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How To Track Revenue Over Time In Salesforce

How To Track Revenue Over Time In Salesforce

Many businesses need to track revenue over time in salesforce.

For example:

  • Capital equipment items that the customer draws down or pays for over time.
  • Professional services to deliver projects over time.
  • Maintenance contracts in which revenue spans 12, 24 or 36 months.
  • Software-as-a-Service (Saas) licenses on fixed term or open-ended contracts.
  • Transactional items in which you anticipate the customer will buy a significant volume over goods every month, but with no guaranteed amount.

Do any of these apply to you? Perhaps several do.

It’s common for businesses to have a mix of different revenue streams over time on the same opportunity, some managed by framework agreements.

Unfortunately, many companies do one of two things when it comes to tracking revenue over time in salesforce.

The first is they perform this critical activity outside salesforce. They perceive it’s simply too difficult to do in the system.

This means those companies lose valuable visibility of committed and scheduled revenue. This impacts account management, business development, target tracking, revenue forecasting and performance management.

Alternatively, they add numerous fields to the opportunity. These fields capture revenue for Q1, Q2 and so on for each year.

Unfortunately, it’s virtually impossible to produce meaningful reports this way. It also results in one heck of a mess on the page layout.

There’s no need to take either of these routes.

It’s perfectly possible to track revenue over time in salesforce. The result is a significant increase in the benefits you generate from your salesforce licenses.

Two ways to track revenue over time in salesforce

Essentially, there are two options.

Option 1 is to use the standard product schedules feature in salesforce. This works well for many businesses. However, there are significant limitations, which we’ll explain.

Option 2 is to use a custom schedule solution. This solves the limitations of the standard schedule functionality. It’s a dynamic and powerful approach to tracking revenue over time in salesforce that is already benefiting many of our customers.

So let’s start with the standard approach.

Option 1 – Standard product schedules

Here’s how the standard product schedule feature works in salesforce.

The salesperson adds one or more Products to an Opportunity in the normal way.

The salesperson then creates a Schedule for each line item. They do this by clicking on the product line item on the opportunity, then on the Establish button.

This provides the page to enter the details about the schedule for that product on the opportunity.

This generates the product schedule that tracks revenue over time for the first product.

The salesperson repeats the process for any other products on the opportunity.

Advantages of standard product schedules

  • It’s standard functionality with no need to purchase separate app or salesforce.
  • Reports and dashboard chart can track revenue over time using standard product schedules.

Disadvantages of standard product schedules

  • The user interface is cumbersome. For example, the salesperson must drill down to each product line item in order to create the schedule.
  • If the opportunity close date changes, the schedules do not automatically shift. However, you can solve this problem with our Schedule Shifter app.
  • It’s impossible to customize or adapt the standard schedules. For example, you cannot add a Status field to track Booked, Shipped, Invoiced, Paid values. You also cannot schedule by margin or other values.
  • There’s no ability track committed and pipeline revenue over time against current and future targets.

The standard approach is appropriate if you normally have only one product per opportunity and you want an out-of-the-box way to track revenue over time.

Option 2 – Custom Schedules

A custom schedule approach overcomes the limitations of the standard product schedule feature.

Tracking revenue over time in salesforce using custom schedules means you can:

  • Forecast both committed and pipeline revenue over time.
  • Compare revenue over time in salesforce with targets.
  • Update revenue you previously forecasted based on ‘actuals’.
  • Adjust forecasts of future revenue based on current expectations.
  • Analyse revenue over time by product category, territory and other parameters.

Your system administrator can build the custom schedule solution, alternatively or you can use the pre-built GSP Custom Schedule app. We’ll demonstrate how the app works here.

When the salesperson adds one or more products to the opportunity then several additional fields are available.

For each product, these fields define:

  • The method of scheduling the revenue over time. More on this below.
  • The start date when the revenue over time will begin.
  • The number of months for the revenue over time.

Clicking Save simultaneously adds the products to the opportunity AND the associated revenue schedules.

At any time, salespeople can use the Edit Line Item Schedules button to return modify the schedules and change the way salesforce tracks the revenue over time.

Close Date changes

If the opportunity close date changes at any point, then the custom schedules automatically adjust by the same number of days.

For example, if the opportunity close date moves by 20 days then all schedules that track revenue over time also shift by 20 days. This avoids salespeople continuously re-aligning schedules and maintains the accuracy of revenue forecasts.

Track revenue over time in reports and dashboards

Additional information is stored on the schedule including product, margin details and ‘actuals’. This information is available for reports and dashboards.

Track revenue over time against Target

Each custom schedule links automatically to a Target record. This means salespeople and managers can immediately assess whether there is sufficient committed and scheduled revenue over time to meet quota.

Straight-line and S-curve revenue forecast

It’s easy to understand why you want to schedule revenue over time in salesforce using a straight line.

Service contracts, maintenance agreements, repayments on capital goods, Saas licenses – they all need the ability to track revenue over time in a straight line.

However, project work is often different. For example, frequently you have a period of mobilization in the early stages. Then you get into the heavy lifting of the project. Finally a period of testing and commissioning in which the revenue tails off.

An s-curve therefore accurately tracks the revenue on month projects. With the GSP Custom Schedule App, simply select the S-curve option in defining the schedule. The app automatically schedules revenue over time in an S-curve profile.

Advantages of standard product schedules

  • Easy for salespeople to us.
  • Flexibility to define different revenue profiles over time for each opportunity product.
  • Forecast accuracy is maintained because schedules automatically shift when the close date changes.
  • Track additional information over time including margin and actuals.
  • Track pipeline and committed revenue over time in salesforce.

Disadvantages of standard product schedules

  • Requires more setup than the standard product schedule feature (although our app takes care of this).

Many business already track revenue over time salesforce. Don’t hesitate to get in touch if you need our help in becoming one of them.

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How To Manage 4 Types Of Framework Agreement In Salesforce

How To Manage 4 Types Of Framework Agreement In Salesforce

How To Manage 4 Types Of Framework Agreement In Salesforce

Framework agreements exist in virtually every industry.

They are the backbone of many commercial relationships. If you want a long-term relationship with a customer, then get a framework agreement in place.

So naturally, you want to manage framework agreements in salesforce.

Yet companies often struggle to do this.

“We’ve made a dog’s breakfast of it”, as one prospect told me recently.

They weren’t wrong.

So, here’s what you need. The definitive guide to managing framework agreements in salesforce.

Types of Framework Agreement

To manage framework agreements in salesforce effectively, you first have to decide which type of framework you are dealing with. Here are four types of framework agreement you can manage in salesforce.

  1. Drawdown.
  2. Regular Order.
  3. Occasional Order.
  4. License to Hunt.

(If you have a different type of framework agreement, let us know. We’ll figure out how to manage it in salesforce).

1. Drawdown Framework Agreements

Customers ‘drawdown’ a quantity of products against an overall assumed volume.

Often, at the start of the agreement, there is an assumed order quantity each month. In practice, the actual order quantity can often vary from month to month.

