Ch-ch-changes to contracts: CPQ turns nightmare admin into no dramas
It’s a universal challenge for any companies selling subscriptions: customer contracts get changed for some reason partway through the term.
It could be that extra licenses are added, so a customer who began with 10 licences adds three more six months into the term. Sounds great on paper, but when it’s “on paper”, it’s the finance team that bears the burden of the changes. They have to prorate the value of that contract which now has, say, 13 licences for six months and 10 of them for the full term. They have to make sure that the proper information flows to the billing team so the correct invoices are sent out.
We worked with a customer recently whose finance team stays in the office until 2am at the end of every month! That’s what it takes for them to reconcile changes and amendments to software-licence contracts and make sure that they don’t send out a bunch of incorrect invoices.
Think about what it could mean to that company to automate the amendments process. Right away, CPQ calculates the correct pro rata terms and eliminates the need for that finance team to stay back to that crazy hour every month. You have happier employees, they spend less time overall on administrative tasks and they can use the saved hours for higher-value work for the company.
That company was a great example of the common pain points companies suffer when they continue to operate without CPQ. We’re seeing a lot of it as SaaS grows across industries. Once Salesforce CPQ is in place, amendments flow automatically to downstream systems at the correct price. It’s easy to understand why it’s so transformative for companies who’ve been doing it manually.
Building on your base with customer engagement that’s automated to be personal
Cancellations are also handled seamlessly once Salesforce CPQ is in place. We all have customers who potentially have the ability to reduce their licence counts or have an opt-out clause in their subscriptions that allows them to cancel the contract prior to the end date. CPQ treats cancellations the same way as it does an amendment to a contract; by automatically managing the downstream effect of cancellations.
CPQ keeps a running total of the licences over time, making it easy to handle all this out of the box. As well as automatically creating an amendment quote and invoice, it will also decrease the sales forecast. This means that even if it’s a downward dip in your sales, it’s not a nasty surprise. On the upside, CPQ has set your sales team free to spend more time selling, so they should be able to make it up!
Think of any amendment a customer may want and CPQ can handle it. Maybe it’s an upgrade, with a customer wanting to boost their subscription to 24/7 support as their business grows and scales. CPQ amends, requotes, and generates an accurate invoice.
Another common contract amendment are product swaps, where a customer wants to redirect resources from one product to another. In the US, we worked with a Silicon Valley recruiting company that wanted to divert resources from advertising job postings to banner ads promoting the company instead. Using CPQ, we were able to determine the funds left from the original contract with the advertising agency and divert the remaining funds to support their new self-promotion strategy.
CPQ is also your trusty wingman when your customer is less than enthusiastic about the original deal they were sold. Perhaps it isn’t performing as expected, or the setup fees may have been undersold. Whatever the reason, you need a little something to make amends with your customer. Using CPQ, we can create a special set of products that are identical to the base products and set them up as subscription-based non-renewable products. For example, you could offer licences to core products but ensure that those licences – which are in essence your get-well package to retain that customer – don’t get included in the renewal rollups at the end of the contract. CPQ automatically avoids an all-too-common glitch of giving away make-good products in perpetuity.
In the final article of this series, I’ll show you how CPQ makes guided selling easy and accurate across even the most complicated product catalogue, as well as making quotes lightning fast so you can close the deal.
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