Monthly recurring revenues and opportunity value

[sunchaser]

Hi.

I work a tech company and we sell SAAS services to banks .We charge the bank on a monthly basis a fee based on % of through put - like an agents fee.

In opportuinities, amount is only a single amount not the monthly recuring fees. At the moment we put in the annual amount we would earn from the bank

If I want to use forecating, how do I break it up into the monthly amounts to recognise that our sales are no one off opportunities but are recurring? the fees are a percentage of the platform usage

eg

1 million through put - we charge x % fee

The issue is that The revenue will ramp up over time. Its not equal every month

[dtokeefe]

Hi Sunchaser,

There are several solutions depending on how you treat recurrent revenue and opportunities.

Example: An Opportunity = Chance to sell 1 year of recurrent service. Amount of Opp = 12 x monthly charge plus setup, training, etc.

Custom module Payments = Monthly record of the amount billed and paid by each customer. Or use Quickbooks (or equivalent) for keeping track of billing.

In this example, Opportunities and Forecasting are for the big picture of sales, not for billing.

I would go this route in most recurrent revenue scenarios. My company has recurrent revenue and we tried using Opportunities for it. You end up with very messy data and a useless Pipeline (some Opps = 1 month charge for single customer, other Opps = big project).

Best regards,

David

[dtokeefe]

Hi,

In response to your email:

"The thing I can’t get around my head is how do we forecast monthly recurring revenue.

I.e. opportunity is $1 million. But on a forecast its earned over a 3 years period not one lump sum "

This is an accounting issue. You might view a 3 year contract as a series of 1 year contracts. That would make 1 initial opportunity and 2 renewal opportunities in your forecast.

The monthly payment stream should be tracked in your billing software. A key metric might be called Expected Monthly Payments.

There are certainly other ways to handle this. The most important thing is to choose an approach and stick with it, so you can compare your data over time.