Drawdown framework agreements are common in many industries.

For example, based in Greensboro, NC, Gilbarco Veeder Root finalizes a drawdown framework agreement with a petrol retailer for the purchase of a large quantity of petrol pumps.

The agreement defines the products and pricing, commercial arrangements and legal terms of the contract.

The petrol retailer does not want to receive all the pumps in one go. There may be a written minimum and maximum order quantity each month. However, progress on their gas station re-fit programme will determine the actual quantity ordered each month.

2. Regular Order Framework Agreements

Companies that sell large volumes of relatively small-ticket items or consumables often use transactional framework agreements.

The customer places regular orders when they need to re-stock. Often, the customer does this directly via an online portal.

For example, in the UK, Zimmer Biomet sell a variety of consumable products to dental practices.

Zimmer Biomet enters into a framework agreement with the dentist. This agreement specifies the price for each product, together with the support and other services provided by Zimmer Biomet.

The dental practices place orders every few weeks using the Zimmer Biomet ERP portal. This streamlines the end-to-end process of packing, shipping and invoicing each order.

3. Occasional Order Framework Agreements

With these framework agreements, customers place occasional, rather than regular orders.

These occasional orders are often significant in size. The framework agreement covers the commercial terms and over-arching legal terms. However, a separate specification and agreement defines the specific products and services within each order.

Based in Malta, Evolve provide products and services to fit and equip a wide variety of medical laboratories.

Fitting-out each new laboratory is a significant undertaking. A framework agreement is set up with a pharmaceutical company or government department. This agreement defines the pricing and other terms that apply to each contract within the framework agreement.

However, no two laboratories are alike. Each order requires consultancy and detailed collaboration with the customer to define the specific products and services that are required. A separate contract, under the umbrella of the framework agreement, defines the agreed work.

4. License To Hunt Framework Agreements

A license to hunt framework agreement gives one party the permission to seek-out deals elsewhere in the organization or group of companies.

It’s a common agreement in financial services and many other industries.

For example, based in the UK, Hornbuckle Mitchell provide financial services to brokers. They can secure a license to hunt framework agreement in two ways.

First, within a large multi-branch brokerage, the head office team will make framework agreements with selected providers in each market category. This gives Hornbuckle Mitchell permission to visit the branches and convince individual brokers to use their products.

Second, Hornbuckle Mitchell makes framework agreements with buying groups. These financial services buying groups make framework agreements on behalf of many small brokers. The agreements cover fees, training, regulatory services and more. The license to hunt gives Hornbuckle Mitchell permission to visit the members of the buying group to promote their financial products.

How To Manage Framework Agreements in Salesforce

Here’s how to manage each of the four types of framework agreement in salesforce.

1. Drawdown Framework Agreements In Salesforce

Products, combined with standard or custom schedules, are the key to managing drawdown framework agreements in salesforce.
Here’s how.

Create an Opportunity to represent the potential framework agreement. Add Products to the Opportunity to represent the physical goods and intangible services you anticipate the customer purchasing during the lifetime of the framework agreement. (Consider using the GSP Product Selection Wizard to make it easy to add Products to Quotes or Opportunities in salesforce).

Then, for each Product create a schedule that describes how the products and services will be drawdown.

Let’s use an example to illustrate this. Assume the customer anticipates purchasing 216 generators over a 12-month period. To make it easy, we assume each generator costs $1000.

The opportunity has a ‘gross’ value of $216,000 (216 x $1000). That’s the figure in the Amount field.

Add products to the opportunity to represent the goods and services the customer will buy in the framework agreement.

From gross sales perspective, the deal is worth $216,000. However, that’s only half the story.

Forecast Revenue On Drawdown Agreements

We can use revenue schedules to forecast the month-on-month order value.

Revenue schedules project the anticipated income over an extended period. Create a revenue schedule for each product on your opportunity.

This means we get an accurate view of the revenue contribution from each opportunity, over time.

Use revenue schedules to forecast sales on framework agreements.

Using our example, we might assume that on average, the customer will drawdown generators to the value of $18,000 per month.

Optionally, you can adjust the revenue schedule for this month based on the actual value of orders placed. At the same time, you can also update the forecast for future months, based on your latest information from the customer.

You can use a similar approach to forecast the quantity of products the customer will draw-down each month.

Don’t forget you can also use the GSP Schedule Shifter to keep the Opportunity Close Date aligned with your schedules.

Auto Adjust Product Schedules To Match Close Date Changes

Download the FREE App from the AppExchange today

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For much more on using the standard revenue schedules in salesforce read 5 Killer Examples Of Recurring Revenue Forecasts In Salesforce.

Custom Schedules for revenue forecasting

The standard revenue schedule functionality in salesforce works well for many of our customers.

But not all.

The problem is the standard feature is not very flexible. You can’t, for example, track the Status of each schedule – Not Ordered, Ordered, Invoiced, Paid.

To do this, you need custom schedules. These give considerable flexibility for revenue and quantity forecasting on framework agreements in salesforce. This has even included s-curve revenue forecasting for some clients.

2. Manage Regular Order Framework Agreements in Salesforce

‘Regular order’ framework agreements in salesforce also need an opportunity.

But this time, the opportunity serves a different purpose. It represents the process of getting a potential customer onto the books.

In other words, the opportunity has a notional value. No orders are placed and no money changes hands on the day the deal is done.

Rather, there is an expectation that the customer will begin placing a flow of regular orders.

The customer will require regular account management. However, there’s no sales process required for each order.

So, here’s what you don’t want to do. Create an opportunity for each new order. Rather, use a custom object to track all the orders that get placed.

At Zimmer Biomet, customers place orders using a portal that gives access to the ERP system. Integration with the ERP system inserts these orders – and associated invoices – into custom objects in salesforce.

It wasn’t always this way, though. Initially, Zimmer Biomet extracted the orders into a spreadsheet each week. The orders were imported into salesforce using the Data Loader. It just goes to show, one person’s integration is another’s import wizard!

For more information on this topic, Import Orders Into Salesforce to Optimize Account Revenue.

Either way, account managers have great visibility of the trend in orders for each customer.

Orders and Invoices imported into salesforce gives account managers great visibility of the trends for each customer.

Zimmer Biomet uses this information to segment customers, drive business development activity and implement marketing campaigns. They also measure account management performance, not on opportunities, but on the quantity and value of orders placed by the customer.

Here’s one more thing they do.

All information about the rationale for any discount is stored in the Chatter feed, directly on the Opportunity. This means it is easily available in the future – certainly compared to hunting for a long lost email.

The reason is this. A large volume of promised future orders may justify a discount. The customer may fall short of this volume. At the very least, you need to know this when it comes to re-negotiating the framework agreement. Storing all the rationale for the original discount in the Chatter feed keeps this information visible and easy to find at the appropriate time.

More tips on controlling price discounts using salesforce.

