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Contract and Revenue Management

Dave Blake avatar
Written by Dave Blake
Updated over 2 weeks ago

Welcome to ClientSuccess Revenue Management. We have designed a whole new way to manage your existing book of business from “New to Renew”. Our goal is to help you be as efficient as possible while empowering your team to play a more strategic role in expanding the business to drive upsell and cross-sell opportunities.

Definitions

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  1. MRR - Monthly Recurring Revenue
    Value of the contracted recurring revenue components of your term subscriptions normalized to a one month period

  2. ARR - Annual Recurring Revenue
    Value of the contracted recurring revenue components of your term subscriptions normalized to a one year period

  3. ACV - Annual Contract Value
    Annual yearly revenue generated from each customer contract, including one-time revenue that’s in term

  4. TCV - Total Contract Value
    Total revenue generated from each customer contract, including one-time revenue

  5. Subscription Status

    • Forecasted - qualified revenue leads that are not yet closed

    • Lost - forecasted contract that was not booked

    • Booked - booked revenue that is not yet in term

    • Active - booked revenue that is in term

    • Overdue - booked contract that is out of term or past its end date

    • Churned - booked contract that is terminated OR renewed by a forecasted contract that was Lost

  6. Type
    Configurable setting for what type of revenue you’re working with (ie Contract, One-time, Adjustment, etc.)

  7. Stage
    Configurable setting for managing revenue pipeline and progress (ie prospecting, negotiation, etc.)

  8. Forecast Type
    Configurable setting for classifying each revenue forecast in terms of category (ie pipeline, best case, etc.)

  9. Probability
    Configurable setting for classifying each revenue forecast in terms of confidence (ie 50%, 100%, etc.)

  10. Booked Date
    Best estimate of when you expect to close the forecast. The Close Date will change as you work the sale.

  11. Booked By
    Individual (CSM, AM, AE, etc.) working the forecast

  12. Item Products
    Product line items listed in the Items related list

  13. Item Amount
    Total revenue amount for given line item for the given term

  14. Item ARR
    Overrides auto-calculation for ARR

  15. Renewals / Amendments

    • Previous (Renews) - contract relationship indicating the previously renewed contract

    • Next (Is Renewed By) - contract relationship indicating the next renewal forecast or renewed contract

    • Amendments - contract relationship indicating an upsell, cross-sell, or down-sell to an existing contract

Getting Started

  1. Before we can do anything, you need to have an accurate ClientSuccess product list. This will determine recurring and one-time contract line items.

    • Recurring revenue is counted toward ARR and MRR calculations.

    • Non-recurring revenue is one-time and is counted toward (ie ACV, TCV, LTV)

  2. You’ll also want to check and configure the Contract System Fields (found under Field
    Settings > Contract) to match your desired nomenclature. Please see Revenue & Subscription Configuration for more information
    ​

    • Stage (REQUIRED) - Configurable setting for managing revenue pipeline and progress (e.g.
      prospecting, negotiation, etc.)

      • Revenue Stage Classification

        • Booked - flag for closed (e.g. closed-won) revenue stages

        • Lost - flag for terminated revenue stages

        • Forecast - flag for forecasted revenue stages (e.g. proposal)

    • Forecast Type (OPTIONAL) - Configurable setting for classifying each revenue forecast in terms of category (ie pipeline, best case, etc.)

    • Type (OPTIONAL) - Configurable setting for what type of revenue you’re working with (e.g. Contract, One-time, Adjustment, etc.)

  3. Confirm your ClientSuccess Team List

    • Because Revenue Management can now track individuals (CSMs, AMs, AEs, etc.)
      working on forecasts, you’ll want to ensure your team list is up-to-date

    • The “Sales (Limited)” role does not count against your seat limit and will be utilized
      for non-CSM users

  4. Configure Downsell and Termination Reason Codes

    • These will come into play later when making a down-sell amendment or
      terminating a lost renewal so it is marked as churned revenue

Adding Contracts

With the basics now in place, you’re ready to work with the new Revenue Manager.

  • There are many different ways to add contracts to ClientSuccess including:

  • Fields required to create a contract

    • Contract term start date (can be at line-item or contract level)

    • Contract term end date (can be at line-item or contract level)

    • Revenue amount for the entire contract term (not ARR or MRR)

    • Product(s)

    • Quantity for each product

    • Close date

    • Stage

Understanding Contract Status and Stages

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  • What does the Subscription status indicate?

    • Forecasted - qualified revenue leads that are not yet closed

    • Lost - forecasted contract that was not booked

    • Booked - closed revenue that is not yet in term

    • Active - closed revenue that is in term

    • Overdue - booked contract that is out of term or past its close date

    • Churned - booked contract that is terminated OR renewed by a forecast contract that was Lost

  • How do contract stages relate to revenue status?

    • Stages are configurable and should represent what you use for managing revenue pipeline and progress (ie prospecting, negotiation, etc.)

    • In order to accurately represent retention, revenue, and renewal metrics, each stage has to map to one of three contract states: Forecast, Booked, or Lost

    • Please see Revenue & Subscription Configuration for information on configuring your stages

Renewals and Amendments

With an active contract now in place, you’re ready to work with the other aspects of Revenue Management. The steps for creating an amendment (ie upsell, cross-sell, or down-sell) and renewal are very similar to the previous steps for adding a new contract, with a few differences.

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  • How do Amendments work?

    • An amendment is an upsell, cross-sell, or down-sell to an existing contract.

    • Amendments are additional contracts that are linked to the original contract.

    • When the original contract is up for renewal, the amendments are used along with the original contract to calculate revenue retention

  • How do Renewals work?

    • A renewal is an additional contract that is linked to the previous contract

    • When you click into any active, booked, forecasted, or churned contract (especially one
      that has renewed or is a renewal) you will have clear visibility into how the contracts are
      connected. This is called Renewal Relationships. These relationships are critical to understanding your revenue

      • Previous (Is Renewal Of) - indicates the previously renewed contract

      • Next (Is Renewed By) - indicates the next renewal forecast or renewed contract

    • If the previous active contract is past its term end date and the linked renewal is in a Forecast status, the original contract will be marked as Overdue

    • Once the renewal contract is in a status of "Active", "Booked" or "Lost", the previous contract will move to the "Past" tab.

Auto-Forecast and Auto-Book Renewals

If you have "auto-renew" checked on an active subscription, ClientSuccess can create an active forecast and/or book the forecast depending on your settings. The forecasted amount will be the same as the active subscription.

  • If "Automatically create a forecasted renewal for eligible contracts" is checked, a forecast will be created once the contract is within the appropriate date range to the renewal date. For example, between "30 and 90 days".

  • If "Automatically booked forecasted renewal" is enabled, the renewal forecast will then be updated to a Closed-Won stage.

  • This functionality requires a default "Forecast" stage and a default "Booked" stage.
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    ​

Understanding Contract Data Fields

  • What are cARR, cMRR, and cLTV?

    • These are committed revenue metrics. These metrics enable you to distinguish between the current, active ARR and newly committed ARR in the case of an early renewal or other future opportunities. cARR is the future expected ARR that accounts for future bookings, upgrades, downgrades, upsells, and cancellations.

  • Why is the ARR field editable?

    • This allows you to override the calculation ClientSuccess uses for ARR

  • What is the difference between recurring and one-time contract line items?

    • Recurring revenue is counted toward ARR and MRR calculations

    • Non-recurring revenue is one-time and is counted toward ACV, TCV, LTV

  • Can I have the same product on multiple line items?

    • Yes. This is the recommended approach if you charge different amounts for different time periods. For example, year 1 has a different price than year 2.

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