why companies need a bookings policy, and how to create one
TRANSCRIPT
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Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Why Companies Need a Bookings Policy, and How to Create One
• Recognize why a bookings policy is now standard prac6ce for subscrip6on and services industries
• Iden6fy how to define bookings which align with go-‐to-‐market strategies all the way through to contracts
• Recognize booking nuances between customer renewals, new customers, cross-‐sell and up-‐sell ac6vity
Learning Objectives
After attending this event you will be able to:
Proformative Event Notes
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Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Why Companies Need a Bookings Policy, and How to Create One Mike Murphy, CPA, Chief Business Officer, goTransverse
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$ $ $
We Killed our Numbers!
We Missed our Revenue!
$ $ $ $
Traditional Business
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Ø Bookings as a predicable proxy for revenue
Ø Based on concluded arrangement of goods and/or services
Ø Time to revenue is in sync
Ø Valuation based on earnings
photo by Ford Europe on flickr
Cloud/Xaas* Business
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Ø Bookings may NOT be a good proxy for revenue
Ø Based on concluded arrangement of goods and/or services…
Ø Timing gap between bookings and recognized revenue
Ø Valuation based on future revenue
*XaaS = anything as a service
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Polling Question
Bookings Policy
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• Purpose: To ensure bookings accurately and consistently reflect the future revenue potential of new business arrangements executed during the reporting period
• Owner: Chief Accounting Officer, VP of Finance
• Includes: – What constitutes a booking – Value of said bookings – When bookings are realized – Order Documentation – Contingencies, Creditworthiness and Collection, Timeframes and
Exceptions
Bookings Policy
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Ø Intend to represent this to your board and/or investors? Ø Manage change in contracts and sales compensation?
Ø Enforce the same level of scrutiny as your rev rec policy?
Go-to-Market (GTM) Alignment
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photo by Gene Wilburn on flickr
A Good Deal • Formulated/aligned with
overall go-to-marketing • Pricing tied to terms and
conditions to customer that can afford services
• If deviated, then work within organization to ensure everyone is aligned and committed to delivering on parameters
Polling Question
Value of a Booking
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• Contract value – commitment vs. non-commitment – How “sticky” is the solution? – How quickly can a customer start to receive value? – What “gives” in order to get a commitment? – If solution is sticky, what does a commitment mean?
• What is included in a booking? – Not all bookings have the same value – Different offerings, services, etc have different value to the
company
Tie Bookings to Revenue
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• If driving bookings, tie to future revenue plans – Understand various rev rec criteria based on GTM and offerings – Build revenue “waterfall” predicting when bookings turn to revenue – Ensure that “triggering events” are captured and monitored
• If paying sales teams on bookings, what happens “if” – Rights to “claw back” if the booking never converts to revenue? – Show negative booking?
Net New Customers
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• When does the customer have to start paying?
• Is there an implementation period? If so, how long and when can customer start receiving the benefit of solution?
• What if take order but it’s not deployed for 12 months – is that a booking?
• A history of failed deployments? If so, is it material?
• In the contract, what “outs” does the customer have? Is the contract worth the paper it is written on?
Up-Sell, Cross-Sell and Renewals
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• How are up-Sells or cross sells measured? Are they dilutive to the original contract?
• Is sales creating bookings thru existing revenue streams and creating commitments resulting in lower revenue?
• What is your policy around renewals?
• Are “one time” items included in bookings? (creating an inflated view of long term subscription valuation)
In Summary
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Ø All businesses need a bookings policy
Ø Bookings policies must align with go-to-market strategy
Ø Contracts & sales compensation must align with bookings policy
Ø Only YOU can define the company’s bookings policy
SURPRISES
Thank You
Q & A
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• Thanks to our speaker
A Few Final Items
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Polling Question