July 31 by Eric Dreshfield
Revenue management brings a variety of benefits to the Finance and Sales teams, customers, and partners. Here are the top five benefits of an effective revenue management solution.
1. Revenue Management Helps Manage Cash Flow:
Cash flow is the amount of cash a company has, or expects to have, on hand at any given time. Knowing—and accurately forecasting—what’s coming in and out is crucial, because it determines what purchases can be made, how much employees are paid, what programs can be adopted, and what interest rates to borrow money at.
2. Revenue Management Ensures Billing Schedules Match Customer Expectations:
Billing schedules are the forward-looking plan for invoicing customers, which in turn, serves as the foundation for cash flow. Cash flow will suffer if businesses do not punctually bill customers or collect the correct amount for products, services, and subscriptions.
3. Revenue Management Accurately Recognizes Revenue:
Recognizing revenue can be a thorny process, but the information needed to ensure a company is in compliance with these guidelines can be found in the contract data. Contracts outline everything from order delivery and pricing to terms and milestones associated with delivery. The contract is the foundation for billing and revenue forecast so it’s critical to capture all details accurately. Unfortunately, many financial professionals struggle with a lack of visibility into the latest agreed-upon terms, commitments, and pricing especially when leveraging manual, spreadsheet-based processes to pull contract data and manage revenue.
4. Revenue Management Accelerates Revenue Cycles:
The revenue cycle is the plan accounting teams use to align revenue recognition tasks with actual product and service delivery. The faster the cycle, the faster cash is in hand, and the faster the revenue can be used to grow business value.
5. Revenue Management Makes the CFO’s Job Easier:
A happy CFO is always a good thing. Majority of financial professionals struggle with accurately projecting their company’s future finances, obtaining real-time visibility across the organization, measuring the successes and failures of current business strategies, and managing financial risk. All of these are significant challenges, but what keeps a CFO up at night is the thought of incorrectly recognized revenue.
If revenue is recognized incorrectly or the team cannot justify how it has recognized revenue, the risk of having to issue a restatement runs high. Restatements are public mistakes that have a real and significant impact on stock price and can land a CFO in handcuffs.
The good news? Issues can be avoided with an effective and integrated revenue management process.