Revenue growth management is critical for businesses of all sizes, yet not all can achieve it. This article illustrates one of the biggest issues of poor revenue management, the significant cause, and the ultimate solution to deal with it.
Table of contents
- What Is Revenue Growth Management (RGM)?
- The Primary Cause of Limited Revenue Growth: Traditional Billing
What Is Revenue Growth Management (RGM)?
Revenue management is a process that businesses use to increase revenue and profits. It includes activities such as:
- Pricing: Setting the right price for products and services is critical to maximizing revenue.
- Forecasting: Predicting future demand is essential to ensure that products and services are produced and sold correctly.
- Allocating Resources: Ensure that the right resources are allocated to maximize sales and profits.
- Cross-Selling and Upselling: Offering customers additional products and services to increase revenue.
Why Is Poor Revenue Management a Problem?
Poor revenue management can be a significant problem for businesses of all sizes. The main reasons are:
- Loss of Sales: If the business cannot sell enough products or services, it will lose money. It can happen because of incorrect pricing, forecasting errors, or insufficient products or services.
- Reduced Profits: If the business can sell products and services at a lower price than it costs to produce them, the company will lose.
- A decline in Customer Loyalty: If customers are dissatisfied with the products and services provided, they may never return to the business. It can happen due to poor quality products and services, delivery problems, and incorrectly forecasting demand.
The Primary Cause of Limited Revenue Growth: Traditional Billing
The issue with unreliable billing and revenue management can happen for various reasons.
- First, the business doesn’t have a solid collection process.
- Second, it employs inexperienced or irresponsible staff.
- Third, the company doesn’t take the time to improve its revenue growth management framework.
But probably the most significant reason for the challenges in revenue growth management is traditional billing:
- It Is Time-Consuming: It takes time to generate an invoice, sends it to the customer, and then wait for the payment to be received. This process can take weeks or even months.
- It Is Inefficient: The invoicing process may not include all the products or services provided, leading to disputes about what was delivered.
- Traditional Billing Lacks Flexibility: It can be challenging to change the terms of an invoice after it has been sent to the customer. The old billing system may also not adapt quickly to the changes in the collection process, including modifications in federal reporting and generally accepted accounting principles.
- It Can Be Costly: It can be expensive if the business hires someone to manage the billing process.
- The Old Billing System Can Cause Revenue Leakage: This leakage means a missed opportunity for a company to generate the correct revenue. It can happen when a customer pays late, a discount is applied on a hefty invoice, the payment is split into different prices, or the product is underpriced.
Achieve a Profitable Revenue Growth Management with Automated Billing
The revenue growth solution that companies use worldwide is Tridens’ proven and acclaimed Monetization automated billing software.
It includes the following benefits:
1. Minimize Missed Opportunities to Generate Revenue
Using automated revenue growth software significantly reduces critical problems in payment collection, including leakage. It can:
- Improve the Efficiency of the Revenue Growth Process: Automated billing solutions quickly and accurately create invoices, which helps improve the revenue growth process.
- Increase Accuracy with Detailed Reporting: The detailed reporting function provides an accurate real-time view of all revenue activities. This allows for better decision-making and quicker response times to problems.
- Improve Billing Timeframes: The revenue growth solution can also help manage cash flow by helping to improve billing timeframes. This means customer invoices are sent quickly, revenue is recognized sooner, and the collection process is simplified.
2. Allow for Greater Flexibility in Invoice Management
The revenue management software makes it easy to change the terms of an invoice after it has been sent out. Terms include discounts, payment plans, installments, and more.
Updates are also quick and reflect new changes in the industry, such as changes in the revenue recognition principle. For example, the best-automated revenue growth manager follows ACS 606. The short form of ASC means Accounting Standards Codification and was defined by the FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board). This revenue recognition standard outlines a five-step approach to improving billing and revenue management:
- Determine the contract with the customer
- Determine the obligations outlined in the contract
- Know the transaction price
- Align the transaction price with the promises in the contract
- Recognize the revenue when the other party completes, satisfies, or meets the performance obligation
3. Reduce Costs Associated with Revenue Growth Management
Automated growth revenue management software can reduce the costs of revenue growth. For example, a business might hire someone with revenue management skills and expertise without revenue growth automation, which could be expensive.
In addition, revenue automation can reduce billing errors and simplify revenue recognition by having one system in place instead of multiple ones for different revenue activities. It can lead to less employee training and reduce the overall time to generate invoices.
Lastly, businesses that want to take advantage of revenue growth software can make a one-time investment or opt for subscription billing. In this model, companies can pay a recurring billing, which spreads out the cost of the platform without spending money on its maintenance and upgrade.
4. Improve Dunning Management
Dunning is the process of attempting to collect failed payments due to situations like declined credit cards.
Automated billing improves dunning management by providing an adequate taxonomy of delinquent accounts, allowing teams to track revenue recovery campaigns and manage workflow easily.
It also offers an easy way to view revenue data, which is vital for making informed decisions about revenue growth. The data can be filtered by date, product, customer, and more.
In addition, revenue automation makes it possible to track both customer and non-customer interactions with the company. It helps organizations understand where most of their revenue problems are coming from.
5. Increase Customer Satisfaction and Retention
Revenue growth software can increase customer satisfaction and customer retention by automating revenue growth tasks and improving the accuracy and timeliness of their invoices. These will result in a better and improved customer experience and a lower churn rate.
Revenue automation can also help reduce billing errors, often leading to customer and company disputes.
Revenue growth is the lifeblood of any business, but it’s not easy to balance all aspects of revenue management. Automated software is a great place for businesses to start when looking for ways to increase billings and revenue.
By using automated billing software, organizations can collect payments faster, align their customer invoices with contractual agreements, and improve their troubled management. Revenue automation can also lead to increased customer satisfaction and retention.
Want to get more information about Tridens Monetization? Leave a comment below or schedule a free demo!