3. Manage Occasional Order Framework Agreements in Salesforce

Manage the sales process of getting a customer to the point of signature on an occasional order framework agreement by using an opportunity in salesforce.

With this type of framework agreement, there is sometimes an initial order or project to fulfil. However, the key thing is both parties take the opportunity to put a framework agreement in place that will cover future deals.

So far, it’s not dissimilar to the way regular order framework agreements are managed in salesforce.

However, unlike regular order agreements, there’s no expectation of a weekly or monthly flow of relatively small orders. Rather, you need to work proactively with the customer to identify new projects and opportunities.

Unlike regular order framework agreements, manage these future orders through separate opportunities in salesforce. That’s because each one needs its own dedicated sales process.

Here’s another thing.

Often, the framework agreement will define a specific set of product prices that will apply to future opportunities. This means you create a special Price Book, just for that customer.

Use the GSP Auto Price Book Selector to ensure this dedicated Price Book is applied to the customer (and not to any others).

Automatically Assign Price Books To Opportunities

Download the FREE App from the AppExchange today

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The Auto Price Book Selector is an effective – and free – way to make sure salespeople consistently apply the right Price Book to the right Price Books

4. Manage License To Hunt Framework Agreements in Salesforce

Manage these framework agreements in salesforce in a similar way to the ‘occasional order’ agreements.

Use an opportunity to manage the sales process of getting the overall framework agreement secured. This opportunity can have a notional value, based on the 12 month or long term anticipated value of related deals.

Be sure, though, to exclude these type of opportunities from your pipeline of ‘paying’ opportunities.

Once the framework agreement is in place, create a separate opportunity in salesforce for the Accounts you are working.

Potentially, use Products and Schedules on these opportunities to define and track revenue over time in salesforce.

So there you have it. 4 types of framework agreement to manage in salesforce. Don’t make a dog’s breakfast of it. Decide first which type of framework agreement you’re working with. Then follow the advice above – or – for a free 30 minute free consultation on managing framework agreeents in salesforce, follow the link below.

Free 30 minute consultation on framework agreements

Get in touch today

Get it now!

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9 Ways To Win Big Using Opportunity Products In Salesforce

9 Ways To Win Big Using Opportunity Products In Salesforce

Every opportunity has a value.

That value is the revenue from the products and services you sell to the customer.

Yet here’s the thing.

The way you record that value on the opportunity has a major impact on the benefits your business can generate from salesforce.

Do it right and you get increased user adoption, better forecasting accuracy, improved pipeline management and superior analysis of individual salesperson performance.

Do it wrong and you get little or none of those benefits.

So what is the right way?

The right way is to use opportunity products.

If you are still in doubt, read Part 1 of this blog post. Part 2 will follow next week. Together, they explains 10 ways to increase your salesforce benefits by using opportunity products.

Product Benefit #1 – Improved usability

One of the best things about salesforce is that it’s easy to create fields.

One of the worst things about salesforce is that it’s easy to create fields.

And that’s what a lot of companies do. They create many salesforce fields to record revenue information about the products and services they sell.

Here’s a real-life example. It’s a screenshot from a new customer.

Too many fields on the opportunity page layout to record revenue about products and services.

This customer created many fields on the opportunity page layout store revenue information. In fact, this is only the top third of the page. We couldn’t get all of the fields into the screenshot to keep it readable!

Not only did this customer have fields for revenue for each type of service they offer, they also had fields to track revenue over time.

It was, frankly, a pain in the tail to enter the information. User adoption is seriously impacted. And it is virtually impossible to create meaningful reports.

The way to avoid these issues is to use opportunity products.  The screenshot below shows an opportunity with two products.

Salesforce becomes much easier for salespeople when opportunity products are used. Clicking and data entry is dramatically reduced.

Salesforce becomes much easier for salespeople when opportunity products are used. Clicking and data entry is dramatically reduced.

Using opportunity products also makes prices much more accessible. For example, in manufacturing companies, or indeed any company dealing with many physical or tangible products, the prices have to be stored somewhere. Often that’s in a ring binder or online spreadsheet.

Using Products means it is much easier for salespeople to find the right price for each type of customer and product selection.

That means improved usability and increased salesforce adoption.

How to extend this Product Benefit

The GSP Product Selection Wizard makes it even easier to add products to opportunities. This means average deal size is increased, sales person productivity is improved and user adoption is raised. 

Recommended blog post

Bring Your Opportunities To Life With Products

Product Benefit #2 – Improve Opportunity Accuracy

Robust pipeline visibility and reliable forecasting require opportunity amounts to be accurate.

This is unlikely if salespeople simply enter a single figure into the Amount field. The value of the opportunity is invariably going to be a guestimate.

Far better to use Products to calculate the opportunity amount.

This way, salespeople enter the unit price, quantity and any discount. It also means there’s a breakdown of the opportunity amount by product category and individual product item.

The value of both opportunity product line items roll up to the Amount field.

The value of each opportunity product line item is calculated. The total value of all product line items rolls up to the Amount field.

The result is much improved accuracy in opportunity values.

Tip: if you offer volume based pricing then don’t leave salespeople to work out prices outside of salesforce. There are four ways to manage volume based pricing directly within salesforce.

Product Benefit #3 – Improve Pipeline Visibility

Using opportunity products improves the accuracy of individual deal values.

But it also means that dashboard reports and charts are significantly improved.

For example, here’s the pipeline report from the customer that had lots of fields on the opportunity.

Too many fields on the opportunity make it difficult to get good quality pipeline reports.

The reports lists the opportunities in the pipeline. But it’s a far cry from a concise, usable pipeline report needed to manage the funnel effectively.

Here’s the same information. This time we’ve re-built the report using Products.

Using opportunity products means accurate revenue amounts and robust pipeline dashboard charts.

The improved chart means the key information can be understood much more quickly.

Using products also means the pipeline can be analyzed by product category.

Report in salesforce showing pipeline by product family.

This means reliable forecasts can be created by individual products.

For manufacturers like Gilbarco Veeder Root, this is crucial information. These reports inform the production levels within the factory. For companies like Invennt, who provide consulting resources, it means accurate manpower planning.

And for everyone, it means the strength of the pipeline can be understood and interrogated by product category.

Make It Fast & Easy To Add Product To Opportunities Or Quotes

Download the FREE App from our website today

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Product Benefit #4 – Identify Development Needs

Look at the dashboard chart below. It show salesperson performance by average deal size.

Average deal size dashboard chart created using opportunity products.

The dashboard chart is a starting point for analyzing why some salespeople may have higher overall sales than others. However, to get meaningful information, that can help identify individual development needs, we need to dig deeper.

For example, the dashboard chart below analyses average deal size by product category.

Analyzing average deal size by product category reveals more insight into salesperson performance.

Each product is allocated a category – Core, Optional, Service. The dashboard chart clearly shows that Dave is better than his peers at including non-core products in his deals. In other words, Dave increases the average value of his opportunities by including non-essential products and services.

