Entering the domain of accounting and finance with Salesforce
Salesforce Billing is now part of Revenue Cloud, which extends the Salesforce platform into the domain of accounting and finance.
This article focuses on the additions to the Salesforce data model by Revenue Cloud that extends Salesforce from a sales opportunity tracking system to a complete system for managing sales, order processing and revenue tracking – also known as “lead to cash”.
The Classic Lead to Order Scenario:
Closing the deal, or ‘opportunity’, in Salesforce terms, has been the focal point for most of Salesforce’s Sales Cloud customers from day one. To this end Salesforce was built to deliver an out of the box data model around Leads, Accounts, Contacts and Opportunities with supporting mechanisms to enable the progression of sales opportunities through to the close. This is the classic lead to order scenario and the typical domain of the sales team sometimes with involvement from marketing.
Diagram 1: This diagram shows the principal Salesforce data object structure highlighted in blue for managing this process.
What happened after the deal closed was left to individual customers to manage with custom solutions or integrations to ERP systems. To help out, Salesforce introduced the Order, Order Product, and Contract objects.
There was no automation around these, but they provided useful best practice data repositories. They held the information required to process orders and manage customer contracts and allowed Salesforce to hold a record of products delivered that could be amended from those on the sales opportunity. These are shown in red in diagram 1.
This has been extended in the last few years with Salesforce now being able to auto-generate orders and contract records through Salesforce CPQ. With the release of Salesforce Billing, management of the complete invoice and payment process is now within Salesforce. CPQ and Billing have now been neatly packaged into Revenue cloud.
Introducing Revenue Cloud:
So now let’s take a closer look at what makes up the data model for the billing side of Revenue Cloud.
In Diagram 1 the objects in green show how invoices, invoice lines, payments and payment allocations have been added to the object model. This allows Salesforce to manage the progression from opportunity quotes and quote lines, through to one or more orders with order products. From each order an invoice is then created with one or more invoice lines that subsequently record payment against that invoice line.
Diagram 2: This details the data model involved in supporting the detail and complexity around generating the invoice lines from the order products.
Billing, Revenue & Tax:
The three core concepts modelled are billing, revenue and tax.
Billing represents the creation of an invoice, which in accounting terms means an expectation that a customer will pay a sum of money.
Revenue represents that portion of amount billed, which can be recognised under the relevant accounting rules. For example, you can invoice for services to be delivered but it is recognised only on delivery.
Tax represents the incremental duty imposed on the amount expected from the customer based on local tax laws and obligations.
How Revenue Cloud Provides a Complete System for Lead to Cash:
How billing, revenue recognition, and tax amounts are calculated is now controlled by a series of rules setup as data records. For each category there is a top-level rule object, and each rule has one or more treatment records within a treatment object in that category.
These rules are referenced against each product in the system using the standard product object available in Sales Cloud and the order products that make up that order. Based on key dates around the order product they calculate invoice line record amounts for billing and tax, and revenue transaction record amounts along with a revenue schedule for forecasting.
The product can also use one time charge pricing, subscription pricing (such as monthly payments), and usage-based payments. In usage-based payments Salesforce Billing manages the production of the invoice at the appropriate time and includes relevant pro-ratio calculations such as part-month scenarios.
From an accounting perspective these invoice line and revenue transactions are linked to a finance book period based on transaction dates or revenue recognition schedules determined by the aforementioned treatments. They are also segmented by general ledger account records and codes for incorporating an organisation’s full accounting system.
We can clearly see that with the extension to Revenue Cloud the Salesforce Object data model has been enhanced significantly from the basics of accounts, contacts and opportunities. The system can now model complex billing and revenue recognition requirements, providing a complete system for lead to cash within the Accounts Receivable function of any business.
Reach out to email@example.com or complete our website contact form if you’d like to learn more about how Revenue Cloud can enhance and improve your business’s lead to cash system and processes.