Classification of revenue

Context: Consistency in reporting of MRR

The company has rules for financial records, but different teams (Sales, Product, Finance) calculate metrics differently, causing inconsistencies and tension.

For example, Sales compensation depends on MRR Expansion, but Sales and RevOps calculate it in different ways, often without enough data expertise. Complex factors like account aggregation (e.g., a small team buying first, then the whole organization renewing) add to the confusion.

Sales may merge accounts to inflate MRR, skewing reports. While Sales' business knowledge is essential, it leads to inconsistencies, with each case requiring clear metric definitions and commission calculations.

Problem

1. To prevent Sales from pushing incorrect metrics, each report must be manually reviewed to ensure that accounts are aggregated according to the approved rules.
2. When discrepancies are found, you have to approach the salesperson, which can waste their time addressing the issue.
3. The manual analysis of reports and the back-and-forth communication (since salespeople are sometimes correct) can be very time-consuming, often taking days or even weeks.
4. This leads to frustration, especially when salespeople discover that they won’t be receiving their commission.

Solution

1. The company creates a shared document that defines the metrics. This document represents a company-wide consensus, is shared across all departments, and is accessible to all sales teams. It outlines metric variations by department and is updated as new edge cases arise.
2. The document is then shared with the AI.
3. Sales provides the AI with their data (CRM and spreadsheets).
4. Using the definitions from the document and the provided data, the AI calculates the report and generates an explanation of how the metrics and commissions were determined.

Advantages

The organization is completely aligned.

AI streamlines negotiating metrics across departments, speeding up data gathering, reducing errors, and handling complexities.

Sales still control reports but avoid handling every detail. They can provide quick feedback and easily adjust rules, while VPs instantly see how changes affect commissions and quotas.

Finance gets consistent, reliable data. AI enables "what-if" analysis, showing the impact on both Management and GAAP accounting.