Simply telling salespeople to sell more optional or non-mandatory products is unlikely to have a significant impact. Yet now we can identify the development needs of each salesperson more precisely.

Remember, the chart, in itself, does not tell us specifically how Sarah can increase her average deal size. Perhaps she needs to improve her technical understanding of other products. It could be she needs coaching on how to introduce the other services. Potentially she needs to work harder during the Investigation Stage of the sales cycle to understand better the potential customers’ needs.

Analyzing performance using opportunity products does not automatically give us the answer. But it certainly tells us where to start looking.

Recommended blog post

Why You Need To Compare Average Closed Won Opportunity Size

Product Benefit #5 – Price More Selectively

When it comes to product pricing, one size certainly does not fit all.

Different market places will support different pricing. Countries and geographical regions may justify different prices. The cost of fulfillment may differ between territories or certain marketplaces will support a higher margin.

You may also chose to give not-for-profit customers a lower price. Some companies also have client-specific pricing. Perhaps you have exclusive pricing arrangements with strategic customers.

To handle this variability properly in salesforce means you need to use opportunity products. This is because using Products with opportunities means you can also use Price Books.

A Price Book is a selection of products along with their List Prices. Here’s an example.

Let’s say you have a product with a standard List Price in the United States of $1000. 

Using Price Books means you might have the following List Prices for this product

  • $1000 for standard customers in the USA.
  • $900 for strategic customers in the USA.
  • $800 for not-for-profit customers in the USA.

There could be many additional variations based on geography or territory. For example, the Eurozone Price Book or UK Price Book may have different prices than the straight-forward exchange rate equivalent. This may reflect differences in fulfillment costs or variances in what the market will bear in those territories. 

Here’s how these prices get applied.

The salesperson defines the price book that will apply to each opportunity. The Price Book contains the products and prices that apply within that price book.

Product price book associated with an opportunity in salesforce.

Chose the right price book on the opportunity and you have the right set of prices.

You can even go a step further.

Not all products need to belong in each price book. Perhaps, for regulatory, commercial or technical reasons, a specific product cannot be sold in Europe. Then simply exclude from the European Price Book. When the European Price Book is added to an opportunity, the product will not be available for selection.

Automated price book selection

You may have spotted the potential human error with Price Books.

What happens if the salesperson adds the wrong Price Book to the opportunity? The result is incorrect prices are given to the customer.

There’s a way to avoid this problem and it won’t cost you a penny to implement. It’s the GSP Auto Price Book Selector. It’s free on the AppExchange.

The Auto Price Book Selector automatically assigns the relevant Price Book to an opportunity. It ensures the right prices are given to the right customers.

Recommended blog post

The Ultimate Guide To Product Price Books In Salesforce

Product benefit #6 – Track Revenue Over Time

Very often revenue associated with a sale is not invoiced in one go.

Quite the reverse.

It may take many months for the revenue to materialize. For example:

  • Service contracts, with regular, repeat revenue over one, two or three years.
  • Framework agreements, in which goods and services are ‘drawn-down’ over time.
  • Professional services, with projects that may take several months to complete.

In each case, it’s important to track how revenue materializes over time. This results in improved revenue forecasting and more predictable cash flow.

To do this, you need to use opportunity products in conjunction with standard or custom product schedules.

Here’s what a salesforce dashboard revenue chart and report look like based on product schedules.

Opportunity product scheduled revenue displayed on a salesforce dashboard chart and report.

The chart and report don’t show the ‘gross’ value of deals. Rather, they measure the scheduled opportunity product revenue.

Many of our customers forecast scheduled revenue over time in this way.

How to extend this Opportunity Product Benefit

There is a challenge in salesforce with keeping opportunity product schedules aligned with the opportunity close date.

For example, let’s say the close date on the opportunity is April 1. The revenue on each opportunity product may be scheduled to start May 1. But what if the close date changes? It means the revenue schedule must be adjusted. In salesforce, this has to be done manually. But that means the adjustment is often forgotten about!

The solution to this is the GSP Schedule Shifter.

The Schedule Shifter automatically moves opportunity product schedules when the Opportunity Close Date changes. This maintains the accuracy of revenue forecasts.

Here’s a short video and more information on the Schedule Shifter in action.

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Use Product Schedules To Improve Revenue Recognition

5 Killer Examples Of Recurring Revenue Forecasts In Salesforce

Product Benefit #7 – Increase Price Discount Control

To reduce the amount of discount given away, use opportunity products to implement discount approval processes.

Here’s an example of how price discounts can be calculated and managed using opportunity products.

Using opportunity products means greater control over price discounts given away by salespeople.

The sales person enters the discount percentage for each opportunity product. In this case, 10% discount has applied to each opportunity product.

The total discount amount rolls up to the opportunity. That’s $4,000 in this example.

The overall price discount on the opportunity is 5.7%. That’s because although 10% has been applied to each opportunity product, the value of each line item is different. In other words, across the board, the discount on this opportunity is only 5.7%.

We can see that on this opportunity, the discount amount has been approved. This is done using the standard approvals functionality in salesforce.

Recommended blog post

10 Expert Tips To Improve Discount Approval Processes

Product Benefit #8 – Close Deals More Quickly

Using Products opens the door to two ways that radically speed up deal closure.

First, accurate products on the opportunity means they can be output into a quote document. This avoids salespeople having to re-key and re-enter information. It also means templates containing the up-to-date set of set of terms and conditions are used consistently across the business.

Second, combine the quote with an electronic signature application such as Docusign or Echosign.

These electronic signature applications integrate tightly into salesforce. They make it super-easy for customers to commit to contracts in a robust, legally binding way.

Our customer, project management training provider ILX, take it even further. They have embedded the process of validating whether a PO is required, and capturing that number where appropriate. This means they have a super-tight contract signature process.

Recommended blog post

Product Benefit #9 – Sell Bundles Of Products

One way to increase average deal size is to sell bundles of products.

Our customers use product bundles in two key ways.

First, to group technical products together. The bundle of products comprise the solution offered to the customer.

Secondly, they offer promotional product bundles. These bundles offer discounts or additional products that are available for a limited amount of time. They are intended to drive sales for a specific period.

There is no pre-built product bundle capability in salesforce. So instead, use the GSP Product Bundle Wizard.

The wizard contains features that enable system administrators or product managers to create product bundles easily. Salespeople have a user-friendly interface for selecting the bundle and adding the component products to the opportunity or quote.

Product bundle allows multiple wizard products to be added to the opportunity at the same time.

Price book integrity is preserved, which means that bundles can only be added if they match the price book associated with the opportunity.

Recommended blog post

GSP Product Bundle Wizard overview.

Recorded Webinar | 10 Ways To Win Big Using Opportunity Products

Watch the full webinar with Gary Smith and Nick Ambrose from GSP, and special guest Robby Johnson from Ellison Technologies. Gary, Nick and Robby explain and demonstrate all 10 ways to win big using opportunity products.

