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services credits take a lot of time and resources to manage manually - automate in Salesforce

Better way to manage professional services subscriptions in Salesforce

This is the second post in a three-part series about services credits as a method to sell and deliver professional services. In the first post, we shared what a services credit model looks like, the benefits of the model and why services credits are a valuable way to sell services for you and for your buyers.

Challenges When Managing Professional Services Subscriptions

When it comes to tackling Professional Services Automation (PSA), the manual management of tracking services credits has long been a source of frustration for organizations who use a professional services subscription model.

Many companies currently grapple with manually tracking usage, balances, and consumption history in cumbersome spreadsheets. This laborious process poses significant challenges in terms of maintenance, reporting, integration with revenue recognition systems, and accurate revenue forecasting. 

Initially attempting to support service credit management natively in Certinia PSA may seem plausible, but based on specific requirements, it is often more effective to treat service credits as a separate entity. A few simple extensions for service credits avoids manual efforts and ensures that the milestone and budget objects can be utilized as intended.

Ultimately, the overarching desire to automate the management of service credits outweighs any concerns around customization in order to alleviate these pain points and enhance operational efficiency.

Service Credit Lifecycle in Salesforce

As we covered in the first post of this series, the lifecycle of service credits within Salesforce involves tracking the purchase of credit bundles by buyers. These credits are tracked on the standard Salesforce object called “Account”, where it’s easy to monitor the client’s credit balance with the addition of a simple object for service credits. Buyers are billed upfront for the credit packs, and projects are created based on the types of credits sold. As buyers redeem credits for various services, the solution deducts from the account credit balance and updates the credits-used balance and projects accordingly. 

Revenue Recognition

To facilitate revenue recognition, delivered credits are linked to revenue transactions. Notably, credits are often set to expire after a year, prompting sellers to forecast all credits to be consumed in the last month of the 12-month period. This structured approach enables sellers to manage credit usage efficiently, creating a seamless experience for both buyers and sellers in professional services subscription model.

Automating Service Credit Management in Salesforce

To automate service credit management in Salesforce, CLD uses a systematic approach. Usage is tracked at the account level, and projects are utilized to monitor consumption, especially for services like educational classes. Credit management extends to tracking obligated credits for future use, denoting them as “pending” until delivered. Revenue recognition is based on the concept of “delivery,” with different definitions of delivery depending on the nature of the service. Delivered credits trigger revenue transactions, ensuring accurate financial reporting.

Revenue Recognition

Revenue forecasting for service credits presents a unique challenge, however. The absence of a clear heuristic, coupled with diverse usage patterns, makes forecasting difficult. Credit consumption could be manually forecasted month-to-month but again, consumption likely cannot be predicted. 

With the desire to automate, organizations have options such as the “peanut butter spread” approach, evenly distributing credit balances across 12 months, or focusing on forecasting unexpired credits in the last month of the year. The latter option involves updating forecasts as delivered credits are recorded and revenue is recognized to maintain accuracy. 

Choosing the right forecasting method becomes a critical decision for clients, balancing the need for automation with the intricacies of service credit utilization. Most companies prefer to automate the forecast of all the credits in the last month of the year. 

Save headaches by automating service credit management in PSA

Manual processes are driving companies to look for automation solutions to improve operational efficiency. It’s possible to automate tracking service credit balances and related revenue forecasting in Salesforce by implementing Certinia PSA. 

If you’re using services credits or considering a move to use services credits, give us a call—we can help.  

In the next and final post of this series, we share our interview with Scott Sunday, a long-time CLD client, who shares his insights about using service credits and how it improves the Customer Experience.