Closing the Books: Alleviate (some of) the pain and shorten the process

by Amy Pruitt, Zuora Account Executive

Before I launch into a discussion of the process and pains associated with closing the books, it should be acknowledged that companies of varying sizes will have very different experiences. A $1B Enterprise company will differ significantly from a company that is aspiring to be that $1B company. If you fall into the second category, read on:

“How long does it take you to close your books?”

When I ask this question of clients and prospective clients, 99% of the time the initial response I get indicates to me that the client is thinking “Closing the books is not on the top of my list of ‘Fun Things To Do or even to Think About‘, but it is at the very top of my list of ‘Things I Have to Do, and Do Well.’”

The actual answers I get range from “three to five days” to “two weeks”. No matter what the spoken answer is, the vibe is always, “I wish we could close the books faster, and that it wasn’t such a painful experience.” For subscription companies, there also seems to be a direct correlation between the complexity of pricing models and the time required to close the books.

In order to understand the health of your business, and take swift action to help the company maximize value, you need to accurately and quickly report on your organization’s financial results. In this process, one of the key themes you want to create and maintain is “trust.” Let’s say you are a $30M company with IPO aspirations; since a strong level of trust in your revenue line is a crucial component of the company’s eventual valuation, you must be able to reflect accurate and meaningful results. The same is true for smaller growing firms that plan to raise another funding round.

I ask the question about ‘time to close’ because Zuora makes it easier for you to close your books – accurately, quickly, and consistently- and to take full advantage of having done so.

Zuora helps by removing manual steps, integrating with other systems, maintaining an accurate subledger, making reconciliations easier, automating reporting, and keeping an accurate record of very complex inputs such as co-terminus subscriptions, payments, pre-payments, usage, delinquencies, monthly recurring charges, and non-recurring charges.

Some of the downstream effects of closing the books faster include the ability to:

• Drive business decisions at a macro level. Primarily you want to know, “What should we fix, or what should we keep doing?”
• Act decisively on the information in a timely basis. If you have information ten days earlier you can affect vital course corrections quickly, instead of getting the same results next month. You are faster and more nimble.
• Spend less time in your accounting processes and reduce the amount of manual effort required, thereby lowering your staffing requirements. Also, this allows for the ability to use ‘less expensive’ resources because the process is less complex.

So if you’re asking yourself, “How can I close my books faster?,” we’ve got a few suggestions.

• Perform a systems review. What systems do you currently have in place? To what degree do they help automate accurate transactions, processing and reporting?
• Analyze business process flow. Where are the manual steps in your closing process? Which data feeds could be synchronized or automated? For example, feeding invoice information directly into both the CRM system and the accounting system.
• Evaluate your close schedule. What activities are being done? By whom, and are the right skill sets in play? When?

Then give Zuora a call and let’s talk about your current process, how you can optimize your operations, think through ideas to help substantially reduce your close process, and see how you can manage complexity and actually turn it into trust – on your way to getting to $1B.

Top Ten Ways to Improve Cash Flow

by Tricia Reilly

It seems like we’re starting sentences with "In these economic times..." quite frequently these days. But as every CFO knows, cash is king in any economy. It enables growth, investment and expansion; without it, you’re basically dead in the water. So how can you improve your company’s cash position?

We tackled this very issue in our second installment of the Secrets to Successful Subscription Businesses Webinar series. Featuring our CFO, Gary Hagmueller, the live event covered innovative ways to condense the length of time from when a prospect requests or is given a quote to when the money is actually received in your bank account.

Here’s a quick rundown of what was covered:

• Cash flow in a subscription business is different – While a subscription business offers a great recurring revenue stream, more transactions and billing complexity mean more opportunities to impress or confuse your customers.
• There are three distinct processes in the subscription quote to cash cycle, delays to any of which can mean a lag in cash flow:
  • Quote to close – How fast can your reps put together a quote, get it to the prospect, and get it back with the appropriate signatures and approvals?
  • Close to invoice – Can your organization generate an invoice the same day that the order is signed? Reducing delays in this phase increases the likelihood that the customer will pay.
  • Invoice to remittance – How easy do you make it for your customers to pay? Do you have multiple payment options – check, ACH, credit card, PayPal? Are you taking advantage of automated payment options?
• The Top Ten List – Gary provides his list of the best ways to Streamline, Automate and Scale your subscription business to improve your cash flow.
• Jeff Yoshimura jumps into a demo of the Zuora Subscription Management suite to show how we enable you to execute on many of the top ten recommendations.

Want to learn more? Watch a recording of the Webinar at your convenience.

Who needs a subscription management and billing solution?

by Amy Pruitt, Zuora Account Executive

Why do I need a subscription billing system when I already have an accounting package?

On the front lines here at Zuora, this is a question that comes up from time to time when speaking with prospective client CFOs and COOs. Maybe you’re asking yourself the same thing. Put simply, accounting and billing systems manage two different worlds in the business; so an effective accounting system doesn’t guarantee an effective billing system. Just how are billing and accounting systems different?

• Accounting systems record revenues and expenses after they happen. A subscription billing system is where your product catalog, customer subscriptions, and all change orders and amendments are housed. This is where you group features into various packages and rates plans, allowing you to offer customers the level of service they want at a price they can handle, based upon their individual needs.
  
  
• The accounting world revolves around debits and credits and requires business events to work around it. Billing, on the other hand, is built around the business events that drive the flow into accounting: customer acquisition, provisioning, pricing, usage tracking, calculations, invoice generation, collections, etc.
  
  
• An accounting system stores the charge after it has been billed; whereas a billing system looks at the customer’s subscriptions, including all change orders and amendments, and calculates what the bill should be, e.g. prorations, upgrades, downgrades, etc.
  
  
• Accounting will generate a balance sheet, but falls short when it comes to generating key subscription metrics like MRR, churn, renewals, etc.

So, let me pose the question:

How important are money and growth to you, right now?

The answer you give to that question indicates whether or not you should invest in a subscription management platform on top of the accounting package you already have.

If you said, “It’s about cash. Darn it! It’s about fueling the growth of my company by enabling my product, marketing, and sales teams to position and capture as much market share as humanly possible – right now, today! And, I want a system I can leverage in the day to day operational complexities of my business.”

Then, I would respond, “You need a subscription billing system.” Actually, I would say, “You need Zuora.”

Here’s why:

A subscription billing system, correction – a subscription billing system that is flexible, scalable and integrated, handles the tough stuff – change orders, proration, billing in advance and arrears, usage-based billing. The hard part of subscriptions is where the value is. Go for that if you want to make money!

You might not see it yet – actually you might not feel it yet, but it’s there. The pain you’ll experience when your customers want to upgrade, downgrade, pay with a briefcase full of cash (not a credit card), or pay you monthly not annually. Or your sales team wants to discount, and you want to empower them, but without fostering rampant pricing inconsistencies. Or your marketing team wants to offer all kinds of pricing and packaging scenarios to see what the market will respond to… without involving your IT department.

The way that subscription businesses grow is by understanding how the different segments of the market want to buy from you and then selling to them in those ways. It’s NOT about a lot of products but it IS about a lot of pricing and packaging options.

Totally not a surprise when I’ve hung up the phone or left a client meeting in which my client tells me that his customer said one of two things: “You’re charging how much??” or “Your price isn’t high enough for a company like ours.” Both of them have money, so sell to them in the ways they want to buy. This is what a powerful subscription billing system (read: Zuora) can do for you.