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Link Close Dates To Product Schedules To Avoid Warped Forecasts

Link Close Dates To Product Schedules To Avoid Warped Forecasts

Here is something that will inevitably your revenue forecast utterly wrong if you are using Product Schedules in salesforce.

The salesperson modifies the opportunity close date.

But then, she does not make the same date adjustment to the Product Schedule.

To be fair, it’s an easy thing to forget. And to use a technical term, it is a right pain to do.

Using standard salesforce functionality, the salesperson needs to go to each product on the opportunity. Then she needs to modify each product schedule. Individually.

It takes time. It is a distraction. And it almost never happens.

The root cause of the problem is that there’s no link between close dates and product schedules. Unfortunately, that means revenue forecasts that rely upon product schedules are nearly always wrong.

And over time, the problem gets worse. Both pipeline and won revenue reports become increasingly inaccurate.

Fortunately, it doesn’t need to be that way. The Schedule Shifter App solves the problem. It directly links the close date with product schedules.

Link Close Dates To Product Schedules

The Schedule Shifter links the close date to product schedules. This means that whenever the close date changes, the product schedules are automatically adjusted by the same number of days.

The close date can move forwards or backwards in time. The Schedule Shifter will keep the product schedules aligned with the close date. And if there’s already a delay between the close date and the start of the product schedule, then that delay will be respected when the schedules are automatically modified.

The Schedule Shifter works with both revenue and quantity product schedules. It’s particularly useful for accurate forecasts on ‘regular order’ framework agreements.

It’s simple to install. We’ll give you a link to a private listing on the AppExchange. And it’s great value at $700 per year for unlimited users. Find out more.

Schedule Shifter In Action

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When Recurring Opportunities Are Right (And When They Are Not)

When Recurring Opportunities Are Right (And When They Are Not)

When Recurring Opportunities Are Right (And When They Are Not)

Not every sale results in a single, one-off invoice and payment.

Many result in multiple payments over time.

But here’s a common mistake companies make in salesforce.

They use recurring opportunities when they shouldn’t. And sometimes they don’t use recurring opportunities when they should.

Here’s what happens if you do this:

  • Your sales process is far more convoluted than it needs to be.
  • It will be difficult to get accurate pipeline visibility.
  • Key sales metrics such as the number of month close date changes, days since last stage change and open age of the opportunity will be distorted.

So here are five situations where recurring opportunities potentially have a role to play in salesforce.com.

In each of these commonly-occurring scenarios, companies receive multiple payments over time. So when are recurring opportunities required?

Here’s a simple way to answer this question. Determine whether the future revenue is in jeopardy.

If the answer is yes, then recurring opportunities are probably required. If the answer is no, then you probably don’t need recurring opportunities.

Here’s how recurring opportunities apply – or don’t apply – to each of the situations above.

Recurring opportunities with software as a service

Based in Paris, our customer Sidetrade provides predictive software to accelerate credit management and the sales-to-cash cycle.

The platform is delivered on a SaaS basis and customers generally sign-up for a fixed term contract for a number of years. Payment is on an annual basis.

Sidetrade doesn’t need recurring opportunities.

This is because the future revenue on the contract is not in jeopardy. The opportunity is closed won. The customer is committed via the contract.

So instead of recurring opportunities, Sidetrade forecasts future revenue using Schedules.

For sure, Sidetrade will aim to sell additional services or upgrades to the customer. But Sidetrade handle these via additional opportunities. But these are new opportunities for incremental revenue rather than recurring opportunities.

Recurring opportunities with insurance premiums

Based near Toronto, another customer, Aboriginal Insurance Services (AIS) sell insurance products to the Indigenous Native American communities across Canada.

For example, the community will purchase motor insurance to cover all vehicles operated by the municipal community.

The insurance and premium is for one year of cover. AIS will aim to renew the policy with the community. But this is not guaranteed.

In fact the future revenue is in considerable jeopardy. Competitors will seek to undercut AIS or challenge the incumbent company in other ways.

So it’s right for AIS to create a recurring opportunity to manage the renewal. It is a separate sales process. AIS will apply proactive key account planning and optimize their chances of success but there is no certainty of a positive outcome.

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Recurring opportunities with service contracts

Based in Yorkshire in northern England, MAM Software sell advanced software and hardware to support the automotive logistical supply chain in the UK and USA.

The company sells support contracts that cover the software and hardware. These typically run for 3 – 5 years.

The customer pays an annual fee for the support.

But MAM don’t use recurring opportunities. That’s because the customer is committed contractually for the duration of the support arrangement. The revenue is secured. It’s not in jeopardy.

To manage this MAM have a single opportunity. They use Products with Schedules to forecast the future revenue. This means MAM have an accurate, forward looking view of secured revenue.

It also means the pipeline for new opportunities provides a clear picture of future income if the deal is won.

Recurring opportunities with Proof of Concepts

Another London based customer, Modernis, provides advanced analytics and consultancy services to the insurance and re-insurance markets across the UK, USA and Europe.

The analytics products are offered in a software-as-a-service platform. The sales process often involves a two stage process.

First, Modernis sometimes provide chargeable proof-of-concept access to their platform. Then, once customers have experienced the value that the platform brings, Modernis will sell access via a contract that runs for a number of years. This contract incorporates an annual license charge.

To manage this, Modernis create two opportunities. The first represents the sales process for the chargeable proof-of-concept. A trigger then automatically creates a second opportunity, this time to manage the full contract sales process.

So the company uses recurring opportunities – at least of a type. This is because the full contract is not a given. It depends on a successful outcome to the proof of concept.

Modernis also forecast the future revenue on the full contract using Schedules. This is because this revenue is not in jeopardy. Therefore no recurring opportunity is required.

Framework agreements in salesforce

Gilbarco Veeder Root (GVR) is one of the world’s leading manufacturers of petrol pumps and retail equipment. Based in Greensboro, North Carolina, the company has a salesforce deployment covering six continents.

A GVR opportunity may often relate to a major site re-fit program for one of the major petrol retail companies.

The refit program may take the petrol retail company several years to complete. It’s likely to require a large-scale purchase from GVR.

One the one hand, both parties want to benefit from the pricing and security of trading that is reflected in a long term commitment.

On the other hand, the customer doesn’t want all the petrol pumps manufactured and delivered in one go! Rather, they want to ‘draw down’ the units as and when the refit program is ready to install them.

So the total value of the contract is agreed (usually within an agreed range). But the month-on-month revenue is more volatile.

GVR handle this with a single upfront opportunity. The company uses custom revenue schedules to predict the volume and revenue that is anticipated each month. Then, when the actual trading volumes are known, the GVR Account Manager updates the schedule with the actual number and value of orders placed.

This allows GVR to track the projected volume (upon which the commercial terms were agreed) with the actual volume ordered by the oil company.

Recommended blog post: How To Manage 4 Types of Framework Agreement In Salesforce.

