Revenue management is the field of expertise known for disciplined analytics that predict consumer behavior at the micro-market levels to maximize revenue growth or revenue generation. The practice involves optimization of product availability, and it leverages price elasticity in order to sell the right product to the right customer at the right time for the optimal price. As a continuing field of business management, the essence of this specialty expertise is based on understanding customers’ perception of product value and accurately aligning product prices, placement and availability with each customer segment.
As it relates to businesses and organizations using Salesforce + Conga for their CRM, revenue management is the automated processes that occur after a contract is signed: invoicing, billing, order management, rebates, and revenue recognition. When setup properly, revenue management impacts everything from operations to sales and marketing (CRM) processes, as well as finance and legal.
So how does Conga supplement revenue management?
- Entering and processing orders (order management)
- Creating and managing invoices (billing management)
- Accurate revenue reports (revenue recognition)
- Contracted agreement between seller/partner and customers (rebate management)
Order management: entering and processing orders for revenue management
Once a customer signs a contract, order management is the process of coordinating, scheduling, building, shipping, and installing the acquired products and services.
Because order management is based on the order information found inside contracts, the process is smooth and seamless when integrated with Conga’s contract lifecycle management (CLM) tool. Today management is done within a CRM system like Salesforce because of the need to catch real-time order changes and tie them into front-end tools like websites.
Effective order management to optimizes revenue recognizes that customers can change their minds. When done right, changes to fulfillment instructions are validated against the contract, and the fulfillment team has full visibility into current inventory and resources to effectively manage when the order can be filled.
Billing management: creating and managing invoices for revenue management
Billing management is the front-end process that ensures the customer receives the right invoice on time with accurate information and the billing terms.
And while the order is being processed, the order information moves to the finance team to generate billing schedules based on the contract. Since many companies sell product bundles, services, and subscriptions, it’s critical that invoices clearly explain what customers are billed for. Any changes, swaps, deletions, or additions to the order increases the complexity of the invoice.
Ultimately, if a customers’ bill, invoice or receipt is clear and easy to understand, customers are more likely to pay quickly and leave with a positive impression of the company.
Revenue recognition: accurate revenue reports for revenue management
Revenue recognition can be a challenge, but it’s much easier when finance can automatically generate the appropriate revenue schedules for products, services, and subscriptions based on contracts and agreements. A revenue schedule for a product can be automatically set up for a one-time revenue impact in month one, while subscriptions are automatically set up for monthly revenue impacts across 12 months.
Rather than spending the end of the quarter in a conference room trying to reconcile stacks of contracts, orders, and invoices, finance can verify if services have been rendered or products delivered to see the impact on the overall revenue forecast. Finance can also automatically incorporate the most up-to-date guidelines for revenue recognition and deferred or delayed revenue. They will also appreciate an automatic and easy way to set revenue recognition rules based on product, service, and subscription price lists, as well as complex bundling set ups.
Rebate management: contracted agreement between seller/partner and customers for revenue management
The final aspect of revenue management is managing rebates offered to customers during the sales process. Rebates are most commonly paid out as incentives to customers or channel partners once a certain requirement is met—e.g. a volume, quantity, or spend level.
Rebates are best practice for influencing partner or reseller behavior because they’re low risk – the incentive is paid only when the partner or customer complies with the rebate terms. For example, consider a hardware supplier that provides joint marketing dollars to distribution partners to train and certify sales agents to effectively communicate the value proposition of a new product. In this scenario, the supplier benefits by getting its message out in the marketplace, the partner gets a bonus for following a set of criteria, and both supplier and partner gain by stimulating more sales volume.
To enable effective rebate management, set up and manage all the parameters included in partner rebate arrangements. This means the ability to enter, track, and reconcile the rebate forecast against the actual payments, as well as manage the types of payments and how they are calculated. It’s also important to track date- or milestone based rebate performance to ensure the company gets the performance level it is paying for.
Why is revenue management difficult?
The processes are intricate… when an order is completed, the data must first flow operations for fulfillment, which cam involve custom design and configuration, scheduling manufacturing processes, software provisioning, equipment installation, and the scheduling of services teams. If customers update their orders before receiving the product or service, fulfillment becomes even harder to manage.
Simultaneously, contractual information about the billing schedule is sent to accounting. Products are generally invoiced upon shipment or installation, but services may get billed upon finishing the job, based on a percentage of completion, or when a milestone is reached. Software subscriptions might be invoiced based on the number of users or usage data, like number of minutes used or processed transactions. Again, if a customer has multiple orders or changes, invoices must be coordinated so customers aren’t receiving dozens of invoices a week.
During the fulfillment and invoicing cycles, finance must identify revenue schedules that will determine when revenue is recognized based on when products are delivered, services are rendered, or subscriptions are used. At this point, finance sends invoices to the customer for payment, which is eventually received and recorded by accounting. Based on the schedules in place, revenue is recognized and the customer is secured until it’s time for renewal.
When selling complex product and service offerings, there are often increases in the number of departments involved in a sale or the amount of change orders over time. These increases make contract visibility more difficult. And unfortunately, effective revenue management is nearly impossible without a solid contract lifecycle management solution already in place.
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When done right, revenue management can support different industries and models for products, professional services, aftermarket services, and subscriptions. No matter the line of business or if it is a recurring revenue streams, with the right support, Conga can deliver more consistency across channels or customer segments, more stable customer interactions, and operational efficiency once deals are signed.