How many billing errors has your CSP business detected in the last year? It could be missed renewals, an unsent invoice, incorrect usage metering, or under billing. Billing errors can mean significant revenue loss and a net decrease in margin for CSPs. In the world of cloud, costs remain even if associated revenue is missed or inaccurate.
We have heard many stories of retrospective audits that have revealed alarming losses for CSPs, with missed or incorrect invoicing amounting to tens of thousands of US dollars for some—even wiping out entire margin for others. This is because the manual management of cloud subscription services, and Microsoft billing, is hugely complicated. The bigger the sales volumes, the bigger the risk. For some CSPs, the billing challenge sets in for as few as 10 customers. For others, it’s more—and it all depends on the robustness of the systems and processes in place.
To get a view of how complicated billing can get, here is a breakdown of four Microsoft specific billing challenges, and why these cause the sorts of accounting mistakes that can send profits tumbling.
1. Microsoft’s Prices Aren’t Static
One of the most critical things CSPs have to do, is make sure that all of their costs have been correctly accounted for, so that each of these costs can be forward invoiced to customers. The first challenge hampering this effort is the fact that Microsoft’s prices are not static. This makes it difficult to set and keep on top of pricing.
CSPs who have not set up an automated process rely on Microsoft’s extensive Office 365 pricelist and Azure’s pricing calculator to identify costs so that they can configure prices. If products and prices aren’t updated on a regular basis, margins risk getting smaller over time.
2. Tens of Thousands of Microsoft Billing Lines to Reconcile
While Microsoft’s prices aren’t static, neither is the customer’s buying behaviour. As subscribers, Office 365 customers have the right to add, remove or re-assign their licences during the billing cycle. For every change made, new billing lines are created in Microsoft’s monthly reconciliation files. Azure usage data is also added to this cumbersome file, which can be tens of thousands of billing lines long (Azure has thousands of resources). The accounting team has to manually pick through this high volume of detailed information to isolate costs for each customer (with the assistance of the Microsoft Partner Center and the Azure Portal to identify which customers bought what services during that billing period).
Once accounting has (hopefully) tracked down the right costs, they then have to take stock of the correct sales price or margin, and make sure to take account of any discounts or deals. This can be particularly tricky if sales data is left in silos across business systems.
Overall, the reconciliation process is convoluted and time-consuming. Manually processing huge volumes of reconciliation data requires an extraordinarily high level of attention to detail which means that mistakes are inevitable, especially as more customers and services are added.
3. Too Many Cooks Can Cause Chaos
There will be a number of different people doing different jobs aimed at maintaining the efficient end-to-end management of your CSP business, including engineers, technicians, sales, accounting and support. However, too many cooks can cause chaos if there’s no unified view of who’s doing what across the business. An IT engineer, in a good will bid to help a customer might, for example, access the Microsoft or Azure portals to add a brand-new SKU or resource. If this SKU isn’t logged as one of the company’s products and isn’t entered in the ERP system, it probably won’t be accounted for or invoiced.
The more people there are with this sort of access and freedom to add services on behalf of customers, the more risk there is that these services will slip through the billing process.
Worse still, some billing systems aren’t set up to support any changes made in the Partner Portal which can lead to even greater reconciliation and revenue leakage challenges.
4. Most ERP Solutions Aren’t Designed to Support Cloud Subscription Services
Most ERP solutions weren’t conceived to support cloud subscription management. This tends to create systems mayhem when customers upgrade and downgrade their services during the subscription period.
For example, a customer might want to add 12 Office 365 licenses. The sales team processes a sales order. The customer might then request to have the licenses set up for recurring billing. Sales set that up. A few months in, the customer phones to remove four licenses. Sales go back in to make the changes.
Over time, the adding and subtracting starts to create confusion, and with so many messages back and forth between internal teams, the vendor and the customer, some communications slip through and don’t get recorded. Accounting then has to try to piece together a puzzle that’s missing vital pieces a jumbled ERP system can’t readily supply.
This scenario applies to just one customer and one solution. Imagine how this story might unfold if your CSP business is growing, and more customers are demanding more services.
Cloudmore Guarantees 99.9% Billing Accuracy
Revenue often leaks because systems and processes haven’t been consolidated and streamlined. Having a unified view and control of the end-to-end cloud buying, provisioning and billing process is therefore a good way to keep tabs on revenue flow. It also helps if your workflows and systems setup is fine-tuned to CSP requirements.
Cloudmore’s automation solution puts CSPs’ needs at the forefront by offering one of the best Microsoft CSP integrations available. Our bi-directional sync with the Partner Center and Azure portal guarantees automatically updated pricelists and usage information, easy Microsoft subscription management and fast and accurate billing reconciliation.
We’re so confident that there won’t be any revenue leakage with our end-to-end billing solution, that we promise 99.9% billing accuracy, and not just for Microsoft, but for any product or service across the board, be it hardware, software, bundles… You name it, Cloudmore can help you sell it.