(Editor’s note: so many areas of friction within businesses can be eliminated by technology – often, areas we never even consider. Doug Erb of Lanshore brings us an example of this today – CPQ is the technology, and conflict between sales and finance is the area of friction. Here’s Doug.)
We all know that in sales there are often price concessions given to customers. This can be in many forms, from a simple discount to a more strategic B2B negotiation. In the latter case, sales may have to get approval from several people to allow for specific price concessions. This approval could require not only the sales rep’s manager, but the manager’s managers and perhaps move into different departments like finance.
Let me paint a picture: A sales person is asked for a price concession by their customer. What should they do?
Option A: “Hey, if I give them the concession, this customer will ink immediately. I’m going for it, ask for forgiveness later.”
Option B: “Maybe I should ask my sales manager. ‘Hey Sales Manager, should I give this price concession?’ Sales Manager: ‘Will they ink now and do a press release? If yes, we can ask for forgiveness later.’”
Option C: I should probably run this through the right channels so I don’t have to go back and embarrass myself, possibly losing the deal by telling my customer I can’t honor the price
I know this is a gross oversimplification, but these scenarios play out often. It is what causes the friction between departments like sales and finance. By automating the approval process, sales people are more likely to seek the proper approval with guided concessions. This in itself can help a salesperson, not only with what they should be promoting in the form of a price concession, but can also help him or her bundle packages that may reduce cost and be more beneficial to customers. It also gives finance departments visibility into how the sales organization is behaving and effectively allows for margin protection.
The other benefit to this workflow automation is it allows everyone to understand where, when and how concessions should be made. This takes a lot of the guess work out of what can be done and if forgiveness needs to be sought.
What amazes me most is that the decision to implement CPQ solutions is usually driven from sales operations and not finance. Considering that finance departments across businesses constantly pull their hair out over the behavior of sales, one would think they would jump at the opportunity to automate such a critical piece of communication.
With CPQ, if your sales reps decide to give away the farm, before he can print the proposal a big red light comes on and tells him STOP. This gives finance the opportunity to have input before it is too late to stop the process.
This is a call to all finance administrators out there: take your head out of the sand and be a proactive part of the automation process – you’ll save yourself a lot of headaches, and your company will generate more revenue as a result.