Points to consider when you need recurring opportunities

  • You need a process to manage the sales process on the recurring opportunity. Remember, the revenue is in jeopardy. It’s not guaranteed. That means you need a well thought out process that maximizes the probability of securing that revenue.
  • Consider triggering the recurring opportunity automatically. This will avoid the recurring opportunity from being forgotten about. That trigger can happen when the original opportunity is won or at some other pre-determined point in the process.
  • Measure the win-loss ratio for the recurring opportunity separately to the initial opportunity. In other words, the ratio of won / lost deals on recurring. Improve your process.

Points to consider when you don’t need recurring opportunities

  • There are several different ways to track the value of the sales. These include the total upfront sales value and the revenue recognition on a quarterly or annual basis.
  • Use Products and Schedules to forecast the revenue over time. Read this blog post for more advice on how to do this.
  • Consider custom revenue schedules if you need additional flexibility. For example, if you need to record the status (not due, invoiced, paid) on individual schedules then you will need custom revenue schedules.

Not every sale results in a single payment or transaction. Use recurring opportunities when it is right to do so. And if it isn’t right, then try revenue schedules instead.

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5 killer examples of recurring revenue forecasts in salesforce

5 killer examples of recurring revenue forecasts in salesforce

5 killer examples of recurring revenue forecasts in salesforce

I’ve never met any company that couldn’t – or probably shouldn’t – be using Products in salesforce to forecast revenue.

But here’s the rub.

Many of us sell products and services that involve recurring revenue. And that means you need to use standard or custom product schedules.

Unfortunately many companies that use salesforce think this is difficult to do.

But it isn’t. And you shouldn’t be put off.

In fact, making the effort to forecast recurring revenue in salesforce has many benefits. For example it:
– Increases visibility of committed and pipeline revenue streams.
– Improves the ability to manage customer payments.
– Ensures opportunities are managed to secure the full anticipated revenue.
– Improves cash flow management and production planning.
– Removes the labour intensive headache of forecasting on spreadsheets.

So here are 5 examples of companies that manage recurring revenue in salesforce. We bet you can spot at least one that is similar to the products and services your company sells.

If they can do it, so can you.

(Just for the record, all screenshots below are taken from real GSP customers but the actual data displayed is fictional).

1. Service Contracts with recurring revenue

Let’s start with the absolute easiest one.

Service Contracts typically have a fixed duration and recurring revenue over the life of the contract. This recurring revenue is easy and simple to forecast in salesforce using product schedules.

Linx Printing Technologies, for example, sell service contracts of 1, 2 or 3 years to support and maintain the printing equipment they sell. Payment terms on the service contracts can be monthly, quarterly or annually.

Linx have created the various service contracts in salesforce as Products. For each product, a default revenue schedule has been created.

A default schedule is the revenue schedule that will be automatically applied when a sales person adds a product to the opportunity.

Default revenue schedule on a service contract product in salesforce.

For example, the product that represents the 2-year service contract with monthly payments, has a default of 24 revenue schedules. The 3-year, annual payment service contract has default of 3 revenue schedules. And so on.

Here’s how it looks in a dashboard chart and report. We’ve used three examples of 1-year service contracts to keep down the size of the image.

Report showing recurring revenue over time.

salesforce dashboard chart plotting recurring revenue.

2. Products with deposits or multiple part-payments

MAM Software provides management software solutions to the automotive, building and distribution industries.

Each opportunity can contain multiple products including software, hardware, licenses, service contracts and professional services.

Like many companies MAM charge an initial deposit. Further payments are due when the products are delivered. Subsequent invoices and payments are triggered upon implementation and customer sign-off.

In other words there’s recurring revenue for a short period of time, albeit the payment amounts are not necessarily identical.

There are two ways to handle this type of recurring payment – standard salesforce product schedules or custom schedules.

Standard product schedules

Using the standard functionality the sales person enters the core data required to create the schedule.

Establish initial revenue schedule on a product.

This will create an initial recurring revenue schedule of 4 payments @ £750. However the sales person now has a chance to modify the date and amount of each schedule.

Users can adjust recurring revenue schedule.

The result is a series of recurring schedules that correspond with the payment arrangement agreed with the customer.

Custom product schedules

It’s imperative for MAM to record this schedule of payments in salesforce.

  • Contractual payment agreements are visible to appropriate users.
  • Goods are prevented from being shipped to customers that haven’t paid their deposit.
  • Professional services and implementation work can be triggered based on customer payments.
  • Sales people can accurately forecast upcoming pipeline and committed revenue.
  • Finance has the visibility needed to manage credit control effectively.

However this means that additional information must be entered for each recurring payment – the status, for example.

Unfortunately the functionality associated with the standard product schedule in salesforce has several constraints – additional fields such as ‘payment status’ cannot be added for example. It also requires sales people to manually calculate the amount and timing of each schedule.

MAM overcome these constraints by using custom product schedules.

Sales people record the deposit and repeat payments using a Visualforce page embedded within the Quote.

mam_vfpage_custom_schedules_resized

The scheduled payments are automatically calculated based on the default payment terms – for example, 20% upfront deposit, 60% upon delivery and so on.

If additional products are added to the Quote then the deposit and recurring revenue calculations are automatically updated. Once the deal is agreed with the customer the final Quote is synced with the Opportunity and both are locked to further changes.

The Finance team within MAM use these payment records to send invoices. When the invoice is paid the relevant payment term is updated and the next project stage can begin.

The structure gives MAM a robust dashboard view of pipeline and committed recurring revenue. It also enables product delivery, implementation and commissioning activities to be scheduled based on invoices and customer payments. It also means MAM can easily compare expected with actual orders on framework agreements.

In summary, if you simply need to record the basic recurring revenue schedule agreed with the customer then standard product schedules are likely to meet your needs. Anything more complex – then use custom product schedules.

3. Transactional products

Some companies sell high volumes of products that the customer will use on a monthly basis. But at the outset, the actual number of units or transactions per month can only be guessed at.

Brainstorm, for example, sell text messages to accompany their software products that enable companies to get real time feedback on their customer service performance.

A large deal might require as many as 1 million text messages, to be used over 12 months.

To manage this Brainstorm has created Text Message as a product in salesforce.

Sales people add the product to the opportunity and enter the estimated volume of units and unit price. They then add a revenue schedule based on the duration of the contract.

Custom product schedules modified to reflect actual revenue.

Each month, the account manager updates the forecast revenue schedule with the ‘actual’ revenue that was generated. We can see this in the figures for January to April in the screenshot above. Optionally the account manager also updates future schedules based on the latest available information.

This means the reports and dashboards provide a clear view on two key things. First, the actual revenue that was generated from the text message product on each of the opportunities. And second, the projected revenue for future months.

4. Distributor sold products / run-rate recurring revenue

Gilbarco Veeder Root is the worlds’ leading supplier of petrol pumps and related retail equipment. In addition to their direct business, Gilbarco also sell significant volumes via distributors.

Revenue from these distributors is ‘guaranteed’ in the sense that there’s an ongoing commercial relationship and contractual arrangement with the distributor.

