping you understand which might be the best fit for your business needs and long-term goals.
Centralized vs. Decentralized Billing
First, let’s define each so we’re speaking the same language.
Centralized billing means your platform handles the billing processes centrally for each of your customers or subaccounts. This approach consolidates financial management under one roof, offering consistency and streamlined financial operations across all transactions.
Decentralized billing means each of your customers or subaccounts handles their own billing. This model delegates financial responsibility to individual subaccounts, promoting autonomy but requiring robust coordination.
Simply put, the difference comes down to where the responsibility for billing and financial management lies, centralized at the platform level or decentralized to the customer or subaccount level. Now, let’s dig a little deeper into each model.
Centralized Billing
In a centralized billing system, control over billing processes and financial data management is kept within the core business. This method leads to the following benefits:
- Greater control and oversight for the parent company as they have complete control of the billing process to set pricing, handle disputes, and manage credit terms.
- Improved consistency and compliance across all transactions, as billing standards and procedures are uniform.
- Easier financial tracking and auditing, since all records are consolidated.
- Enhanced customer service so customers need only deal with a single, knowledgeable point of contact for billing inquiries.
- Stronger brand control, as the platform oversees all billing touchpoints and ensures a consistent customer experience across locations or subaccounts.
Centralized billing has a few challenges, however:
- Potential bottlenecks could arise if the central billing department becomes overwhelmed or understaffed.
- Increased dependency on the central team, which can be a risk if disruptions occur.
- Greater technical burden on the parent platform to build, maintain, and scale the billing infrastructure..
Decentralized Billing
Decentralized billing allows individual subaccounts to manage their own billing processes. This setup offers the following advantages:
- Reduced central load on the parent company’s billing department, since the responsibilities are more evenly distributed.
- Greater flexibility for subaccounts to adapt billing practices to their specific needs and local conditions.
- Faster response times to billing issues or changes, as each subaccount manages its own affairs without waiting for approval from a central authority.
Decentralized billing comes with a few challenges to consider:
- Varying standards and practices across different subaccounts can lead to inconsistencies and compliance issues.
- Lack of oversight of financial data across the entire organization can make audits and financial analysis more difficult.
- Less control of customer experience and brand, as billing communications and processes may vary by team or region.
Factors to Consider When Choosing a Billing Model
Before committing to either a centralized or decentralized billing system, you should consider several key factors to ensure your chosen method aligns with your operational needs and strategic goals:
- Company size and complexity: If your company is large, you may prefer centralized billing to maintain consistent control over the user experience, enforce brand standards, and streamline oversight. In contrast, companies with highly localized operations, or those seeking more flexibility at the regional level, may benefit from decentralized billing.
- Regulatory compliance: Depending on the industry you’re in and where your operations are located, compliance requirements can influence your billing structure. Centralized billing could simplify compliance management, while decentralized systems could be better at adapting to regional regulations.
- Customer base: If your customer base is diverse and spread across different geographic areas with a variety of preferences and needs, decentralized billing could provide the flexibility you need. Conversely, a more homogenous customer base might be more efficiently managed through a centralized system.
- Internal capabilities: Your decision may depend on your company’s internal capabilities, including the availability and expertise of your staff to manage billing systems. Centralized systems require a robust central team, whereas decentralized systems require capable managers at the subaccount level.
- Technology and infrastructure: Whichever you choose, you’ll need to have the technology and infrastructure to support the chosen billing systems. You’ll need to assess whether your current systems and those of your subaccounts can better support one model over the other effectively and at what cost.
When you consider these factors, you’ll be able to make an informed decision that’s right for your circumstances and your client companies.
Forge Simplifies Your Billing Choices
Forge is EasyPost’s trusted white-label shipping platform designed to empower your business. With Forge you can shape your platform using the most reliable end-to-end shipping APIs, enjoy straightforward, code-free subaccount management, and (you had to see where this was going) choose centralized or decentralized billing.
Centralized Billing With Forge
Forges allows your platform to handle all billing processes from a unified location. This is ideal for businesses that want to control financial operations more completely and ensure consistency across all transactions. When you opt for centralized billing with Forge, this is what it looks like for each feature:
API usage fees and EasyPost carrier accounts
Usage fees such as label volume overages and insurance as well as carrier fees, postage, and weight adjustments are billed directly to your EasyPost wallet, consolidating all financial transactions under your platform’s control.
Customer carrier accounts
When customers use their own carrier account credentials, those carrier charges will go directly to your customers.
Your customers/subaccounts enjoy a fully white-labeled experience, with EasyPost remaining completely invisible. This enhances your brand’s presence and customer loyalty.
Decentralized Billing With Forge
If it makes more sense to give autonomy to your subaccounts, Forge supports decentralized billing. This model is perfect for businesses that want to empower their subaccounts to manage their own financial processes more independently. With decentralized billing, this is how it will work:
API usage fees and EasyPost carrier accounts
Each subaccount is billed to its own EasyPost wallet for usage fees such as label volume overage and insurance as well as carrier fees, postage, weight adjustments, etc. This gives them independent control over their expenses.
Customer carrier accounts
This is the same for both centralized or decentralized billing. When customers use their own carrier account credentials, those carrier charges will go directly to your customers.
This model maintains a high degree of autonomy for subaccounts, though subaccounts will see SimplerPostage on their payment statements for wallet transactions.
Whether your business favors a centralized or decentralized approach, Forge can accommodate your needs. This flexibility allows you to tailor the shipping and billing experiences to best fit your operational demands.
Learn more about Forge here.