Suezann Holmes, CEO of ScaleXP, and Hugh McNulty, HubSpot, explore best practices with CRM data for finance professionals, focusing especially on small businesses and SMEs with recurring revenue in this recent webinar.
Topics covered:
- how to use CRM data in forecasting,
- practical tips to manage contracts and renewals, and
- best practices to eliminate revenue leakage.
CRM data for finance teams: unlock efficiency & insight
Experts at HubSpot and ScaleXP share insights into best practice for integrating your CRM and accounting system without breaking the bank
In this webinar, Suezann Holmes, CEO of ScaleXP, and Hugh McNulty, HubSpot, explore best practices with CRM data for finance professionals. They focus on how to collaborate across your organisation to unlock your data and drive results for your business.
Topics covered include:
- how to use CRM data in forecasting
- practical tips to manage contracts and renewals
- best practices to prevent revenue leakage.
Key takeaway: connecting finance and CRM data doesn’t have to be hard or expensive and it is possible for companies to get started early in their life cycle, as they’re building towards success, to put the right tools and processes in place for efficient and effective growth.
Why this is so important
Companies of all sizes, from SMEs up to large large enterprises, often spend huge amounts of time, effort and resources making sure their commercial data is right in their CRM. So they are tracking salespeople’s every move: they are tracking the deal values, all of that. And then their finance data sits completely separate – “over here in a dark room that no one should ever talk to or look at”.
The key point is that really those two things should be connected because bad CRM data, whilst annoying and a drag on your business, probably won’t’ shut down your business, but a bad collections policy or not getting invoices out the door or having cash flow problems, that will tank your business. That will shutter a firm.
So we have to think about this stuff. You can have sales people closing deals that are millions of dollars in your portal. Unless that money hits your bank account, it doesn’t matter. So you need to have a source of truth that you can rely on by connecting these two.
We realise that’s difficult. If it was easy we wouldn’t bother having tools like ScaleXP and HubSpot. So it is difficult, but there are certain things we can do that make it worthwhile. It is absolutely key and for the firms that nail it, everything else becomes easier and their businesses run better.
Topic 1: Revenue forecasting from your CRM
Sales forecasting: why is this so hard?
- The first reason is that the data for revenue forecasting sits in multiple systems.
- It is always changing.
- Many people feel like they need to import the entire sales funnel in order to get a view of future revenue and they then need to work to remove certain deals – any that are stagnant, old or unlikely to close
- There are renewals that need to be folded in as well.
So there’s lots of different data sources.
People often talk about a revenue forecast like it’s a crystal ball. And while there is always an element of the unknown and the future, it doesn’t need to be such voodoo. It can be a very structured process.
There are some best practices in terms of the data that should come in and how the data should come in to make this process as straightforward as possible.
Revenue forecasting from your CRM: data best practices
There are four key pieces of data that you need to capture in order to have a forecast.
New sales. You need to have an object in your CRM or a line item in your spreadsheet or some sort of object that captures every piece of additional revenue that you’re going to close. So you can’t have your B2B Pipeline that’s really well forecasted but a B2C pipeline that you don’t really capture. Every deal, whatever the probability, needs to be captured. For each of those you need to have:
- an amount, so whether that is for a SaaS business, a recurring subscription amount, or for an e-commerce business, how much you are selling it for, there needs to be a dollar/pound/Euro value for every single one of those. There are ways in CRMs you can make that mandatory – HubSpot, Salesforce, Zoho are the same for this. And you can alert on anything that is one or zero, for example.
- a close date. at the very least you need to have something that largely represents how often the period of time in which these deals close. So even if the salesperson is like I have no idea when it’s closed, make an educated guess, otherwise the revenue is never going to come in, you shouldn’t be counting it in the first place. So it’s mandatory to have an estimated close date for every deal. Be aware that will get closer as the deal travels along the pipeline. Tools like HubSpot or Salesforce do this automatically as a deal travels along your pipeline.
- a deal probability. so if something is at scoping, right at the start, or you know you’ve just got a warm lead, hand it 10%. As it moves through and you’ve sent it a quote or you’ve sent a contract or you’re at negotiate, 50 or 60% and then it’s out for signature, 80 or 90% depending on how confident you are.
With those four pieces of data: deal, amount, close date, deal probability – you can get a revenue forecast. The better and more accurate those number are, the better your revenue forecast will be. That sounds too simple to be true, but when you boil it down that’s pretty much all you need, if you’re capturing all parts of that and your data is reasonably clean.
