Pricing to Invoicing
Part 2 of: Five Critical Insights for a Successful CPQ-Billing Transformation
The introduction of a CPQ system provides extensive pricing options for your business, allowing you to price more dynamically than ever before. Even the best pricing models crumble, however, if they cannot be consumed by your Billing system. In part two of our series “Five Critical Insights for a Successful CPQ-Billing Transformation” we’ll dive into top considerations to develop a pricing design that works seamlessly with Billing. Before we jump in, is your vision of product catalog and bundle structure complete? If not, be sure to revisit part one. If you’re ready, let’s explore!
With a product catalog and bundle structure defined, the next step is to align on pricing and discounting models. The increasing prevalence of subscription and usage revenue models based on factors outside of P * Q have cemented the importance of a well-defined pricing waterfall, providing the ability to quickly identify starting price from prorated, extended totals and understand complex discounting structures applied throughout the selling process. Leadership teams understand the importance not only of accurate and detailed pricing, but also the need to properly communicate price and layered discount amounts to the customer to invoice and collect without interruption or customer confusion.
In order to sell and bill with accuracy and clarity, cross-team business and functional collaboration is critical to align on a pricing structure that not only is informative for the sales team, facilitates proper quote approvals and enables customer quote display, but also is able to be consumed by the billing system for correct invoicing, invoice display, and revenue recognition. Whether unit price, extended price, or another price metric is the correct amount to send, your integration must facilitate this flow from CPQ to Billing.
Consider a simple example of a monthly subscription eligible for both volume and customer discounts.
What prices/totals will you show to the customer?
What prices/totals must be passed to the billing system to enable invoicing?
More often than not, different data points are required for these functions.
Some requirements will be dictated by system capabilities (such as the amount to send to the billing system) or accounting compliance (derivation and inclusion of a stand-alone selling price), others need more in-depth analysis to understand and align across teams and systems. You might find summary-level transaction detail suitable for quote and/or invoice output or may demand a comprehensive view of the deal structure. These decisions generally require broader conversations of account hierarchies, compliance and legal obligations, and customer expectations (to name a few). A sound pricing design and team alignment is critical to ensure frictionless communication between CPQ and Billing, faster time-to-market, and clean reporting.
Nailing your pricing structure ensures every quote, invoice, and revenue entry is accurate, transparent, and built for scale. But even the best pricing models won’t deliver results if your data doesn’t make it into the right system at the right time. In part three of our “Five Critical Insights for a Successful CPQ-Billing Transformation” series, we’ll delve into one of the most challenging aspects of any implementation: data migration.
If you can’t wait for Part 3, or just want to chat about a Pricing complexity, reach out to us at info@ravusinc.com.
