The ultimate guide to financial controls (2024)

The vast majority of B2B organizations that sell to enterprise customers use a deal desk that involves a configure, price, and quote (CPQ) process. While it’s tempting to see the deal desk as a simple accountability checkpoint between sales, finance, product, and customer success, strategic finance teams are taking a different view. 

 

When approached as a cross-functional alignment between the people making a product, the people selling a product, and the people billing a product, finance teams can empower sales success while mitigating risk throughout the quote-to-cash (QTC) process.

 

For businesses offering complex revenue models, the deal desk is an even more critical touchpoint to ensure pricing terms defined during the CPQ process align with billing best practices. Subscriptions, usage-based pricing, and bundled products or services create multifaceted recurring revenue contracts. Price breaks, add-ons, and on- and off-ramping terms negotiated during the sales process can add even more complexity to contract and billing terms. This process makes the deal desk even more integral in creating quotes with financial structures requiring no reconfiguration or rebooking when finance teams close the books monthly or annually.

 

In this article, you’ll learn everything you need to know about financial controls, including:

 

• What are financial controls?
• Financial controls example
• Types of financial controls 
• The benefits of strong financial controls in the quote-to-cash process
• Financial controls checklist
• Financial controls and compliance in the SaaS industry
• The role of automation in strengthening financial controls
• Refining your deal desk to keep the CPQ process on financial track
• Why the deal desk is a strategic necessity
• Flexible CPQ technology: A game-changer for deal desks
• Advanced CPQ features for financial controls
• Reframe the deal desk conversation
• FAQs

 

What are financial controls?

Financial controls are processes and policies that allow a business to manage its financial resources. They help organizations allocate resources and boost profitability with effective planning.

 

Financial controls example

Now that you know what financial controls are, let’s explore an example. Your company’s overall financial implementation and management are a significant financial control and can include the following and more:

 

• Enforcing qualification restrictions in the hiring process to ensure only certified financial managers are taking on key roles.
• Requiring regular training and informational sessions to keep everyone on the same page with any important legal or financial updates.
• Delegating financial responsibilities to prevent bottlenecks and create more efficient processes.

 

Types of financial controls

Your business should be aware of at least three key types of financial controls:

 

• Preventive controls: Focused on preventing fraud or errors before they happen.
• Detective controls: Discover fraud or errors that have already happened.
• Corrective controls: Fix uncovered issues and prevent them from occurring again.

 

The benefits of strong financial controls in the quote-to-cash process

Let’s explore some of the numerous benefits to maintaining strong financial controls in the quote-to-cash process:

 

• Create accurate pricing and quoting: Setting high standards will allow consistent pricing and prevent potential revenue loss from incorrect calculations.
• Improve cash flow: An efficient quote-to-cash process can accelerate payment collection and better predict upcoming payments.
• Enrich revenue recognition: Accurately monitoring contract terms and sales stages allows your business to recognize revenue within the proper accounting period.
• Ensure compliance: By maintaining high standards, you can feel confident that your team is adhering to accounting regulations.
• Decrease fraud risk: Strong controls, such as approvals and separation of responsibilities, can prevent fraudulent activity.

 

Financial controls checklist

Lists will vary from business to business, but the following are items that most businesses should have on their financial controls checklist.

 

• Identify potential risks in your financial processes
• Create objectives that align with company goals
• Document policies and procedures
• Lay out a robust implementation plan
• Conduct frequent internal audits
• Hold annual reviews and continue to observe processes

 

Financial controls and compliance in the SaaS industry

When managing personal data, it’s critical to have safeguards in place, such as adherence to cybersecurity, revenue recognition, and data protection standards. With these strong regulations across the board, your finances are protected from fraud and errors that could occur. The following are some regulations to guide your teams:

 

• ISO 27001: This international standard establishes how to manage information security, privacy protection, and cybersecurity. The standard aims to uphold the following three traits: Only authorized people can access information (confidentiality), only authorized people can edit the information (integrity), and the information must be accessible to authorized users whenever necessary (availability).
• ASC 606: Accounting Standards Codification (ASC) 606 is an accounting standard that shows companies how to recognize revenue from customer contracts. It ensures consistency across industries and helps companies provide the most accurate information to their customers.
• GDPR: The General Data Protection Regulation is an EU law that mandates how companies can use personal data with integrity in mind. Examples of the regulations include only using personal data if it’s legal (through consent or contract), people having the right to access their personal data and know how companies are using their data, and personal data breaches needing to be reported within 72 hours.

