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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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•  For CPE: Answer all polling questions and remain for the duration. CPE Credits awarded in 24 hours. –  Questions on CPE? Email cpe@proformative.com.

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•  Please take the short survey at the end of the webinar.

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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

Sponsor

Polling Question