How does Finance use a CPQ (configure-price-quote) system to grow revenue and drive profitability? More specifically, how does a CPQ increase revenue while supporting Finance’s broader strategic goals?
The Finance department does more than count the beans. Rather than being relegated to the sidelines keeping score, enterprises are looking to Finance to play a larger role, both strategically and tactically, in the management of the business. CPQ helps Finance more effectively evaluate, advise and make recommendations related to the allocation of resources by helping management balance opportunity risk with opportunity potential. Finance is expected to make meaningful contributions toward helping the enterprise boost revenue, increase margin, and improve operational efficiency, and that’s where revenue growth CPQ technology can help finance do just that by generating accurate quotes.
What is CPQ Software?
CPQ software, also known as Configure, Price, Quote software, is a powerful tool that helps businesses streamline their sales processes. It enables sales teams to easily configure products and services according to customers’ needs, accurately capture what features or components are desired in the product and produce a quote. CPQ software integrates with other existing software such as ERP, CRM, accounting systems, or eCommerce platforms to ensure product data accuracy at the time of the quote. By automating these tasks, CPQ software reduces errors, speeds up the sales cycle, and allows sales reps to focus more on building relationships with customers and closing deals.
CPQ Data Helps Finance Forecast Sales and Expenses
Companies love the annual rite of planning the path forward for the coming year. This annual event is almost entirely focused upon two factors: projected revenue and projected expenses.
Revenue is mainly based on forecasted sales, and the expense number is mostly based on paying for the activities necessary to achieve the forecasted sales.
Growth is achieved by reinvesting the profits from previous sales into expanding the business capacity of the enterprise, literally paying for the additional people and building out the processes and infrastructure required to drive that expansion.
The specific plans proposed to achieve these revenue targets are the figurative horses that management must bet on to complete their annual plan.
Implementing revenue growth CPQ solutions can significantly reduce sales cycles by streamlining workflows and enabling quicker response times to quote and proposals. This reduction in sales cycles aids in more accurate forecasting, enhancing both efficiency and customer experiences. This is a prime example of how a CPQ increases revenue—by accelerating deal velocity and improving quote accuracy.
Finance is uniquely equipped to offer validation of the plans as proposed. But, more importantly, Finance can offer real direction to improve the chances of the plan’s success. Finance requires two things to accomplish this: data and information.
CPQ Provides Financial Performance Data
CPQ systems can be the essential tool that provides the information that Finance needs to participate in strategic and tactical planning discussions.
CPQ data illuminates specific performance metrics related to individuals, departments, territories, products and options. That data identifies the performers and non-performers—those people and products who have exceeded expectations and those who have not.
More importantly, that data can be used as grist for any number of sophisticated analytical tools that Finance has at its disposal to extract the kind of information needed to predict success, improve planning and drive successful management of specific business processes and the enterprise.
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Let’s look at some specific CPQ product performance data types and see how Finance can contribute to the interpretation of what that data reveals. he revenue growth CPQ model enables sales teams by streamlining the sales process and increasing efficiency through accurate quote generation and standardized pricing.
1- CPQ Software Product Configuration Data
Just because a product can accomplish a specific requirement, doesn’t necessarily mean it should be marketed or promoted for that ability. Finance can help identify where specific product configurations are creating liabilities once they are in the field or, perhaps, simply costing the company more money to maintain the inventory necessary to offer the option than the company receives from the sale of that option. CPQ makes product data available for analysis to ensure that companies are optimizing their buying and selling processes. Additionally, CPQ applies pricing rules to ensure pricing accuracy and compliance. This is also a strong use case for revenue growth CPQ as it connects data-driven analysis to profitability.
2- Accurate Pricing Validation and Price Optimization
Finance, from its vantage point, can see the impact of a product across the entire enterprise. What looks like a fair price at the point of sale may in fact be costing the company money after the sale in warranty work. Conversely, hot-selling products may simply be underpriced products and point to the company leaving money on the table every time a copy is sold. CPQ helps the Finance Department validate the prices of products to ensure healthy margins by setting parameters that control pricing, discounting, promotions, and generating accurate quotes throughout the sales process. This illustrates how does a CPQ increase revenue by enabling more precise price controls and margin optimization.
3- Market Performance with Complex Pricing Models
When is a market viable? Selling products into the medical device market is vastly different than selling them into the office products market. CPQ enables Finance to see where the company is spending money on certifications that don’t support sales volumes that pay for themselves. In addition, medical, GSA and many other market regulatory requirements can be very expensive. Finance can help you identify where to reduce the markets you address and increase your profitability at the same time. Revenue growth CPQ capabilities here empower strategic decisions by identifying underperforming markets.
4- Territory Performance
If a company’s product is selling well in one territory and not in another, finance can help examine potential reasons why this might be happening. CPQ integrates with order management systems to streamline the entire sales process. With a robust CPQ system, Finance can analyze the sales performance and look at other factors related to where products are sold. Maybe boosting the sales force in the under-performing territory is all that’s needed for improvements. Perhaps modifying the product can open more opportunities. Perhaps abandoning a specific territory is necessary. CPQ data can enable Finance in helping to make this call.