“The big gap in process that I see people leave is closed won deal or closed lost deal is the end of the process. Sales walk away, management walk away, and everybody’s happy or not so happy.
What I’ve seen really good businesses do with a tight process is the closed one is really only three quarters of the way through the deal goes to closed won, then it goes to to be invoiced or a process or a tool like ScaleXP then it automatically invoices that customer.
Now there’s a little bit of setup in that, there’s a little bit of connecting different tools but with technology now it is not as difficult as it used to be.
You don’t have to hire somebody, you don’t need an agency or anything like that so for example in HubSpot it would be Closed Won deal that’s automatically invoiced then still not finished you have to ensure that that invoice is paid.
Only when the invoice is paid does everybody walk away happy because the money’s in the bank. The salespeople get paid their commission .
So you have to think about it in a slightly longer process but with small pieces of key data that all go all the way through and then that’s what we can do to build a basic forecast.
Some people put renewals at the end of that process – we will talk about that later – then it sort of goes in a circle all the way around.”
Revenue forecasting: the added complication of revenue recognition rules
Another complication of forecasting from your CRM is that CRMS tend to focus on contract and invoice values, whereas financial forecasts need to follow accounting rules for revenue recognition.
A common issue for SaaS companies and other subscription businesses is how to translate booked and invoiced revenue into accounting revenue for purposes of forecasting, spreading the value across the appropriate amount of time. Often this is done in manual spreadsheets which are time consuming to maintain and do not sync automatically with the latest CRM data.
This is where tools like ScaleXP come in, to automate translation of all the CRM data into a financial forecast which meets business and investor needs to see recognised revenue and other key business metrics of revenue such as monthly and annual recurring revenue amounts.
Here is an example of best practice in translating CRM data into a financial forecast.
This example forecast has been generated in ScaleXP, in this case combining CRM data from Hubspot and accounting data from Xero to generate a forecast.
This graph illustrates historic data alongside a forecast.
The components that are coming into here are:
invoiced Revenue: that’s invoiced revenue that’s yet to be recognised, in other words, deferred income.
Contracted Revenue: these are deals closed in the CRM system that are not yet invoiced. If you’re closing a three year deal and you’ve issued one invoice, then year two and year three obviously need to come into your forecast. Those are shown here.
Renewals: you can pick these up either based on a historical renewal retention rate, or you can pick them up on a deal by deal basis.
Deals in Progress: Deals in the pipeline that are expected to generate new sales, generally probability weighted.
Topic 2: Best practices in managing contract renewals
Contract renewals: why this is so hard
There are a few reasons that managing and tracking contract renewals can make you feel a bit like you’re a dog chasing your tail.
- The data sits in multiple systems. You will have some data in your CRM system and you will also have some data in your accounting system. To create a reliable renewals pipeline, this all has to come together seamlessly.
- It is critical to track upsells, downgrades, cancellations; that can be hard.
- The problem of shared responsibilities across teams. Usually customer success has responsibility to make sure that the deals are renewed, while finance has responsibility to make sure that the value for the contract renewal is captured correctly.
- Values are always changing, often without anyone thinking to keep a record of it.
Renewals best practice
1. Have a separate renewals pipeline in your CRM
Companies that track renewals well treat it as another sales pipeline. The customers that you’ve already sold to and are happy, or unhappy, are still the easiest revenue you will ever get, far more than new business, so treat your existing customer base and your renewals as a different pipeline.
And that’s just the same in your CRM, so the same way you have an online sales pipeline or a regional model or whatever, have another one called renewals.
Each deal or each existing customer with a contract that’s ending on a certain date or renewing on a certain date, then, is the estimated close date and their current run rate is the deal amount.
2. Have a clear owner of the renewal; include ownership of both data and payment status
So in a typical renewal situation, someone internal – customer success or sales or someone else – effectively becomes a salesperson to the internal customers and his or her job is to close that renewal before the customer contract runs out. And from a deal perspective, the amount may then change as there might be an upsell or other upgrade at renewal or if say, the customer is removing some software or reducing the package they are on. Someone needs to price that and, from a data perspective, edit the deal amount up or down.
This becomes quite a complex thing where customer success, finance, sales all are involved. It’s sort of everybody’s problem and yet who will get it boiled down to one new deal in the renewals pipeline with an object for each against three or four data properties?
It is super important to define who’s responsible for this. Too often salespeople who have sold the account get left involved with the account and they have to jump in when it’s contract renewal time or somebody in customer success who maybe isn’t that commercial has to jump in without training, or finance are involved negotiating contracts.
