Enterprise resource planning (ERP) systems were initially designed decades ago. Some of them seem more like time capsules of how business used to work: a customer bought a product and then it had to be shipped. As the world has evolved to a services economy, ERP systems have morphed to pick up different capabilities on billing and fulfillment, but such systems often remain costly and cumbersome to design and implement.
In a recurring revenue model, the pain points of an outdated system can manifest themselves in frustrating ways. For example, if it’s set up purely to intake onetime new orders, your staff may need to repeatedly input “new” orders — for the existing service arrangement — just to generate monthly or quarterly billing.
When a company customizes its own solutions atop an older ERP system, its teams then face a burden to keep them fit-for-purpose without disruptions to service fulfillment and reporting, making them difficult to maintain on a go-forward basis. Customization also freezes your ERP system in amber, as it may no longer be easily updated.
Ultimately, technology and processes need to be scrutinized through a different lens. Some people approach this as: “I want to fit things into the way I do it.” But this is different and needs to be treated as such. New software solutions are becoming available on the market specifically for subscription models.
• Do your operations support changes to your selling strategy?
From quoting through revenue, you have a lot to execute seamlessly, with added complexity from customer flexibility. You need harmony across four areas: your quote to the customer, how you fulfill that request, how you bill the customer for it, and how you earn the revenue associated with it. Data-centric integration is key. Consider what new technology tools and processes you need for each step along the way, like in the next few questions.
• What configure price quote (CPQ) or customer relationship management (CRM) platforms are needed?
With a CPQ system, you or your customers choose components — say, for creating a computer that they want — and receive a price quote based on those selections. You need this information to move to order fulfillment automatically, without rekeying information in a manual process, to deliver what the customers need at the price they expect. When a CPQ system doesn’t talk to the ERP system, you may create misalignment between what customers believe they ordered and how you have fulfilled their order or invoiced them for it — for instance, by not providing them with all the components in a bundle or billing them incorrectly for it. You don’t match what your customer is buying or what they’re paying, and you experience revenue leakage — for instance, not knowing when to shut off access to the service. Or if your quote doesn’t match your invoice, you may delay payment from customers simply because it doesn’t match their purchase order.
• What billing system is needed?
A cellphone plan may offer you a set subscription rate each month, but then you may need to pay more if you surpass a certain threshold on data usage, for example. In most industries, legacy billing systems aren’t equipped to “count” or factor in optionality. Consider your metering — whatever you’re counting, whether it’s pages printed, or transactions processed — and see how it needs to fit into your billing system.
• Do your systems support multiple sales channels?
B2C has a greater velocity of changes, as customers are encouraged to go online and make changes to their accounts as they need to. By contrast, the mechanics of billing itself, typically through a credit card, is relatively straightforward. For B2B, there are fewer changes, but the payment processing is vastly more complex. Businesses want invoices — perhaps even thousands of them for individual stores, or a consolidated invoice. They may even require your invoice to be structured in a certain way, such as for country-specific tax requirements or language needs.
• To what extent are you able to automate?
Less manual work leaves more time for analysis, insight and business engagement. For example, revenue recognition software can be implemented to automate revenue and reporting processes. Revenue recognition software can be implemented to standardize data collection and reporting with business processes. But if standard software is not available, focus on data quality and create focused teams aligned with IT to support data collection and reporting.