At the start of each year each account manager forecasts the product volumes that will be sold by his distributors.  He does this based on historic information and his knowledge of the distributors business.

To reflect this revenue in the pipeline reports and dashboards, Gilbarco take a similar approach to the transactional product example shown above.

In other words the account manager creates an opportunity for the estimated annual volume. At the same time she creates a revenue and quantity product schedule that reflects anticipated month-on-month orders.

Every month the revenue and quantity product are updated based on the actual volumes received. At the same time she modifies the schedule for the following months based on latest understanding of the distributor pipeline.

So again it means that there is an up to date view of confirmed deals and pipeline revenue based on the latest information. This is critical information to Gilbarco in production management and financial planning.

Find out what Derek Davis, Sales Support Director at Gilbarco Veeder Root has to say about working with GSP.

5. S-curve recurring revenue

Taylor Woodrow undertakes major construction and infrastructure projects such as motorways, tunnels and railway lines on behalf of government agencies.

The sales pipeline for these projects can last many years. As can the construction and engineering work that results from a deal.

Yet like any other business, Taylor Woodrow needs to forecast the anticipated revenue for pipeline and closed won opportunities.

For any given opportunity the revenue can be predicted – it’s either going to be a straight line, or more commonly, an s-curve.

The s-curve profile reflects the fact that at the beginning of each project there’s a comparatively modest design and set up cost. At the end there’s commissioning and sign-off. However in the middle, there’s a major chunk of heavy duty construction going on!

To manage this Taylor Woodrow use an s-curve function built into the opportunity.

s_curve_recurring_revenue

The opportunity owner enters start date, end date and number of months, projection method (straight line or s-curve) and the system does the rest.

Taylor Woodrow amalgamates the recurring revenue from all projects in reports and dashboards to produce a predictable view of anticipated income.

So did you spot a company that operates in a similar way to your own? Try making the effort to implement product schedules to forecast recurring revenue – there are major benefits to be gained!

And if you have a question – or want to talk to us about helping you forecast recurring revenue – simply get in touch.

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5 Killer Ways To Increase Your Salesforce Benefits

5 Killer Ways To Increase Your Salesforce Benefits

Last month we gave you 5 Compelling Ways to increase your salesforce.com benefits.

As promised, here’s another five ways our customers have increased the benefits they deliver from salesforce.com. See which ones apply to you.

1. Improve sales funnel management

Nearly every sales funnel contains padding. Deals that rumble along month after month. Opportunities that with the best will in the world, are unlikely to ever close successfully.

It’s these Opportunities that are artificially inflating your sales funnel and giving everyone a false sense of future revenue.

So improve sales funnel management in your company by identifying these lame duck deals and weeding them out. Here’s three metrics that help you do just that:

– Number of Close Date changes.
– Number of days since the last update in the Opportunity Stage.
– Number of days the Opportunity has been open.

These are key metrics that measure the quality of opportunities in the sales funnel. Tracking these metrics will improve the effectiveness of your sales funnel management.

These metrics increase salesforce.com benefits by measuring the quality of opportunities in the sales pipeline.

Let’s say your typical sales cycle is 90 days. The Opportunity in the screenshot above has been open for 143 days. The Close Date has moved 12 times. And the Opportunity Stage was last updated 60 days ago. Can you rely on this deal to successfully close? Probably not.

Combine these metrics with sales target solutions to determine whether you’ve sufficient opportunities in your sales funnel to meet your revenue goals.

Remove The Poor Quality Sales Deals That Inflate Your Sales Funnel explains how to increase your salesforce.com benefits by creating these metrics.

2. Use Product Schedules to track future revenue

Many businesses do not receive the total value of an Opportunity in a single invoice.

The traditional sales funnel view gives good insight into the total value of potential deals. But it does little to inform management on how the income or cash will be received. Here are five examples of situations where Product Schedules can bridge that gap:

  • Recurring revenue models, such as maintenance or support contracts.
  • Manufacturing businesses, in which the goods are shipped and invoiced over several months.
  • Framework agreements, in which a customer draws-down orders against an overall contract.
  • Project-based sales, in which revenue is invoiced based on work completed.
  • Transactional sales, in which customers make multiple repeat orders over the course of the year.

In other words, Product Schedules are highly useful when the Opportunity Amount is invoiced and received through a number of instalments. They enable revenue recognition to be managed in salesforce. And they significantly increase sales funnel visibility by projecting how the gross sales value on potential deals will be invoiced over time.

Creating custom Product Schedules enables even more advanced functionality. Here’s an example of an s-curve revenue schedule in salesforce.com used by a customer in the construction industry.

S-curve in salesforce used in the construction industry.

Reports and dashboards show the accumulated Product Schedules across all Opportunities to generate a revenue profile for the months and years ahead.

Use Product Schedules For Revenue Recognition And Funnel Visibility explains how the standard salesforce Product Schedule feature works. It also demonstrates how custom Product Schedule solutions can easily be created to significantly extend your salesforce.com benefits and forecast recurring revenue. If you want to know more in general about using Products in salesforce then Learn The Basics; and even try The Ultimate Guide to Product Price Books.

3. Load Invoices or Orders into salesforce

Many businesses rely upon regular repeat orders from existing customers. For these companies, an Opportunity represents the process of acquiring a new customer that will subsequently make many repeat purchases. These repeat orders will often be processed through an ERP or Finance system rather than directly through salesforce.

Importing the actual Order or Invoice data into salesforce on a regular basis provides powerful insight that drives business development and account management. It reveals customers whose orders are increasing or decreasing. And allows managers to track the relationship between business development activity and invoiced revenue.

Orders imported against the Account record and inline charts used to display the trend in Order value and increase salesforce.com benefits.

The screenshot shows Orders imported against the Account record and in-line charts used to display the trend in Order value. In this particular customer, the Orders are also automatically linked to a Target record to track performance against target in salesforce.

Getting the data into salesforce doesn’t necessarily require full blown integration. Quite the contrary. We have many customers that load Invoices or Orders into salesforce using the Data Loader on a weekly or monthly basis.

4. Use web to lead to capture new sales enquiries

It’s amazing how many companies don’t implement web to lead.

Most business people will acknowledge that the quicker you get in touch with a new Lead, then the greater the chance of a sale. This is particularly the case when the prospect contacts several companies. Being the first to respond dramatically increases your probability of success.

Yet very often companies using salesforce.com fail to implement web to lead. This is a shame, because it gives an easy way to capture new leads from your web site and immediately direct them to a person that can respond quickly.

Here’s what you can do with web to lead:

  • Automatically insert new Leads into salesforce from a Contact Us page on your web site.
  • Immediately send an acknowledgement email to let the prospect know you’ve got his enquiry.
  • Automatically send prospects content (white papers, case studies, product specifications) that they request from a form on your web site.
  • Automatically assign the Lead to the person or team that can respond quickly.
  • Use multiple web to lead forms on a single web site, each tailored to a particular product area or geographic region.

And of course reports and dashboards provide management information on how well each Lead Source is performing and how quickly sales teams are responding.

