In this week’s NetSuite China solution showcase, we look at a solution we deve

2024-04-29

In this week’s NetSuite China solution showcase, we look at a solution we developed for software and IT service providers based in China.

Software companies that offer services with monthly subscriptions often have challenges managing billing schedules and recognising revenue. The combination of NetSuite’s core ERP, + CRM, advanced modules and high customisability allows software and IT service companies to map highly complex processes to NetSuite. 

One remarkable aspect of NetSuite is that while even some basic system requirements for companies in this industry cannot be met using NetSuite’s standard functions alone, this does not create significant risk for this kind of implementation because NetSuite is so easy to customise. For example: using NetSuite’s standard functions, you can only display the full contract length price of a service item but you cannot view its monthly subscription fees, which is a crucial information for any customer considering a subscription service. It might therefore seem surprising that NetSuite is highly popular with companies that have a subscription-based business model. However, because NetSuite offers numerous free tools to customise transaction forms and build customised business processes, the lack of standard functionality is not a big problem at all. Large functionality gaps would normally be a deal breaker for an ERP systems because most proprietary ERP brands typically require coding even for simple customisations like adding new fields to a transaction form. However, many of the complex customisations to NetSuite we developed for China IT services and software companies do not require any hard coding at all. 

What our solution achieves

For Chinese companies in software and IT services, our solution can help sales and finance staff to increase productivity by reducing the amount of time spent on manual work for generating quotations, managing billing schedules for recurring services, generating financial reports and closing financial periods. Our solution also helps data to flow easily form one department to the next (from sales to operations, sales to finance, etc.) This allows users to avoid duplicating data or manual entering data into multiple systems. Specific functionalities include the following:

· Full integration between CRM and financials to automate billing processes and generation of monthly revenue recognition and related reports

· Finance teams no longer have to manually check when the next billing is due; billing schedules can be set up at the beginning of the contact for the whole contract lifetime and generate the invoices according to the schedule with just the click of a button

· Automatic generation of quotation print-outs in a standard format with all detailed pricing information, including one time and recurring discounts, which are automatically calculated and displayed in a PDF format customized to reflect the branding used by our customers.

·  Purchase requests are managed entirely on NetSuite and are tightly integrated with NetSuite’s accounting module 

· Trigger Networks’ China GAAP reporting add-on software bundle for NetSuite, which allows companies to generate local balance sheet, P&L and other reports directly from NetSuite with just a few button clicks.

Typical user of our solution

Software and IT services companies typically offer a complex combination of software and hardware product items, monthly services and one-time set up fees. These products and services may be directly sold, or they may be resell items. When quoting to their customers, the monthly price of service price is a crucial datapoint to highlight, as this recurring cost will be one of the main considerations for customers making a decision whether to purchase or not. Companies in these industries also benefit from  keeping track of their recognised revenue on a monthly basis and completing accounting tasks like billing and month close-out efficiently.

Before using NetSuite, companies may use a combination of CRM, accounting applications, excel spreadsheets and other systems. In this setup finance teams would typically have to go through the terms of individual service contracts to work out the billing schedule for each client, then manually prepare invoices based on this information. They would also have to manually calculate the revenue to recognise every month by cross referencing data in multiple systems. Companies with multiple non-integrated systems may also have processes and controls that work for each of their stand-alone systems, which create problems for other different teams as data flows through each departments. For example: the ability to set flexible contract terms in the CRM may create headaches when finance are trying to set the billing schedule.  

Solution Overview

Let’s look at how we designed this NetSuite solution for software and IT service companies, focusing on each stage of our customer’s sales cycle:

Lead Categories + Sales Activities

Our solution follows NetSuite’s standard CRM logic for converting new business enquiries into paying customers as they progress in the sales cycle. New Leads are captured from the customer’s website or other email marketing campaigns and automatically assigned a label showing the source of this lead and which marketing campaign it was generated from. Netsuite can also be easily integrated and synchronised with other lead generation and marketing automation systems like Act-On, Hubspot and Marketo.

When a genuine sales opportunity is identified, this lead is classed as a prospect. Then, when the contract is signed, it is labeled as a Customer. Using NetSuite’s flexible reporting tools, sales manager can also see a record of all sales activities associated with  leads assigned to each sales rep, including calls, tasks, meetings and new opportunities.  

