6 steps to build a usage-based billing system

Lago is an open-source billing API designed to expedite the implementation of billing systems by engineers, supporting hybrid pricing models that combine subscription fees with usage-based charges. It provides both a self-hosted option and a cloud-hosted application for flexibility. The setup process involves installing necessary tools like Docker and Git, after which users can define billable metrics such as Monthly Tracked Users (MTUs), create subscription plans with customizable billing periods and charges, and assign these plans to customers. The API supports various charge models and allows for detailed customization of invoices for compliance. Lago's event-based architecture ensures accurate usage tracking with idempotency keys to prevent duplicate event ingestion, facilitating the creation and maintenance of usage-based billing systems efficiently. Additionally, Lago handles various billing complexities such as taxes, discounts, and upgrades or downgrades, making the system both robust and easy to manage.