In renewals, particularly with data management, you have to name one person who’s responsible for moving that deal through the pipeline and closing that renewal. Now that’s not always possible in a scale-up, people wear different hats, but at least make it part of somebody’s job role.
The last thing I’ll say about the data in the renwals pipeline is that, just like we talked about in the sales pipeline, closed one is only three quarters of the way through. So once we’ve got the closed won as a renewal pipeline deal, then invoiced or bill issued, and then paid.
So just like it’s the salesperson’s responsibility to get the company money in the bank, the renewal manager or the customer success manger (CSM), their job is to get the customer closed, invoiced, and paid. And if they have to work with finance to do that and collaborate, even better.
With HubSpot or Salesforce or any sort of CRM, particularly when combined with a tool like ScaleXP, you can probably arrange that quite easily.
3. Create a renewals deal in the CRM as the contract is signed
4. Track changes to deal value, payment status, etc. in your CRM
5. Track renewal retention rates in a systematic, automated way
A tool like ScaleXP can help coordinate renewal activity and ensure data is collected and tracked correctly.
Below is a screenshot from the a renewals summary screen in ScaleXP. On the left hand side you have renewals due; ScaleXP is generating these automatically using the data and the text on existing deals and invoices.
ScaleXP is then tracking them through the CRM pipeline.
As mentioned above, industry best practice is to create a separate renewal deal as soon as the initial deal is closed. Set the renewal up in the CRM and then ScaleXP will pull in the status from the CRM system and keep it continuously updated.
You can just look down the page and see if there’s a deal that’s missing. That can then be flagged early to the customer success team.
Also, with ScaleXP, all the latest contract values can automatically feed into your revenue forecast, so this is a good way to make sure that nothing falls through the cracks and that everything is being picked up and works systematically.
Topic 3: Managing revenue leakage
What does revenue leakage mean? What causes it? How can I prevent it?
So what do we mean by revenue leakage? Revenue leakage refers to the unintentional loss or delay in translating booked revenue into cash sales, and it comes in a lot of different guises.
- late invoices: the most common one that everyone thinks about is invoices that are sent late – delayed a week or a month or sometimes even several months
- a high invoicing error rate: this is a second one that people sometimes don’t think about.
- forgotten or delayed renewals is another example of revenue leakage. People just aren’t tracking renewals or the renewals are tracked in a spreadsheet and then the person who’s tracking those renewals in a spreadsheet leaves and someone forgets to update the spreadsheet. Three deals close in quick success and one deal doesn’t go into the spreadsheet and no one picks it up for months.
- missed invoices and other mismatches between booked deals and invoiced deals: And then the last one which is probably the least considered but very important is the amount of time that the finance team spends reconciling with tech just how many deals have been closed and how many invoices have been sent.
Customer stories: examples of revenue leakage
Suezann Holme of ScaleXP shares some real life examples of how ScaleXP has helped customers prevent revenue leakage by reducing invoicing error and missed invoices.
“A week or so ago we onboarded a customer and this customer mentioned that they had an error rate of about 20%. That means one of every five invoices being sent out has incorrect data. It was because the invoices were being prepared by the finance team based on Slack messages from sales rather than the kind of comprehensive, joined up process that is so easy using ScaleXP”
“Another recent customer said she’s spent three full days already – and likely another two more ahead – just going through all the deals that have been closed and ticking off against invoices been sent.” This is another clear example of revenue leakage because there will be some revenue, some invoices that weren’t sent, not to mention a week of time to manually check this. It’s an outdated process that can easily be sorted with today’s technology.”
Revenue leakage: the importance of collaboration
Quite often, CRM data is entered by salespeople or customer success managers who don’t think about the operations of finance or bill collection. And finance, for their part, don’t understand or care about the deals in the CRM or what data is stored there. Management, meanwhile, are left with the consequences: wondering why the revenue in their sales reports doesn’t translate into cash in the bank.
The solution comes down to connecting the process with the right technology and the right process to ensure collaboration across teams. Having the right process and systems in place to make collaboration easy and routine ensures that this happens and that information flows seamlessly across all parts of the deal process, right through to collecting the cash.
Hugh McNulty of HubSpot explains why collaboration is the answer to preventing revenue leakage.
“I have been on both sides of this:
- I’ve been the customer success manager in small growing firms and I’ve never thought once when I was early in my career about how anything finance would work and I didn’t speak to finance.
- And then I’ve been on the other side of that where at a management level you’re trying to work out how you’ve got all this revenue in the CRM and none of it in the financial accounts.”
