Articles
Customer Experiences with Tensoft Revenue Cycle Management (RCM):
An In-depth Look with Tensoft’s RCM Guru
Tensoft's Revenue Cycle Management chief architect and product expert, William White, has more than 19 years of experience in designing, developing, and managing an array of software systems. As Tensoft's CTO, he has helped many software and high tech companies with their complex revenue management, recurring billings, and contract management needs. Below is an in-depth interview with William and Tensoft Marketing Associate, Alejandro Barajas, on the different types of RCM customers and how this solution helps in their day-to-day business operations.
BARAJAS: What's the profile of a typical Revenue Cycle Management (RCM) customer?
WHITE: A typical RCM customer has complex billing needs, such as the need for recurring billings or usage-based measured billings, and the need to manage deferred revenue and revenue recognition policies. They are looking for a way better way - an automated way - to manage revenue. Most often, a typical, new customer will have thousands of records of billings transactions and deferred revenue balances in an Excel spreadsheet that needs to be updated on a monthly basis. Before using RCM, they are trying to do this manually, and often times, more than one user or department, such as Operations, is updating the spreadsheet in addition to the Finance department. Manually managing large volumes of business critical data in Excel is prone to error, so customers are in need of a system, like Tensoft RCM, that offers a repeatable and consistent process for managing their revenue.
BARAJAS: What are some of the specific issues that customers have solved using RCM?
WHITE: Well, there are a number of different issues that customers have solved while using RCM. A typical issue that comes to mind is the recurring billing for maintenance contracts - that's very common and a high pain point for customers. Most customers have annual billing and deferred revenue recognition rules for maintenance. They need to set-up those billings ahead of time, so that twelve months from now, they'll be able to go back and remember to bill their end-customers. Tensoft RCM takes care of this by allowing the user to define a recurring payment schedule to streamline their billing processes. We also allow the customer to set email reminders before the maintenance renewal is due, and they can attach a document to the contract in RCM so the details of the contract are always close at hand.
Usage based billing is another specific issue where customers benefit by using RCM - specifically those who sell clicks on a page, sell user access to a website, or sell other products and services on a measured pricing schedule. In RCM, the customer can specify a minimum baseline billing amount, for a recurring schedule, and then automatically generate additional billings for overages, like a mobile phone service provider would do. Or, the customer can set the recurring baseline amount to 0.00, and then have all invoicing based on the amount of product or service consumed by the user. RCM makes this much easier to manage since the customer's usage data is imported into RCM and the billing amounts are generated based on the baseline amount and a tiered pricing schedule.
BARAJAS: What are some of the most popular features of Tensoft RCM with customers?
WHITE: So, obviously, the recurring billings functionality is a key benefit of RCM, but a particular feature within that makes it the most popular. Customers like the fact that when generating a recurring billing schedule, the interface is very familiar to them and much like creating a recurring schedule on their Outlook calendar. With a few clicks of a mouse, the recurring schedule is created from the options selected by the user. Those options include daily, weekly, monthly, or yearly recurring selections. So, Tensoft RCM creates the recurring schedule based on your selections, while eliminating the need for you to add each billing entry manually. The next question we get is, "What happens to my recurring billing schedules if the contract end date is changed?" This is a common question for customers with automatic contract renewals that extend their contracts. The good news is that RCM gives you the option to roll any changes to the contract end date to the recurring schedules - automatically! There is no need for the user to manually edit each recurring billing line if the contract terms change.
Another popular feature among customers related to the billing schedule feature is the ability to edit specific entries on a recurring billing schedule. For example, several RCM customers tailor their billings around the seasonal needs of their customer by billing less in the winter months. We handle this scenario easily in RCM using the recurring schedule setup feature. For this case, the RCM user saves time by creating a recurring schedule for the standard billing amount, and then editing the entries generated for November, December, and January to reflect the contract terms. RCM customers really enjoy this feature, since it allows them to quickly fine tune a billing schedule to their specific needs.
BARAJAS: What are some of the more unusual ways that you've seen customers use RCM?
WHITE: That's a good question because we have seen a lot of interesting business models at our RCM customers, and a lot of different ways to manage contracts and billings. What has been nice to see is that RCM has been able to adapt to so many business needs to help our customers manage their contract billings and revenue recognition.
I remember one implementation specifically where our RCM customer needed to bill their end customer based on a percentage of revenue generated each month. One of the complexities was that the "percent of revenue" percentages were tiered into 6 to 8 levels and required 5 decimal places of precision, per their signed contract. The CFO and I looked at the billing options available in RCM and determined that the tiered pricing settings of the usage-based recurring billings would work well for this type of billing. We normally think of the RCM "usage-based billing" feature as being a quantity driven calculation to determine a unit price and total billing amount. In this case, the "dollars" became the "quantity" and the "percentage" was the derived "unit price". Now, instead of manually computing the billing percentages for each "percent of revenue" tier and trying to track that in an Excel file, they can upload the revenue amount and into RCM and have RCM compute the billing amount for them. This saves them a lot of time and helps insure the billings to the customer are accurate and can be verified. They took a feature we had in RCM and used it in a way that we hadn't anticipated, but it actually worked really well for them.
BARAJAS: Is there anything else you'd like to add about customers using Tensoft RCM?
WHITE: Well, I think we have a great set of RCM customers. Our customers are making use of the features provided in RCM, while adapting them to their business processes and business needs. Many are really saving time by streamlining inefficiencies and eliminating manual data entry; there is a tangible increase in productivity when using RCM. With RCM, you have a common data set for tracking contract details which increases visibility of data and allows for better and more accurate reporting. Almost every customer we have places emphasis on the ability to see forecasts, whether that is a recurring billing forecast for a customer or a forecast of revenue recognition by fiscal period. You can see this information easily using RCM This helps with their end-customers in terms of understanding their billings, forecasted billings and forecasted revenue - so that's been nice to see. Finally, one of the primary benefits in relying on a system for revenue management and not people is compliance. Systems, like RCM, help the users by applying rules consistently and tracking changes to transactions by user login. This is not possible if you are managing revenue in a spreadsheet, since a spreadsheet is only as accurate as the last user's edits.
We feel strongly that RCM helps our customers in those three key areas: Compliance, Productivity, and Visibility. A true testament to this was some feedback we recently received from an RCM customer that was being acquired. During a recent customer call, this RCM customer indicated to us that RCM helped with their acquisition because we had transitioned them from tracking several hundred thousand revenue streams of deferred revenue balances from a spreadsheet to managing the deferred revenue and revenue recognition in the RCM deferred revenue sub-ledger. With RCM, they now they had a system of record to manage their deferred revenue - a single source of truth - they could point to as their current deferred revenue balances. Being able to report against this data and to generate forecasts of future revenue by fiscal period by product line was a big help to our RCM customer. The acquiring company was obviously very happy that the company they were acquiring had a systematic way of managing billings and deferred revenue, instead of using a spreadsheet, which tends to be looked upon with more skepticism as far as being an accurate source of data. We were pleased to hear that RCM provided this benefit to our customer.
BARAJAS: William, thanks for sharing your knowledge on Tensoft RCM. I definitely learned a lot!
For further information, please contact Caprice Murray, Tensoft Director of Business Development, at 888-450-4030 x406 or at caprice@tensoft.com
