AI Billing That Works: Smart Solutions for Complex Revenue Models

AI and SaaS companies are pushing the boundaries of what’s possible with data, automation, and customer experience. But as these businesses grow, so does the complexity of their revenue models. According to a 2024 industry survey, over 60% of AI-driven companies now use some form of usage-based or hybrid pricing, yet many still struggle with billing systems that can’t keep up with their evolving needs. When billing infrastructure lags behind product innovation, the result is lost revenue, frustrated customers, and operational headaches.

Lago was built to solve this problem. With a platform designed for high-volume, real-time billing and flexible pricing, Lago gives tech companies the tools to automate, adapt, and scale their monetization strategies—no matter how complex.

Metered Billing for Artificial Intelligence: Why Flexibility Matters

Meeting the Demands of Modern AI Pricing

AI products rarely fit into a single pricing box. Some customers want predictable subscriptions, while others prefer pay-per-use or prepaid credits. Many AI companies need to combine these models, offering add-ons, tiered usage, or custom enterprise agreements. Traditional billing systems often force companies to compromise, limiting their ability to experiment or respond to market feedback.

How Lago Handles Complex Metering

Lago’s platform processes up to 15,000 billing events per second, supporting real-time usage metering and event ingestion[1][2]. This means you can track every API call, data point, or compute cycle as it happens, then bill customers accurately based on their actual consumption.

Example: An AI text generation service charges a base subscription plus a per-token fee. Lago meters each token generated, applies the correct pricing, and generates invoices automatically at the end of each billing cycle.

Key Benefits:

• Real-time tracking of usage metrics
• Support for hybrid models (subscription + usage)
• Automatic invoice generation and payment collection

“AI-based products often require hybrid pricing models that combine flat-rate subscriptions with usage-based billing. Lago’s ability to manage and automate these intricate pricing mechanisms gives companies the flexibility to adapt their monetization strategies as their offerings evolve.”[3]

Usage-Based Billing: From Pay-As-You-Go to Prepaid Credits

Exploring Consumption-Based Pricing Examples

Usage-based pricing, also known as consumption or pay-as-you-go, lets customers pay only for what they use. This model is especially popular for AI APIs, cloud services, and developer tools. Some companies also offer prepaid credits, allowing customers to buy usage in advance and draw down their balance over time.

Lago’s Approach to Usage-Based Billing

Lago’s intuitive interface makes it easy to define custom pricing plans, whether you want to charge per API call, per gigabyte processed, or by any other metric[3]. You can mix and match:

• Subscriptions (monthly, annual, etc.)
• Usage-based charges (per unit, per event)
• Prepaid credits and add-ons

How It Works:

1. Plug your data sources into Lago (logs, event streams, etc.)
2. Define pricing rules and billing cycles
3. Lago meters usage, applies pricing, and generates invoices

Example: A SaaS platform offers a $99/month base plan, $0.01 per API call, and optional prepaid credit packs. Lago tracks all usage, deducts from credits, and bills for overages automatically.

Why This Matters:

• Customers get transparency and control over costs
• Companies can experiment with new pricing models without re-engineering their billing stack
• Revenue recognition and reporting stay accurate, even as pricing evolves

Engineer-friendly and API-First: Lago’s Technical Edge

Why Open Source Billing Software Is Gaining Ground

Many tech companies want more control over their billing infrastructure. Solutions built by engineers to include engineers offer transparency, flexibility, and the ability to customize billing logic without vendor lock-in[2]. Lago stands out as a modular monetization platform that can be deployed on your own servers or in the cloud[4].

Technical Highlights:

• Modular architecture for easy integration and extension[2]
• Full visibility into the codebase for security and compliance
• API-first design for seamless connection to your product stack

Comparison Table: Lago vs. Proprietary Billing Platforms

CriteriaLagoProprietary SolutionsOpen SourceYesNoSelf-Hosted OptionYesRareReal-Time MeteringYes (15,000 events/sec)VariesCustom Pricing LogicFully customizableOften limitedCommunity SupportActive, openVendor-controlled

When to Choose Lago:

• You need to support complex, evolving pricing models
• You want to avoid vendor lock-in and retain control
• You require high-volume, real-time billing for AI or SaaS products

Invoice Automation and Progressive Billing: Reducing Manual Work

Automating the Billing Cycle

Manual billing processes are error-prone and time-consuming, especially as customer counts and pricing complexity grow. Lago automates the entire billing workflow, from metering to invoice generation to payment collection[1][3].

Progressive Billing for Growing Businesses

Progressive billing lets you bill customers as they use your service, rather than waiting for a fixed cycle. This is especially useful for large enterprise deals or high-volume AI workloads.

Step-by-Step: How Lago Automates Billing

1. Meter usage in real time
2. Calculate charges based on custom rules
3. Generate and send invoices automatically
4. Collect payments and update account balances

Example: An AI analytics company bills enterprise clients weekly based on actual data processed. Lago tracks usage, calculates charges, and sends invoices without manual intervention.

Benefits:

• Fewer billing errors and disputes
• Faster revenue recognition
• Scalable processes as your business grows

Building Internal Payment Processing and Billing Infrastructure

Why Not Build In-House?

Some companies try to build their own billing systems, but this often leads to technical debt, maintenance headaches, and slow response to pricing changes. Lago’s platform is designed by a team with deep experience in fintech and SaaS billing, offering a robust alternative to in-house solutions[2].

Framework: The Build vs. Buy Decision

• Cost: Building in-house requires significant engineering resources
• Speed: Off-the-shelf solutions like Lago can be deployed quickly
• Flexibility: Lago’s modular design enables deep customization to any product or monetization model.

Key Features for Internal Teams:

• API integration for custom workflows[2]
• Support for multiple currencies and billing cycles[5]
• Detailed documentation and active community support

“Lago focuses on developer experience, composability, and supporting intricate pricing models. It fosters a growing community and enables businesses to adapt the system to their specific needs without vendor lock-in.”[2]

Getting Started: Lago’s Free Trial and Community Support

How to Try Lago

If you book a demo and qualify, Lago offers a free trial. We also offer open-source deployment options so you can test the platform with your own data and pricing models before committing (or run the OSS version as long as you like). [3][2].

What You Get:

• Access to all core features (metering, invoicing, pricing plans)
• Ability to deploy on your own infrastructure or in the cloud
• Community-driven feature development and support

Next Steps:

• Book a demo to get trial access.
• Explore the documentation for API integration and advanced features
• Join the community to share feedback and request new capabilities

Lago gives AI and SaaS companies the billing infrastructure they need to support complex, evolving revenue models. With real-time metering, flexible pricing, and deep customization, Lago helps you automate billing, reduce manual work, and adapt as your business grows. To see how Lago can support your unique pricing strategy, start your free trial or explore the documentation today.

Citations

[1] https://www.getlago.com/solutions/industries/ai

[2] https://hiretop.com/blog2/lago-open-source-billing-platform/

[3] https://docs.litellm.ai/docs/observability/lago

[4] https://www.signalfire.com/blog/lago-investor

[5] https://www.promptloop.com/directory/what-does-lago-do