The principles of revenue lifecycle management

Chris Bishop at Conga maps out the RLM landscape and describes how many organisations are getting it wrong

 

In today’s unstable economic climate, businesses face the challenge of having to do more with less. How organisations manage their revenue amid current budget constraints, rising costs and shifting market conditions is key to survival – every bit of revenue counts.

 

According to a recent report from Conga, exploring the challenges of revenue management, most executives (97 percent) across the United Kingdom and United States are feeling the pressure to maximise revenue in the next two years. Despite this demand in this turbulent landscape, a surprising 46 percent of all executives reported that they lack confidence in their own organisation’s ability to identify and capture all possible revenue opportunities. 

 

The ultimate goal of any business leader is to establish stable and predictable growth. Every chief financial officer (CFO) knows that failing to stay on top of the organisation’s data and revenue cycles poses a huge risk to their business.

 

The same research found that the biggest consequences of mismanaging revenue processes reported by executives include higher operational costs (50 percent), missed revenue opportunities (43 percent) and revenue leakage (35 percent). Over time, this could lead to increased risk of compliance and regulatory violations, but ultimately, it will hinder long term financial growth. 

 

Effective revenue management, commonly referred to as revenue lifecycle management (RLM), is critical to creating a financially sound business that can withstand these market fluctuations. Clearly, organisations need to review their current data cycle and how they have executed their revenue strategies.

 

 

What is revenue lifecycle management? 

According to Forrester, RLM is defined as a customer-centric growth strategy that helps businesses align their customer lifecycle with revenue opportunities and buying motions. As a framework, it aligns sales, marketing and customer service efforts with the goal of creating a seamless customer experience and maximising lifetime revenue. However, too many organisations are hindered by their own operational complexity. 

 

In fact, in most cases, business leaders report misaligned technology, conflicting metrics and inadequate processes as key operational obstacles. Conga’s research also indicates that time-consuming manual tasks (45 percent), difficulty integrating data across systems (34 percent), compliance and security risks (32 percent) and errors in data or forecasting (28 percent) are impeding organisations’ ability to unlock greater revenue streams.

 

Before investing in any technology or starting a new digital change programme, executives need to take a step back and review their operational model. The key focus areas should be: Are systems integrated? How is data being shared between teams? Is all revenue being tracked across the entire lifecycle?

 

By approaching digital transformation in this way, executives will have a better idea of the changes that need to be made and where technology would be better suited to help them achieve their revenue goals. Only then can organisations start their RLM journey.

 

 

The key principles of RLM

The first stage of revenue lifecycle management involves the lead generation, proposal and quoting process. This stage is all about identifying and acquiring potential customers through various marketing channels, targeting the right audience and converting leads into customers. Enterprise deal-making often requires complex configurations throughout this process and an array of unique pricing rules.

 

As organisations mature, that complexity only grows, resulting in further operational inefficiency and inaccurate sales data.

 

There are two other key processes that business leaders need to consider here. The first is order management. As soon as a customer signs a contract, the process of order management begins. This involves the coordination, scheduling, building and installing of the purchased products and services. This process is based upon the order information found in contracts; the process must be integrated with a contract lifecycle management (CLM) tool in order to manage this smoothly and efficiently. If an order management process is going to be effective, companies need to recognise that customers can and should be able to change their minds. 

 

The second key process is billing management. This is the front-end process that ensures the customer receives the right invoice on time with all the correct information. When an order is being processed, the information about that order moves to a company’s finance department, which generates billing schedules based on the agreed contract.

 

Depending on the products for sale and contract terms, these invoices can quickly become complicated. It is vital that all customer invoices are accurate and easy to understand.

 

The goal of RLM is to deliver a seamless experience. Many companies will rely on their enterprise resource planning (ERP) system, but these often prove inflexible when it comes to handling revenue lifecycle management, making it difficult for the sales and legal teams involved. The issue is that rigid systems cannot accommodate business models like bundled products and services that change rapidly.

 

That is why establishing a unified data model is so important; all departments of an organisation need to have access to the relevant data across each stage of the revenue lifecycle.

 

 

The benefits of RLM

RLM ultimately helps organisations to manage their cash flow. When implemented effectively, executives can accurately forecast how much money the business will have coming in over any given time. This dictates what purchases can be made, how much employees can be paid and at what interest rates to borrow money.

 

In a similar vein, RLM also helps reduce the level of revenue leakage. Revenue leakage is what occurs when a company does not collect the money that they have earned. This typically occurs as a result of a lack of awareness or efficiency. Implementing an effective RLM strategy will increase operational efficiency and create a streamlined end-to-end process, therefore reducing the amount of revenue that is lost.

 

The use of artificial intelligence (AI) in RLM is a massive benefit for any organisation, as it simplifies and learns the core processes in order to save time and boost performance. The best example of this in an RLM system is in legal processes. An RLM with built-in AI software can scan over thousands of documents and inform an organisation’s legal team instantly, reducing the number of errors that would have previously occurred with a manual checking system. 

 

The Conga study revealed that the majority (87 percent) of business leaders recognise AI’s value when it comes to improving revenue-related processes. However, just one-quarter of all leaders report that they are starting to use AI for areas like revenue management effectively. Clearly it is a matter of how organisations approach digital transformation in the first place and whether they have implemented the right technology in the appropriate areas of the organisation. 

 

 

The future of revenue management

Any business leader looking to manage their revenue streams more effectively, must take a step back and think of the bigger picture. That is: what are they looking to achieve; how have they executed their revenue strategy; what processes make up their revenue lifecycle; and how can they begin integrating these into upstream and downstream systems?

 

The biggest risk in business is complacency. Organisations must remain agile and look to optimise their core processes and have the right technology in place to adapt to this ever-changing business environment. 

 

Looking ahead, there is still a lot of economic uncertainty – supply chain issues, high inflation and turbulent international politics remain – all of which are out of organisations’ control. It is imperative that business leaders are proactive and take control of the factors they can affect, making a conscious effort to run a more efficient business model and fully optimise their revenue lifecycle.

 

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Chris Bishop, chief customer officer at Conga

 

Main image courtesy of iStockPhoto.com and Olivier Le Moal