Configure, Price and Quote (CPQ) software is a great accelerator of the sales process and ultimately drives more revenue, improving both the top line and bottom line for the organization. Furthermore, CPQ helps enable strong governance which allows you to validate that you really have good revenue, which will keep your investors, auditors and stakeholders happy. The proper implementation of a CPQ solution is essential in order to reap these benefits.
Laura Stoner a Senior Sales Operations Consultant with expertise in revenue recognition and compliance pointed out in a recent interview:
“There is no question that the CPQ system is such an integral part of helping the business become more efficient and in a controlled manner”.
Not only should a CPQ system drive revenue it should drive more revenue and accelerate the process of creating good revenue for organizations. By good revenue, we are referring to generating revenue that is going to be profitable/accretive for an organization and complies with internal controls system and revenue recognition policies.
The CPQ solution is able to leverage business rules and approvals by enabling the organization to put automated measures and controls in place during the sales process which enhances governance and improves the speed of the sales process. As a control measure, it directs the quote to the appropriate person or department for approvals and will ensure the right person reviews and approves when pre-approved limits have been exceeded, such as technology changes, shipping changes, pricing change etc. Furthermore the CPQ software allows for an audit trail, which is imperative, should there be questions later, allowing the organizations to see who did what and when.
“When you remove human error and decision making from the Quote to Cash process, your compliance and audit cycle will improve both in terms of efficiency, accuracy, and predictability” Ryan Susanna, LogiSense Corporation.
SOX is an acronym for The Sarbanes-Oxley Act 2002, it refers to the annual audit in which a public company is obligated to provide proof of accurate, data-secured financial reporting. The VP of finance is required to ensure they have internal control in relation to their sales process and that the organization has a designed framework in place that ensures they are SOX compliant. CPQ software will enable the design, implementation and measurement of the required controls as per SOX.
“SOX Compliance is easier by an order of magnitude when you and your auditors can follow the same audit trail through the Quote to Cash process. This trail begins with definitions of products, services, and bundles, that map to pricing and revenue rules, and flows through to service delivery, billing, and ultimately the General Ledger.” Ryan Susanna, LogiSense Corporation.
The salesperson is not held responsible for the compliance of internal controls by the government. Hence a salesperson is commonly not as diligent concerning revenue recognition items and controls. Most violations of governance generally happen during the sales process which the CFO is not close to. However the CFO is responsible for compliance to controls within the sales process. It can be difficult to enforce compliance manually, requiring constant diligence by sales teams and finance teams. Fortunately, many of these processes can be automated and built into the sales process, through a CPQ solution, removing the risks and speeding the overall process. A solid CPQ solution provides multi-tier benefits to the organization.
With the recent increase in remote work, compliance to sales processes and ensuring appropriate revenue recognition have only become more problematic, especially with manual processes. This has increased the reliance on disparate spreadsheets and ultimately the spreadsheets require even more review and the risk of human error still continues to exist.
In addition, how products are built and modified in CPQ systems must also adhere to the governance requirements for finance. It is it important to note that modification to approved production configurations and pricing models must be reviewed with finance teams to avoid potential governance issues. As Mark Walker points out below:
“We are increasingly hearing about companies having audit issues relating to management of their CPQ system. It is vital to strike a balance between agility for the sales ops teams and product owners while also ensuring that any changes to approved business rules require re-approval and have a thorough audit trail.” Mark Walker, CEO of the compliance software company, Strongpoint.
The business case is easy to make when you consider the CPQ solution is able to provide additional accelerators that benefit the finance department and provide benefits of better governance and safety to the whole organization.
“CPQ systems are increasingly seen by auditors as critical business tools that control the validity and reliability of reproducible revenue” Mark Walker, CEO of the compliance software company, Strongpoint.
With further benefits including closing sales quicker, minimizing people’s resources and allowing them to establish internal controls that conform with SOX and provides documentation to go alongside the compliance, organizations should seriously consider in investing a CPQ platform.
From a CFO lens, the business case for implementing a CPQ system is clear and is part of a sound strategy for assisting in your sales enablement, allowing you to implement a system that complies with your governance model and revenue recognition policies and ensures adherence to SOX . It truly is a win-win-win sales benefit from accelerated revenue and efficient process, finance benefits from operating governance and compliance and the organization drives good revenue with reduced risk.
“Without having these controls in place, that a CPQ system allows, you really shouldn’t have any issue making the business case for investing in a CPQ platform” Laura Stoner
Learn how servicePath can assist in accelerating good revenue and corporate governance.
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