We recently spoke with the Revenue Manager of a mid-market information technology and services company about their revenue recognition process. Her company sells hardware, software, services, and support, in various combinations. These may be sold directly through the channel and on an e-commerce platform. Each of their sales orders has many moving parts including billing terms, milestones and recurring events. Due to all of this billing complexity, their invoices are often delayed or are incorrect, resulting in unhappy customers. Additionally, her CFO had recently expressed frustration about the timeliness and accuracy of the company’s financial statements.
So what’s the big deal with these issues? This scenario points to the existence of revenue leakage. Although the company delivered goods and/or services to their customer, the goods and/or services aren’t being fully billed, resulting in a revenue loss for the company. And that’s a big deal – revenue leakage of even 1% for a $100M company is $1M annually. This issue is directly attributable to the billing process, which – given its complexity – is entirely understandable.
Of course, process improvements can help reduce revenue leakage. But what’s really needed to prevent revenue leakage is a system. Contract billing functionality that is available with accounting and ERP systems – and even with specialized billing systems – falls short when it comes to handling the kind of complex contract billing described above. For example, an ERP may do a great job with recurring billing but not so much for milestone billing. The ability to handle multiple billing models is essential for many businesses which is why so many of end up billing on spreadsheets!
Luckily, Tensoft Revenue Lens cures revenue leakage and all of its related issues. It enables small to mid-sized companies to handle the complexities associated with revenue recognition, contract billing and fair value allocation. Contact us to learn more.