Our founders have very deep knowledge of the workings of software companies with a professional services arm, and so we are certain that CONVENDIA meets a need that many software company CEOs, CFOs, Sales Directors, Professional Services Directors have. It is very difficult indeed to put together the combined revenue recognition and cash issues of all of the following :
- A salesman in Germany is excited about closing a EUR 2,500,000 5 year deal with an Initial Licence Fee of EUR 1,000,000, Professional Services estimated at EUR 500,000 for an approximately 8 month project, maintenance of EUR 200,000 p.a. Payment terms for this client are 20 days. If he closes this deal on 17th March, two weeks before financial year end, what does this mean for likely cash and revenue recognition in this quarter and the next three quarters ?
- Another salesman in the USA is being told that his bank customer only accepts the subscription model. He charges USD 100,000 pa for a 5 year subscription with no cancellation allowed in the first 3 years, and there are 3 months of Professional Services integration work before the software goes live. The CFO is keen to recognise as much of the subscription revenue on a discounted basis up front. How does cash and revenue recognition look over the 5 years ?
- Another salesman in the UK is determined to meet his quota and closes a sale of GBP 500,000 but bundles in GBP 100,000 of development work. He gives the first 3 months maintenance free. In addition to the initial 20 user licence he expects client growth to 50 users over 3 years and negotiates a per user price for that but this is on an annual basis not an upfront licence fee. The client says those additional users will be in the USA and negotiates a USD annual fee rather than GBP.
- A large consulting contract is signed by the professional services arm, and the driver is regulatory change. There is an estimated price with up to 20% variation. A large part of the project is completed but then there is a postponement of the regulation and some changes from the draft regulation which had governed the project. What are the key parameters needed by the contract negotiation team to deal with this change ?
- A very complicated development contract is being negotiated with a large existing bank customer. The development will go into the vendor’s core software product but the client will fund it based on some product delivery milestones and will pay additional maintenance on it. What is the projected revenue and cash, and the cost of delivering this ?
CONVENDIA is designed to handle all of these different deal types and revenue recognition methods, and in addition to allow scenario modelling of changes in deal value, deal date, project length and scope and exchange rate based on various possible rates over time.
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