Quotation Stage - Pricing and Service Terms

When the lead enters the prospect stage, it is time for the sales to generate a quotation to send to the prospect. 

Our solution features several notable customisations to NetSuite’s quotation forms, including fields that display:

· Monthly prices and one-time setup prices. 

· Monthly price after tax

· Base cost of the service to easily calculate contract margins

· One-off discounts and recurring discounts

Because NetSuite allows users to generate Sales Orders from the quotation page, all the information on these customised fields flows from one form into the other, all the way to Invoice creation forms, eliminating a large amount of manual work for finance teams.

Each of these customisations to the opportunity and quotation forms do not require extensive coding.   

Quotation Stage - Printout 

The element of our solution that requires the most intensive coding work was the quotation printout form. Our customisation involves the following components:

An HTML template based on a design format provided by the NetSuite customer. This allows customers to generate quotation printouts at the click of a button after all the pricing information is confirmed Detailed price breakdown and subtotal fields are displayed in a format relevant to the customer to which it is sent. This requires a complex scripting process to calculate the amount relevant to each field based on the master data on the quotation form  

Contract Signed Stage

After the quotation is confirmed, the sales rep issues a sales order to to the project team and the finance team to activate the service and the billing schedule. The sales order is a crucial document because the information on this record is used to automatically calculate both the billing schedule and the amount of revenue that can be recognised each month. This record will also be used to automatically remind the client of any upcoming renewals due so the sales team can engage with the client again before the contract expires.

Our customisation of the sales order allows users to view both a customized "set up  date” (when the project begins the initial setup” and “service start date” (the date when the services actually start) on the form. These two dates are crucial for NetSuite users who need to distinguish between a one-time setup service and recurring subscription service, each date is required to calculate the revenue recognition schedule related to each type of service. Using the dates in these custom fields, our solution allows users to automatically generate a revenue recognition schedule for each service type.  

Billing Stage

Because the system already knows how much money is due for each service item each month, Finance teams have access to a dynamic report on the system dashboard showing the next payments to bill customers for that is updated automatically according to the billing schedule on the sales order. Rather than searching through contracts to calculate the next invoice due, finance staff simply click through to the relevant record and click the “next bill” button to process the next invoice. Invoice creation forms automatically pull all the relevant price and service item information from the sales order to speed up the billing process.  

Recognising Revenue

Our sales order customisation is complemented by an advanced transaction form available with NetSuite’s Revenue Recognition advanced module, known as a “revenue commitment form” This allows NetSuite customers to calculate recognised sales revenue based on the monthly rate recorded on the sales order that the customer has committed to pay, regardless of whether the invoice has been paid in full. Finance staff than conveniently create journal entries based on the revenue recognition information displayed on the revenue commitment form.  

Procurement Management

With NetSuite, software and service companies can also manage expense reports entirely on the system, without having to manually go through lots of printed out expense reports. Moreover, the maximum amount that can be approved by any manager is also controlled automatically by the system, so the “approve” button can only be clicked if the amount on the application is within the authorised limits. 

Again, This part of the solution shows the considerable flexibility of NetSuite’s platform. For some of our software company clients, we have implemented customised purchase request management solutions on Netsuite with 19 levels of management approval!  

China Tax Reporting

Finally, when all the payments have been processed and billing is completed, it’s time for the finance team to generate China GAAP statutory reports. This uses Trigger’s certified SuiteApp: China GAAP for NetSuite which allows finance staff to navigate to a tab in NetSuite, select the report they want to generate in what time period and create a printable copy directly from NetSuite with no need to login to a separate application. Again, this extension shows the power of NetSuite’s platform to develop complex customisations within the platform itself rather than developing from scratch and integrating with a separate ERP system, which would normally be required.  

Summary

So there you have it! A mix of NetSuite’s core ERP functions, advanced modules for revenue recognition allowed us to build a solution that is uniquely tailored to the needs of IT service and software companies a complex mix of one-off and recurring product and service offerings. This kind of solution has helped numerous software as a service companies to scale from startup to billion dollar enterprise by managing their business processes in an automated and scalable way. And we are seeing similar success stories emerging in China as well, including cloud infrastructure service providers scaling rapidly and expanding abroad.  

Stay tuned for other NetSuite solution showcases for companies in China!