In the past this was hard to sort. The tools that we used for this were NetSuite, Sage, huge on site financial software accounting softwares that took a team of accountants even to make it work- probably ran on diesel in the back of your office. Nowadays we have the technical tools to solve this. It is not that complicated if we agree the processes. You have CRMs that you can get for free, HubSpot is one; there are plenty others. You can get integrations like ScaleXP which work with inexpensive accounting systems that are easy to set up, such as Xero and others.
So therefore I don’t think the technology is any more the blocker. For most of the businesses here, it will be people and process.
Having the right people and process:
So the first thing I would do is get whoever is sending out the invoices, whoever cares what your Xero or your bank accounts look like, bring them in and have them sit beside the person who’s selling the deals and get them to feel each other’s pain. Have them work through a process end to end. Have a finance person watch what a salesperson does end to end and see how that appears in your invoicing, your accountancy software.
You have to make sales and customer success feel that getting the money in the company’s bank is actually their problem too; that it matters if a deal they sold doesn’t pay. Especially at SMBs and scaleups, the company won’t be there in six months to pay them anything if that happens, so it’s important to get them to feel skin in the game that getting money in the bank, that it is part of everybody’s process here, and they’re responsible for that. The flywheel spins faster, they can sell more deals, they earn more commission. Finance are happier, the business can pay more money, and everything works better.
A very pragmatic example of how we see this working is this example of the invoicing process.
Preventing revenue leakage: best practices in invoicing
This illustrates best practice invoicing using ScaleXP and HubSpot in conjunction with a basic accounting package like Xero or QuickBooks.
1. Have the sales team fill in the details needed for invoicing.
The ideal thing to do for invoicing is when a deal is closed won in HubSpot , or in any CRM system, have the sales team fill in the key fields of what the invoicing needs to look at. They know that data they’ve just negotiated the deal and it is very easy to set up in the CRM’s platform the fields that need to be captured to feed into the invoicing.
2. Sync all invoice details, creating current and future invoices seamlessly.
ScaleXP now has an invoicing tool that works with HubSpot and we’re able to take all that data from HubSpot and sync it into Xero. It can either sync into Xero or to QuickBooks as a final invoice or as a draft invoice which is ready for the finance team to review. There’s quite a lot of sophisitication in this functionality so that can include creating multiple future invoices.
Both Xero and QuickBooks have really good functionality for creating repeating invoices for subscriptions; what ScaleXP is doing is just letting Xero and QuickBooks know that those kind of recurring invoices need to be sent out. The data is coming in directly from HubSpot with really no retyping.
3. Issue invoices across as many entities and currencies as required.
In ScaleXP, it is possible to issue invoices across multiple business entities. We work with businesses, even small businesses, that have multiple legal entities in the UK, in Canada, in the United States, and elsewhere. In these cases, the invoices can pass from HubSpot into any one of those Xero or QuickBooks entities. FX rates can be integrated too.
4. Sync invoice status into HubSpot so that the sales team can see whether or not they have been paid.
Using ScaleXP invoicing from HubSpot, there is a two-way sync back into HubSpot so the sales team can go into HubSpot. They can see if those invoices have been paid, if they’re late, if there are credit notes, etc. If there’s any problem, the sales team will be aware and, without leaving HubSpot, they can see what’s happening with the invoices. This empowers them to take more responsibility for payment, to be more willing to jump in when there are problems.
Revenue leakage: best practice
As a holistic process, the goal is to arrive at a process that looks something like this where your systems are seamlessly woven together with really no gaps.
From the time that you create a Closed Won deal, you’re basically creating the invoice schedule including the future invoices and record of financial contract. Invoices are being automatically issued or automatically passed into the accounting system to be reviewed by the finance team.
ScaleXP does a lot to automate not just invoicing, but also revenue recognition off the back of that, preparing and posting the journals back into Xero or QuickBooks, tracking the upsells and downgrades, making sure that the renewal schedules are prepared with the relevant values, etc.
This enables a truly seamless process not just in terms of revenue leakage, but revenue recognition and revenue forecasting as well.
People often think that it’s only possible to arrive at this ideal process in a few years and with a little bit more people, but with today’s tools and technology, there is no need to wait. Tools like HubSpot and ScaleXP are priced to be affordable to small businesses and SMEs, not just large entities.
At ScaleXP, one of our goals is to enable a seamless revenue process quite early in your company’s lifecycle.
To find out more about how ScaleXP might help your company today, speak with our team and arrange a free trial.
