AHow to manage recurring revenuess a support company we have to manage our own recurring revenues as well as implement systems for our customers who have recurring revenues. From my experience not enough thought goes into the management of the opportunities and dangers managing recurring revenues can bring.

What is the problem?

My staff will confirm my mantra on problem solving – before you can hope to come up with a solution you first need to understand the problem. In this case, what is so difficult about recurring revenues?

For my own business recurring revenues could be annual support contracts. For plumbers, it may mean annual boiler maintenance, annual health and safety inspection or annual portable appliance testing and equally the frequency may be more often – quarterly, six monthly or even monthly.

Additionally, the frequency may affect the solution. Taking annual frequency for instance, several factors will come into play:

  • If it is annual is there a process?
  • Do you need to ask the customer if they want to renew?
  • Or do you invoice the customer without asking?

The process defines ownership of the problem, for example, if the annual invoice is simply sent out then the process clearly belongs to the accounts department. Also, you need to define if sales should be involved and/or a renewals team that controls the more friendly approach i.e. reminder letter acknowledging the renewal date informing the customer of the process and possible cancellation policy. This I would describe as a CRM (customer relationship management) process for managing the relationship with the customer.

In practical terms invoicing should be as painless as possible and regardless of process the end result is the creation of a number of invoices or possibly pro forma invoices in the accounts system.

The disadvantage of the first accounts only approach is a lot of wasted time. After sending out invoices the cancellation rate is normally high. Many companies require a PO (purchase order) number and any invoice without PO number is either returned (good) or just ignored (bad).

The returned invoices at least start a conversation, the ignored invoices start a debt collection process – both of these are negative conversations.

Using a CRM approach the invoice or pro forma is sent with an accompanying letter and/or email that explains the positive element of the renewal and starts the conversation. For many a business operating an annual renewal is a good opportunity for account management – the chance to have a conversation with a customer and add to the relationship along with any additional services. Find out if their business has changed in the past year and do you have new services or goods to offer that meet their needs?

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