In our previous article, Introducing Salesforce Billing with Revenue Cloud, we took a look at the data model within Salesforce Billing and Revenue Cloud. We discussed how this extended the core functions of Salesforce around accounts, contacts and opportunities, to the world of accounting and finance, introducing concepts such as billing, revenue recognition and tax.
This article takes a closer look at what’s involved in the Revenue Cloud billing process with support for invoicing, specifically the ability to invoice for regular sums through subscription products.
With the ever-increasing focus on the customer relationship and technology’s ability to deliver products on demand the last 20 years has seen a continual shift to delivering subscription-based products over and above one time charge products. By signing a customer up to a subscription, you establish a stronger relationship with that customer, and through on demand services you can better support and enhance the customer experience and provide a platform for growing that customer relationship through additional services. All this adds to the complexity of the billing process with regular invoicing, possible pro-rated calculations for part period billing, and options to co-terminate and bring together separate services into a single customer contract. These are the problems which Revenue Cloud sets out to solve, enabling organisations to be more flexible with their customer commercials and establish better customer relationships.
To support the above processes, Revenue Cloud introduces four elements to the Product definition – Charge Type, Billing Frequency, Subscription Term, and Billing Type.
Charge Type can be set to One-Time, Recurring, or Usage. We’ll take a look at Usage billing in a future article and focus here on Recurring which will setup the billing process to generate multiple invoices.
The Billing Frequency can be set to Monthly, Quarterly, Semi Annual, Annual, or a custom invoice plan. This will tell the billing process when the next invoice is due.
Subscription Term is a default number and tells the billing process how many months or days should be billed for. This can be changed at time of quoting.
Billing Type indicates if billing takes place in advance or in arrears of the billing period.
To see how the above controls the invoicing process let’s take a look back at our object model for how an order is configured in Salesforce following a successful sale.
Diagram 2 highlights the Order record which is created from a Close Won Opportunity along with the associated Order Product records which relate to the Quote lines from the successful opportunity.
Diagram 3 shows some of the specific data fields for our subscription Order Product and you can see key dates have been setup on this record. These dates will drive the recurring invoicing for the subscription order product.
Start Date indicates when the subscription starts.
End Date indicates the end of the subscription period and is derived from the Subscription Term mentioned above.
Next Billing Date is a system calculated field that indicates when the next invoice should be generated.
Using these fields Salesforce can generate an initial invoice record with associated invoice line items with the amount of the first subscription period.
When this invoice is posted to the finance book and sent to the customer, Salesforce Billing will update the Next Billing Date field ready for the next invoice period.
Invoice records are typically produced by the system using a periodic scheduler which will sweep through and generate the invoice records for all order products showing a next billing date before or on the date at which the schedule runs.
Changes to the system generated dates can be made manually using the Override Next Billing Date field.
So this is a flavour of how Salesforce Billing enables periodic invoicing to deliver on the world of subscription services. Additional capabilities include automatic pro-rating of invoice amounts for billing part months, co-terminating separate subscription products into a common contract with a single end date, plus support for Evergreen subscriptions – continual pay as you go.
In our next article we will take a look at revenue recognition in the subscription world and how Salesforce Billing can forecast and record revenue against billings. If you’d like to know more about Revenue Cloud or how makepositive can help you and your business please reach out to us at [email protected] or complete the ‘Contact Us’ form at the bottom of this page.