 

The role of automation in strengthening financial controls

Human interaction is necessary for strong financial management, but some tasks benefit significantly from automation.

 

Automating revenue recognition (rev rec) helps you manage a larger volume of transactions and scale up your business as it grows. By automating certain manual tasks, you can continue to grow with speed and accuracy. Automating revenue recognition minimizes error potential and manual intervention, allows consistency across the board, and helps businesses remain compliant with financial standards.

 

Automating compliance checks also helps to ensure accuracy within processes. As a business grows, using a system to automatically check compliance violations and correct errors before they happen minimizes the chance of data leaks and allows your team to easily stay in line with compliance standards.

 

Refining your deal desk to keep the CPQ process on financial track

In many places, deals can get tricky from a financial perspective. When run strategically, the deal desk keeps every team’s interests coordinated and the CPQ process moving. Here’s how a thoughtful deal desk can set your finance team up for success.

Establishing financial controls in your CPQ process

Creating financial controls at the quote or order-entry stage is mandatory for maintaining compliance and avoiding revenue recognition headaches down the line. Building clear guardrails into the CPQ process can help you anticipate what will happen later in your revenue pipeline. This involves:

• Establishing clear rules for discounting
• Setting up revenue schedules for charges that are billed over time
• Identifying revenue events that alter your revenue schedule and distribution

Planning ahead for complexity

Most B2B businesses generate revenue through bespoke contracts as well as upsells. However, these contracts introduce complexity in determining SSP allocations and performance obligations, especially if they require canceling and restarting each time a customer makes a change. 

Establishing steps within the CPQ process to address both the immediate deal terms and the long-term engagement empowers your sales team to pursue a wider range of revenue opportunities and secure more revenue more easily over the lifetime of a contract — because you’ve planned ahead to accommodate future billing complexities.

Quoting with precision and control

Many CPQ processes and platforms are built to help sales teams create quotes and get deals done as quickly as possible. While this is efficient for the sales side of the house, it can make things messy for finance if the CPQ process doesn’t reflect what’s possible from a revenue recognition standpoint. The deal desk helps you make sure that sales quotes can actually be sold and billed without a huge amount of manual revenue recognition work.

 

Why the deal desk is a strategic necessity

Your deal desk is the key to creating a smart CPQ process at every stage and for every stakeholder. Getting deals set up correctly from the start provides better visibility into net revenue and less friction when it comes to billing and collection. Treating your deal desk as a strategic investment not only has a multitude of benefits for your revenue and billing teams, it also can mitigate compliance risk during corporate audits and security evaluations.

Financial transparency

As the bridge between sales and revenue, finance has to balance the needs of regulatory compliance and accounting efficiency with being a creative partner to help sales close new deals. During the deal desk, your finance team can answer questions about discounts, bundles, one-time fees, and the impacts of these pricing levers on revenue recognition. 

Having upstream visibility into what is being sold, to which companies, and for what price can provide greater transparency into what’s coming so finance can weigh considerations connected to running a business independent of any individual deal.

Having a function that can run with a deal’s needs while projecting where things are going to end up is important for finance. It gives the team predictability so they can set expectations and projections with investor analysts based on what they’re seeing from the sales side of the business.

Reduced compliance risk

The more financial complexities introduced during the quote stage, the greater the risk of potential compliance issues. This issue is particularly a concern if your deal desk uses a CPQ system connected to your customer relationship management (CRM) platform but not your revenue systems. When CPQ and rev rec systems are siloed, finance teams may have difficulty understanding a deal’s revenue impact — even on the billing side of pure consumption models — opening a compliance risk. You need a fully connected stack to maintain SEC compliance while allowing for deal flexibility and creativity.