The web to lead wizard makes it easy to integrate salesforce with your web site.

The web to lead wizard in salesforce makes it easy to integrate salesforce with your web site.

There’s plenty of advice available on using web to lead to increase your salesforce.com benefits.

5. Use Quotes with Opportunities and Products

So you’re already using Opportunities and Products. And now maybe you’re considering Product Schedules. Why would you want to muddy the water with Quotes?

Let’s say a customer asks you for two different versions of the same proposal. You want to keep both because you don’t know which one he’s going to choose.

Of course the value of the Opportunity is NOT the sum of the two Quotes added together. The Quotes are mutually exclusive. The customer is going to accept one or the other. So how do you calculate the value of the Opportunity?

The answer to this is Quotes. You can create multiple Quotes on an Opportunity. Each Quote can have its own combination of Products. You decide on the ‘most likely’ Quote. It’s this Quote that is synchronised to the Opportunity and is populated into the Opportunity Amount.

If the customer changes his mind and chooses one of the other Quotes, no problem. Just synchronise that Quote to the Opportunity.

Single Opportunity with multiple Quotes

The screenshot shows a single Opportunity in salesforce with multiple Quotes. Quote 1 is synchronised to the Opportunity. It’s the value of this Quote that is counted for funnel purposes.

Using Quotes means you can increase your salesforce.com benefits by:

  • Getting an accurate view of the number of Quotes you’ve sent.
  • Differentiating between Quotes and Opportunities.
  • Retaining each Quote on the Opportunity so you’ve got a record of what’s been sent to the customer.
  • Integrating Quotes with third party applications such as Conga ComposerEchosign or DocuSign to automate the physical production, delivery and acceptance of the Quote.
  • Integrating Quotes with Approvals to streamline Pricing Approvals and Quality Assurance processes.

Learn more about How And When to Use Salesforce Quotes on it’s dedicated blog post.

Increase your salesforce.com benefits

It’s always possible to drive more benefits from your salesforce licenses. We’ve given you ten examples of how that can be achieved in these two blog posts. And of course don’t hesitate to get in touch if you’d like to discuss implementing these ideas into salesforce.com in your own business.

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How to Use Product Schedules to Improve Your Revenue Recognition

How to Use Product Schedules to Improve Your Revenue Recognition

Are your revenue recognition forecasts little more than an educated guess? Or complete stab in the dark at worst?

For companies in manufacturing, IT, telecoms and many other industries, revenue recognition is a major challenge. What often happens is this.

The sales team update their opportunities in salesforce. This creates a bottom-up forecast of the ‘sales’ value of deals that are expected to close successfully.

The VP of Finance takes this data and puts it into a spreadsheet. Or, because he doesn’t trust the sales teams’ forecasts, he maintains his own sales projection data. Either way, he then manipulates the spreadsheet to create a top-down revenue recognition projection.

Frequently neither forecast has any degree of reliability. Which leads to a lot of frustration all round.

The unreliability in the first forecast – the sales teams’ gross revenue figures – can be addressed by using reports and dashboards that give full visibility of the size, trend and quality of deals in the pipeline. The second – the accuracy of the revenue recognition forecast – can be tackled by using Product Schedules within salesforce. Consider these two real-life examples.

  • Gilbarco Veeder Root is a global manufacturer of petrol pumps and associated retail equipment. When an Opportunity is won, delivery and invoicing has to be in line with the refurbishment programme in the customer’s chain of petrol stations. This might take 12 months or more. So Gilbarco uses Product Schedules to accurately forecast revenue recognition.
  • MAM Software creates and implements sophisticated software and hardware to manage end-to-end supply chains for their customers. Like many other companies MAM offers maintenance and support packages. But this future revenue can’t be recognised immediately. Product Schedules give MAM robust information on the future recurring revenue they can expect from support and maintenance contracts.

Product Schedules explained

A Product Schedule is a projection of recurring future revenue from a Product associated with an Opportunity in salesforce. The Product Schedule is associated with the Product that is on the Opportunity rather than directly with the Opportunity itself. Let’s take this Opportunity as an example.

Opportunity in salesforce with three products two of which have Product Schedules

The total sales value of this Opportunity is £78,000. The Opportunity Stage is Negotiation so we’re looking at a pipeline deal. The Close Date shows that we expect the deal to complete in mid-April.

The Amount field value of £78,000 is the total value of the three Products that have been added to this Opportunity. We can see that we’re selling one capital item (the GenWatt Gasoline 300kw). We’ve added a Gold Annual Service Contract that has a total sales value of £24,000 and 30 days of Installation Services @ £800 per day.

Look to the right of the Products. The checkbox shows that there’s a Product Schedule associated with the Service Contract and Installation Services.

Let’s drill down by clicking on the Installation Services. Here’s the screen shot that shows the Product Schedule. We’ve assumed Installation will take three months starting in April.

Product Schedule with three month Schedule

The Service Contract has a similar Product Schedule except that it’s for 12 months starting in April. We could have started the Schedule in a later month if the support arrangements don’t kick in until the installation is finished.

Here’s what the opportunity looks like from a revenue recognition perspective.

Salesforce dashhboard chart showing revenue recognition based on Product Schedule

The revenue of £40,000 that we’re projecting in April is made up of:

  • GenWatt Gasoline product with a total sales value of £30,000. There’s no Schedule associated with this product because it’s a one-off revenue item.
  • The first of the three months of Installation Services. The Product Schedule contributes £8,000 to the April revenue figure.
  • The first of 12 Product Schedule instalments from the Service Contract. We can see the remaining instalments panning out over the remainder of the year.

The same principle applies to May and June. They each contain £8,000 from the Installation Services Product Schedule plus £2,000 from the Service Contract. The other months show the remaining Service Contract Product Schedule. The total combined revenue shown on the chart is £78,000 – the same as the total sales value in the Amount field on the Opportunity.

We’re only showing the dashboard chart here but it’s based on an underlying report that gives all the detail. And of course in real-life both will show the projected revenue combined across all Product Schedules, rather than the single Opportunity we’ve displayed here.

One more thing. In our example the Product Schedule for the Installation Schedule was created manually. We assumed that it requires human intelligence to forecast how long the installation will take. But the Annual Service Contract is different. It’s for 12 months. And it’s always for 12 months.

Default Product Schedules

The Product representing the Annual Service Contract contains a ‘Default’ Product Schedule. That means that whenever this Product is added to an Opportunity, a 12 month Product Schedule is automatically added. Likewise, you can have a Product representing a 24 month service contract, or any other time period for that matter, and add an appropriate Default Product Schedule.

Product Schedules are an excellent way of using salesforce to accurately predict revenue recognition. Admittedly it’s one of the more complex areas of salesforce to configure. There’s a moderate amount of online material but you might also want to get some expert advice and help. Naturally we’d be happy if you chose to get that advice from us!

Read our latest blog post on using product schedules to manage recurring revenue forecasts.

Other related posts:

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