Why Your Revenue Isn’t What It Could Be: The Damaging Effect of Silos on SaaS Subscription Businesses, and How to Stop Leaving Money on the Table
Recognized revenue is not for the faint-hearted.
In fact, it can be a critical concern for businesses because it doesn’t have a margin for error. But most SaaS businesses suffer from silos blocking the information that’s necessary for accurate and reliable revenue recognition.
That puts a huge amount of pressure on a financial team and their company. It’s pressure that no one needs.
What makes the silo situation even more dangerous is that they cause chaos for the entire revenue recognition process, with extra general damage on top.
Here’s what you could specifically be at risk for:
Revenue Leakage-
Leakage describes the unnoticed or mistaken loss of revenue that snowballs into a real problem over time. It’s shockingly common in a siloed environment because you need reliable information to spot leakage.
Crucial data related to customer usage, pricing and terms, and billing can be isolated in different departments including sales, customer service, maintenance, finance, etc. When accurate data doesn’t freely flow, there will be errors in billing. Things will slide between the cracks. Upgrades might get unnoticed. Customers will be undercharged or not charged at all.
Incorrect Invoices –
When teams operate independently, mistakes in billing are going to happen inconsistencies and errors in the billing information. This can lead to frequent invoicing errors, which doesn’t just hurt customer relationships and cause churn. Mistakes demand additional resources and higher operational costs.
With recognizing and reporting revenue, errors in calculations mean errors in allocation. This complicates the revenue recognition process further because there’s no accurate view of your company’s finances.
Unreliable Numbers and Bad Forecasting-
Reliable numbers are the foundation of a company’s health because they’re essential for reports and forecasting. But the unreliable data that silos cause throws off recognised revenue.
And the knock-on effect of that is you don’t have the insights from recognised revenue to feed into reporting and forecasting. You don’t have an accurate picture of trends, product and service popularity, profitability, etc
That makes it hard for stakeholders and decision-makers to develop effective strategies and make informed decisions. In the long run, this can hinder growth and profitability.
Regulatory Compliance Issues:
All financial reporting (including revenue recognition) is under regulation (with standards varying depending on where you operate). Audits need accurate financial numbers. So do tax liabilities.
Running against non-compliance with standards puts you in the firing line for hefty fines, penalties, and even legal action. You’ll also set alarm bells ringing for stakeholders and investors. The financial health of the company is at risk.
Scalability Is No Longer Possible:
Subscription companies can experience only experience so much before they hit that point where they can’t physically scale anymore. Because the more customers you acquire, the most revenue has to be recognised.
Companies that can’t keep up with thousands of customers, are not going to be able to keep up with tens of thousands or hundreds of thousands. That’s a heartbreaking place to be in.
Customer Churn:
There are so many scenarios that happen to customers, leading them to leave you asap. One of the most common is when sales signs up a customer for a specific package, but the finance department isn’t updated right away. This usually leads to an incorrect bill, which a new customer does not want to see.
It’s also a long-term churn creator too. When recognized revenue numbers are slow or wrong, marketing and development will never have good customer data about what they like, don’t like, what they’ll add on, and what they want as a one-time sale. Both teams won’t be able to offer customers what they want, so they leave for a company that can.
Employee stress, burnout and turnover:
This is actually one of the most expensive impacts. Workers feel significant stress thanks to increased workload and communication breakdowns. Efforts can be duplicated. Things are wrong.
No one can work in these conditions without being unhappy with working conditions. Next step is stress and burnout. After that, they quit. Whether employees are signed off from stress, or you’re spending a fortune to replace them with someone who will come in and face the exact same problems.When you allow silos to persist in your revenue recognition process, you’re leaving money on the table. There’s no way of getting around that.
But all this can change with one decision.
The Easy Solution to All Your Problems
Tearing down your silos will send a positive ripple effect throughout your entire company starting with your recognized revenue.
But it also positions your SaaS business for greater scalability and profitability.
Implementing an automated subscription management system is the only practical solution.
The right system will streamline billing processes, automate revenue recognition, and provide real-time visibility into your financial data. Here’s how:
- It creates real-time data flow between teams. Not only does it make the information accessible, but it automatically pushes the data between teams so it’s there before they realize they need it. No more errors, delays, revenue leakage or thousands of wasted hours of manual work.
- It gives reliable numbers for better reporting and analysis. When revenue data is consolidated (and free from the errors related to manual entry), it’s easy to get comprehensive reports that give the insights and recommendations needed for good decision-making.
- It ensures compliance with revenue recognition standards. You’ll feel more assured knowing that an automated system adheres to accounting standards, preps for audits, and remains tax compliant too.
In other words, all the problems that are caused by silos in revenue recognition – the costs, the leakage, the churn, the penalties, the staff turnover – they’re all gone.
With the flick of a proverbial switch.
Give your company and your teams the tools that it needs not only to succeed, but to get a massive edge over your competitors.
Stop leaving money on the table and start realizing your business’s full revenue potential.
Let’s chat further.
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