 

Flexible CPQ technology: A game-changer for deal desks

Each unique deal requires a unique configuration. Having a flexible CPQ platform that’s easy to configure and connected to your revenue systems is a critical input for a high-impact deal desk.

Introduce financial controls upstream

Most CPQ platforms aren’t set up to handle complex enterprise pricing and billing terms, which can keep your deal desk process from giving your finance team what it needs to recognize revenue efficiently. Diverse, long-term revenue strategies require more than a one-size-fits-all approach, and a quote-based deal view isn’t built to allow nimble responses to deal details. Many platforms base their metrics around the quoting speed and how quickly they can accelerate a sales pipeline.

As a result, customers can customize a quote however they want, but no guardrails are in place for things like how you’re allocating your revenue, how you’re going to bill over a certain period, how you’re going to renew, and how you’re going to make changes throughout the customer lifecycle. Offering a limitless menu of options might be good for customers but it isn’t good for finance teams. A CPQ platform with built-in financial controls gives sales the flexibility to create quotes that make sense from a revenue recognition perspective while also supporting customer needs.

Automate complex QTR processes

Building quotes for something like pay-as-you-go pricing gets complicated quickly. Without built-in support for this kind of pricing model, finance teams must build manual workarounds, which increase the potential for accounting errors. A configurable CPQ platform allows finance teams to model revenue projections upstream, set up a performance obligation against these projections, establish billing terms, and then trigger the process to run automatically once the deal is closed. This automated QTR process frees up finance teams to work on moving forward critical business initiatives instead of cleaning up inconsistencies that require constant back-end support.

Minimize manual accounting work

Without upfront structures to keep your CPQ process aligned with your rev rec strategy, accounting will become more labor intensive than it has to be. Building controls into your CPQ platform from the beginning can save your business time and money. If you don’t have safeguards in place, things get tangled financially down the line. Companies solve this problem by paying millions in fees to have an auditor look through the ad hoc things that happened over the course of the deal because they lacked the proper controls at the beginning.

 

Advanced CPQ features for financial controls

If you want to remain vigilant and continue to scale up your business, you may want to look into advanced CPQ features for financial controls. Here are a few examples of features that can keep your company moving quickly and accurately.

 

• Compliance checks: With your company rules and regulations integrated into your CPQ system, you can ensure that you’re abiding by policies with any pricing changes using the help of automation. Automated compliance checks don’t take the place of security professionals, but they do add an extra layer of security and minimize the potential for data leaks.
• Contract updates: Automatic contract updates adjust certain parts of a contract based on predetermined conditions, eliminating the need for manual updates such as price adjustments with market changes or an upcoming renewal date.
• Analytics and reporting: Automatically populating the most current data can help you plan ahead and prepare for any changes.

 

Reframe the deal desk conversation

Generating revenue through custom contracts and sophisticated revenue models introduces financial complexity — and sales opportunities. With a strategic approach to your deal desk process, supported by an end-to-end QTR platform that gives sales teams flexibility without causing revenue recognition issues, your finance team can help your sales team win new business without compromising compliance.

 

Looking for a CPQ and billing solution that’s purpose-built for quoting and billing any combination of subscriptions, products, and services? Zuora CPQ and Zuora Billing can help your finance team streamline billing operations, automate revenue recognition, and connect your finance and revenue teams throughout the sales and billing cycle.

 

FAQs

What is poor financial control?

Poor financial control is the absence of sound processes to track a company’s finances effectively. This situation can lead to financial inaccuracies, overspending, fraud, and other negative impacts on your business.

What is financial control risk?

Financial control risk is the probability that a company’s internal controls won’t be able to prevent errors in financial statements in a timely manner.

What are examples of financial controls?

Some financial controls include qualification restrictions in the hiring process to ensure only certified financial managers are taking on key roles, implementing recurring training and informational sessions to keep everyone on the same page with any legal and financial updates, and delegating financial responsibilities to prevent bottlenecks and create more efficient processes.