5- Channel Performance
Sometimes making a profit can blind us to the real profit potential available. Channel sales are an area where this is most definitely true.
CPQ enables Finance departments to evaluate the actual sales numbers, and the models of products sold via a given channel to reveal how that channel is performing considering their actual potential. A revenue growth CPQ approach allows businesses to not only optimize omni-channel sales and distribution but also to uncover underutilized opportunities that can significantly boost bottom-line performance. Additionally, CPQ acts as a sales tool to streamline quote-to-cash workflows, improving sales efficiency and ensuring consistency and professionalism in customer interactions.
Choosing the Right CPQ for Finance
Choosing the right CPQ software for a financial services company can be a daunting task. It’s essential to consider several factors, including the company’s specific needs, the complexity of its products and services, and the level of customization required. A revenue growth CPQ solution not only supports complex pricing models and accurate quoting but also aligns with broader financial objectives like profitability and scalability. It should also be able to integrate with existing CRM and ERP systems and provide a user-friendly interface for sales teams. By selecting a CPQ solution that meets these criteria, financial services companies can optimize their sales processes, reduce errors, and enhance overall efficiency.
Implementing Revenue–Growth CPQ in Finance
Implementing CPQ software in a financial services company can have a significant impact on its sales processes. It can help reduce manual processes, increase sales efficiency, and improve customer satisfaction. Choosing a revenue growth CPQ solution ensures that the implementation not only improves workflows but also aligns with the company’s financial growth objectives. To implement CPQ software successfully, it’s essential to define clear goals and objectives, identify the right stakeholders, and provide adequate training to sales teams. It’s also crucial to ensure that the CPQ software is integrated with existing systems and processes, and that it provides accurate and up-to-date product information. By following these steps, financial services companies can ensure a smooth transition and maximize the benefits of their CPQ investment.
CPQ Integrations
Revenue growth CPQ software can be integrated with various systems and tools, including CRM, ERP, accounting systems, and eCommerce platforms. These integrations can help streamline sales processes, improve data accuracy, and enhance customer satisfaction. Some common CPQ integrations include:
- CRM integration: This integration enables sales teams to access customer information and sales history, and to generate quotes and proposals directly from the CRM system.
- ERP integration: This integration enables sales teams to access product information, pricing, and inventory levels, and to generate quotes and proposals that reflect the company’s current product offerings.
- Accounting system integration: This integration enables sales teams to generate quotes and proposals that reflect the company’s current pricing and product offerings, and to automate the order-to-cash process.
By leveraging these integrations, companies can ensure that their sales teams have access to accurate and up-to-date information, leading to more efficient sales processes and higher customer satisfaction.
CPQ Informs Sales Teams’ Decisions that Drive Revenue
Revenue growth CPQ data identifies sales by product, option selected, configuration, customer type and location. This information, coupled with individual sales rep performance, territory performance, market performance, and sales team efficiency, can provide useful data for Finance to analyze.
That analysis helps Finance help the business. A CPQ system gives Finance visibility into the entire transactional process, from product development to sales, manufacturing and customer feedback.
This is how a CPQ increases revenue—by empowering Finance to effectively evaluate, advise, and make recommendations related to the allocation of resources, helping management balance opportunity risk with opportunity potential.
This is what Finance does best, and the revenue growth CPQ model equips them further to deliver critical input on lean operations, risk reduction, effective process improvement, and tactical planning for the coming year. Finance helps the enterprise by increasing the potential for success related to any marketing plan, sales campaign, product development decision or expansion plan.
Conclusion
CPQ software is a powerful tool that can help financial services companies streamline their sales processes, improve customer satisfaction, and increase sales efficiency. By choosing the right CPQ software, implementing it successfully, and integrating it with existing systems and tools, financial services companies can achieve significant benefits and stay ahead of the competition. With the right revenue growth CPQ solution in place, companies can optimize their sales processes, reduce errors, and enhance overall efficiency, ultimately driving revenue growth and increasing profitability.
FAQs
1. How does CPQ software help Finance with revenue forecasting?
CPQ provides real-time sales data, pricing trends, and historical performance insights, allowing Finance to make more accurate revenue forecasts. By analyzing sales cycles, deal sizes, and win/loss rates, Finance can develop more reliable financial projections.
2. Can CPQ help Finance reduce revenue leakage?
Yes, CPQ minimizes revenue leakage by ensuring pricing accuracy, enforcing discounting policies, and reducing errors in quotes and contracts. It also provides insights into pricing inconsistencies and areas where margin improvements can be made.
3. How does CPQ improve financial reporting?
CPQ integrates with ERP and accounting systems to provide real-time visibility into sales performance, profitability, and revenue recognition. This streamlines financial reporting, making it more accurate and efficient.
4. What role does CPQ play in compliance and financial audits?
CPQ helps maintain compliance with pricing regulations, contract terms, and discounting policies by providing audit trails and approval workflows. This ensures that Finance has accurate records for audits and regulatory requirements.
5. How can Finance use revenue growth CPQ to optimize profitability across different product lines?
Finance teams can leverage revenue growth CPQ data to gain granular insights into product performance, customer preferences, and profitability per configuration. This enables smarter pricing strategies, phasing out unprofitable offerings, and increased investment in high-margin products.
