What Do You Need To Get To A New Level In Service Pricing?

Do You First Have To Clean Up All Existing Data And Design New Processes To Reach The Next Level?

You have to learn to walk before you can run. You have to get the process to work manually before you can start to automate it. Garbage in, Garbage out. You have to clean the old data before you can start to automate processes. 

Is that actually correct? No, I say it's not. What do you really need to do before you excel in modern service pricing? 

Automating Financial Chains Requires Less Than Is Assumed

Quite simply, you just need to know what pricing looks like right now and be prepared to use that information to decide what to do in the longer run. You may think I am underestimating, but let me explain. 

I just read about a survey in which the results concluded, that around 80% of companies still use office tools such as email and MS Excel for process work. We can well assume this is true also with contract management as well as pricing and billing, which are all related to prices. Actually, based on our experience, the numbers can be even higher in these process areas these days. Sadly, even though MS Excel is a great calculation tool, it is not an intelligent tool for the billing process.  

Fragmented Data. A Threat to Your Business

In practice, most companies are faced with a dreadful reality. Data is spread out in numerous office documents around the organization. Yes, customers are billed and account managers know their contracts; and yes, the finance system is the final destination to gather billed revenue in one place. But it is not possible to see the overall situation anywhere during the billing cycle and details are not visible anywhere even after the billing cycle.  

If we were to analyze the individual contracts and invoices one by one we would see all the variety and creativity that has been used over time when the contracts have been negotiated and signed. Service and product names differ. The variety of ways how to define the price is rich. Price bases differ, price points differ, various volume discounts are defined etc. What is agreed in a customer contract is of course to be obeyed. In B2B prices are often customer specific and contract based instead of being price list based. This is not necessarily an issue, but instead may have to be considered a fact, at least to a certain degree within a particular business model. The variety becomes an issues if/when making changes is time consuming, error prone and mainly manual. This is the case when billing data is gathered and updated in MS Excel spreadsheets and uploaded or manually captured into a finance system. 

From 'Pay-Per-Month' Towards 'Pay Per Used Capacity And Time'

And with business models shifting from 'pay-per-month' towards 'pay per used capacity and time', it will no longer be in any way  possible to just download a snapshot of active services for billing once a month. There must be more intelligence implemented to gathering billing data.  

Another Financial Data Aspect Which Is Usually Totally Missing Is Cost Transparency

Costs arise from the variable components of a service - what internal and external services are acquired to provide the end customer experience, and what the cost prices of these components are. Maintaining up-to-date cost prices and variable service components linked to each contract in office documents is just not feasible. The first place were an account manager or a sales person can typically see any profitability figures is the finance system.

Even then, the figures are often too high level and definitely late in the game. The customer, contract or service/product level profitability is not visible on the operative level where pricing is originally created, nor later when a customer is billed. Are business owners wrong to demand more capability? No, the expectation is fully justified. 

Old School - Executing Chargebacks Manually

For you to know how effective your service pricing is and what the profitability looks like, you must be able to process corresponding rules in a digital format smarter than the office documents. When data is in a digital format and consistently available, it can be analyzed to become information. This information can be used to understand if any changes are needed, or to simulate what happens if changes are made. Furthermore, a digitally consistent format opens possibilities for process automation in billing and in executing chargebacks. 

The most important aspect of intelligent digital pricing, rating and billing is that it opens the possibilities to create totally new pricing models and service products - even to grow the business with new business models. Not to mention that you should expect to be able to set pricing, billing and chargebacks to be executed automatically throughout a complete value network in your service ecosystem. But that is another story. 

My advice, based on thorough experience is, that if you wish to ease and automate service pricing and billing throughout your business, start from existing data and existing processes. Digitalize as-is first.

And referring back to my original statement about data clean up: Digitalized source data and processing will also reveal the needed data changes without tedious manual mapping and clean up beforehand.

After digitalizing as-is, develop your service catalogue, pricing models and costing step by step. Just make sure that you choose an intelligent solution which can orchestrate all current and future variability. 

So What's The Impact of IoT on Service Delivery?

If you are tired of managing your contract pricing and billing manually visit our website to get more information about our solutions for service automation.