Finance
Finance changes from approving deals to approving the cost model behind each offering. It does this once, at Portfolio level, and only re-engages when something falls outside the agreed limits.
What finance does
- Approves the cost model for each offering. Finance confirms that the three-layer structure produces acceptable margin at forecast usage, and sets the risk bands within which sales can price without further review.
- Signs off outliers only. Once an offering is approved, finance does not re-approve each proposal. It re-engages when a proposal's forecast consumption breaches the bands.
- Forecasts and recognises revenue on the three-layer basis. Fixed MVP revenue, recurring retainer revenue and variable consumption revenue behave differently and must be modelled separately. Treating them as one leads to mismodelling.
- Handles margin escalations. When Customer Success reports that actual consumption is materially above forecast, finance works with them and the Centre of Excellence Leads to decide whether to absorb the cost, reprice or restructure scope, and whether the Portfolio or the contract needs review.
Inputs and outputs
- In from the Portfolio: the approved cost model and risk bands.
- Out to the Portfolio: sign-off on outliers, and margin thresholds and forecasting methods for new offerings.
Finance cannot control how customers use inference. Its job is to make sure the pricing structure and risk bands absorb that variability.
Why this design
An earlier version of the model had finance approving every proposal. That made sales dependent on finance for every deal and undermined the point of a governed Portfolio. Approving the cost model once and setting bands gives sales room to act while keeping finance in control of the risk.
Evidence status
Evaluated against an illustrative scenario. Not yet tested in a live organisation.