Revenue leakage is unnoticed leakage of money from your company. Industry estimates are that 3-5% of revenue is leaked annually due to errors and process gaps, and the negative impact compounds in industries where there is a recurring revenue stream over multiple years. That is a huge chunk of the revenue pie that developers have the capability of fixing. We spoke to the company Pramata to tell us more about the problem and how their Spring 2018 platform update is going to help devs stop the epidemic.
ADM: What kind of organizations are most affected by this problem?
Pramata: Organizations most affected by revenue leakage are those with a B2B focus, serving large customers where they have very intricate relationships. Every mature technology enterprise experiences revenue leakage. It’s no surprise given the inherent complexity caused by multiple acquisitions, negotiated commercial relationships, multiple business systems, and expansive product lines.
ADM: What are the sources of revenue leakage and what are the components of an effective strategy to eliminate it?
Pramata: Today, companies are losing millions of dollars in the form of missed price increases, unseen cross-sell, poorly executed renewal negotiations, over-discounting, mis-billing, missed SLAs and
unmanaged operational risk because their teams do not have easy access to important details about their commercial relationships.
ADM: What are the components of an effective strategy to eliminate it?
Pramata: Companies need to consider which buckets of revenue leakage have the greatest financial return saved and then which buckets have the fastest time-to-value and represent the quickest win. Typically, these are pricing levers, entitlements, and service commitments. Look for a solution to close these information gaps, enabling sales and finance teams to
assess leakage risks across their portfolio, optimize renewal offers, take full advantage of pricing levers, and negotiate out unfavorable terms. The information you need must always be kept up-to-date as your commercial relationships and business evolves.
Identifying and eliminating revenue leakage can be relatively fast, without significant changes to your business model or sales process, dramatically improving financial performance for both the short and long game. Eliminating revenue leakage is not a one-time project, but rather a repeatable, instinctive process.
Pramata Spring 2018 release
The Spring ‘18 Release features four new targeted solutions that enable large B2B enterprises to eliminate widespread revenue leakage across the customer lifecycle.
'We are very excited to share these new targeted solutions with our customers and prospects,' said Justin Schweisberger, Pramata’s Chief Product Officer. 'Revenue leakage stemming from deals that aren’t billed correctly, are mispriced or are overly-discounted is sapping customer lifetime value and we intend to help our customers stop it.'
Billing AccuracyWithout access to the current pricing and commercial terms related to a specific order or service, missed revenue and customer under-charging can reduce revenue by 2% (hundreds of millions in revenue) annually. Pramata’s Billing Accuracy solution connects commercial terms from MSAs, amendments, order forms and more to
billing accounts.
Entitlement & Pricing ReconciliationBy not regularly auditing pricing, billing, and entitlements, companies expose themselves to tens of millions of dollars in missed revenue and service penalties every single year. Pramata’s Entitlement & Pricing Reconciliation solution provides the most up-to-date summary of all pricing commitments, entitlements and service obligations for more effective reconciliations and audits. Teams can quickly assess where non-standard terms exist and compare against actual billings and performance to ensure they realize the full value of their relationships.
Deal & Order AccelerationWhen it comes to selling to existing customers, finding the right MSA, determining current pricing, and applying the right discounts can add weeks to a sales cycle. This challenging process also wastes active sales time, while leaving companies exposed to over- or under-discounting. For companies with a significant percentage of revenue from existing customers, this can add up to millions of dollars every year. Deal & Order Acceleration solution ensures that all commercial documentation - MSAs, amendments, order forms, and more - are captured into an always up-to-date, accurate record of pricing commitments, entitlements, and service obligations.
Account Research & RenegotiationEvery quarter, customer renewal and expansion negotiations represent an opportunity to revisit commercial terms and improve the economics of customer relationships. Unfortunately, most companies overlook this key revenue event each time it presents itself. Sales managers struggle to prioritize growth and renegotiation opportunities across portfolios, while account managers don’t have advance knowledge of accurate cross-sell and negotiation terms within their own accounts.