It’s All in the Contract: What RevOps Needs to Know

Revenue Operations doesn’t just support the Marketing, Sales, and Customer Success teams—they support the entire organization.

So does Finance. So does Accounting. So does Marketing, Customer Success, all the way down the line. Each function of a business supports the larger whole but many organizations still struggle.

But because of their unique position within the organization and direct ties to supporting the revenue generation process, Revenue Operations teams are positioned to help support sustainable, long-term growth.

RevOps professionals looking to expand beyond just a tactical point of view should understand the entire Sales-to-Cash workflow even if they only have direct responsibility over certain parts of it.

In this post, we’re going to cover where RevOps should start as they look to review and improve their Sales-to-Cash workflows in order to better support the whole organization.

Improving the Sales-to-Cash Process

Every organization wants to be data-driven. But when 91% of data in CRM systems is predicted to be untrustworthy, it’s like attempting to navigate the globe in 2023 with a map from 1850. 

Revenue Operations shouldn’t be spending all their time policing whether or not people are putting data into systems correctly. Instead, they should focus on establishing controls that make it efficient and easy to capture and leverage data that the organization needs to grow. 

That means capturing all of the information the Revenue team needs in order to successfully get the right customer information into the correct location so it can be used downstream in the customer journey by the rest of the company. 

An example of capturing the right information might include requiring the Sales team to record the customer service start date in a specific Salesforce field, allowing the customer success team to identify an accurate customer subscription renewal date. At the same time, that customer record should include everything that the Finance, Billing and Accounting teams need to create a revenue and billing schedule and follow it closely.

And all of this data starts with the customer’s signed agreement, or the contract.

How the Contract Affects Sales-to-Cash Workflow Downstream

Contracts are essential to improving the Sales-to-Cash workflow because they contain vital information that serves both the Revenue teams as well as the Finance and Accounting teams.

This includes:

• Payment terms - Is the customer expected to pay upon receiving their invoice, or have you extended them net terms? If so, is it net 30? 45?
• Billing frequency - Are they being billed monthly, quarterly, or annually?
• Amounts - How much are they being billed on each invoice, and for which products?
• Date of signing - What date was the agreement signed?
• Renewal provisions - What are the terms of the renewal?
• Subscription start date - When does the customer get access to the product?
• Subscription end date - Does the contract outline when service is expected to terminate

RevOps is perfectly positioned to ensure this information is collected in a centralized location such as Salesforce, which can then be pushed downstream into the accounting system. In return, this prevents teams from wasting time looking for information or, worse, using incorrect information. Bad information of that nature can lead to revenue leakage, unbilled revenue, and an overall inadequate customer experience.

Ideally, information should be pulled directly from the customer agreement so it can then flow into setting up billing schedules.  The company can then bill the customer on-time and for the right amounts which feeds various metrics and analytics the teams will track as well as support long-term revenue growth and company stability.

Helping Finance and Accounting Work More Efficiently

Finance and accounting teams need certain information in order to calculate, analyze, and report-on SaaS metrics that are crucial to track and leverage across the company. This most certainly includes bookings, billings, and revenue numbers, among others. 

These teams also need customer contract information in order to create an accurate deferred revenue schedule. This schedule represents revenue that has been earned but cannot be recognized until certain conditions have been fulfilled (eg. successful delivery of your software product in a certain month).

If the data that’s been captured from customer contract details is trustworthy, these teams can comfortably rely on automation in order to generate the right metrics and analytics in an efficient manner, freeing up their time to focus on more strategic activities.

Identifying Opportunities for Revenue Growth 

Trustworthy and accurate contract data can help support Revenue teams as they look to grow sales. One method is through pricing optimization. 

By analyzing contract data, Revenue teams can better understand the types of customers and the specific price points they buy across all product lines. They can then adjust pricing strategies or construct proposals to prospects with similar characteristics to increase the likelihood those companies will buy in the future. 

Furthermore, as the customer gets closer to renewal, by having all of the products accurately outlined in the most relevant records, Sales and Customer Success teams can easily uncover product white space so they can identify and pursue cross-sell and up-sell opportunities.

If all the information captured from the contract is correct and is then passed between and handled by people and systems responsible for each related function, RevOps is doing its part to minimize revenue leakage. That means ensuring the service start date occurs as it is reflected on the contract so that service delivery aligns with forecasted dates and amounts of revenue recognition. 

Increasing Company Stability and Operability

Revenue growth is important, but isn’t the same as what a company can spend. 

That’s because revenue is not cash. 

Revenue is an accounting term that follows a specific set of rules outlined in ASC 606. Understanding what revenue actually is versus bookings or billings can help RevOps see the larger picture of the overall financial health of their organization. That’s because SaaS companies who are selling an annual subscription to their product don’t recognize the entire contract value all at once. 

For instance, accounting teams will record one year's worth of revenue broken up into monthly amounts.  As each month passes and the service is delivered successfully, the accountants can then recognize that month's revenue.

Cash, on the other hand, is the actual amount of money in the bank that a company has on hand at a specific point in time. As customers are billed successfully and on time according to their agreements, that will continue to increase cash. Then, so long as expenses are controlled and the customers are continuing to be billed on time, the strength of your cash position increases. From there, the company and individual teams can actually fund operational activities, whether that’s expanding your tech stack or increasing headcount.

By understanding how much cash a company has incoming and available at a point in time, you can better understand profitability. Strengthening your organization’s cash position is vital if the goal is to either become profitable or remain profitable. On the other hand, it can be like a falling row of dominoes when the cash collection doesn’t go as planned, since cash flow and cash flow predictions are based on the billing and collections schedule.

Profitability becomes increasingly important when venture capital isn’t an immediately available option, especially in times of economic uncertainty. Instead, the organization needs to focus on reducing revenue leakage and capturing revenue that is already owed so that your cash flow becomes more predictable and the stability of your organization is that much more assured. 

As an added bonus, if you can illustrate that cash flow into your organization is predictable and stable, it will make it easier to be more attractive to VC funding even when funding has dried up.

Why Understanding Accounting is Important for RevOps

Revenue Operations teams are the custodians of vital data for the sustainability and growth of the organization.

By properly managing controls around all systems of records under their purview, RevOps teams can help support more accurate data, identify areas of growth, improve processes, and create a sustainable pace for success. 

It’s important to make sure you have the right tools in place to integrate and automate the processes of contract management and customer billing, and that you have a deep understanding of the financial terms involved in the customer lifecycle.

There are a lot of terms to understand when it comes to revenue. That’s why Place put together The Little Black Book of SaaS, a guide for SaaS professionals to better understand the terms and metrics they need to know.