The Approval Matrix: A Deal Desk Book of Witchcraft

 

More often then not revenue operations and revenue accounting teams have been referred to as the “Wizard of Oz” of the organization; keeping cash flowing and making people (sales and finance) happy by getting the job done from sales to finance to auditors. But they can’t do this successfully without an approval matrix. As a deal desk consultant this is the first thing I ask for once engaging on a project. And if the business doesn’t have one, guess what, we create one as our first action item!

What is an approval matrix?

According to google search and jotform and approval matrix is “An approval matrix, also known as a “schedule of authority,” is a visual representation of these rules. It clearly designates who's in charge of approving what and when. This prevents confusion about how to route tasks and keeps an approval workflow running as efficiently as possible.” 

This definition could not be more accurate but what it doesnt tell you is that each organization has different preferences for what the document actually looks like, who uses it and how. It is a list of the terms & conditions from a contract supplemented with the business’ comfort around changing the terms and who approves such changes. My preference, probably due to my accounting training, is a spreadsheet separated into approvals for pricing and approvals for terms and conditions approval matrix. 

Pricing Approvals

The pricing approval matrix can be fairly straight forward by capturing the discount percentage and identifying the

appropriate approver. Here is an example:

Discount Percentage	Approval Level
0% - 15%	Sales Manager
16% - 30%	Sales Director
31% - 50%	VP of Sales
50%+	CFO

Due to the straightforward nature of this approval structure, many organizations automate the approval process

in their CRM, which I highly encourage. Be careful not to jump on the automation train too soon though, this does

require the business to have their products and pricing standardized and captured systematically via a quote or similar

tool.

Terms Approvals

The approval matrix for the terms and conditions can be a bit more complex to capture which is why the structure and system of record may vary by business. Additionally, it is a living document that will need to be updated and maintained as the business evolves. Here is a list of the columns I attempt to capture:

• Contract Term: this name of the section from the contract (i.e. payment terms)

• Document Reference: section from the document (i.e. section 4.1)

• Standard Term (No Approval Required): this is the actual language or term (i.e. net 30)

• Alternative 1: the language which can be approved in certain cases (i.e. net 60)

• Approver: the approver of the alternative #1 language (i.e. VP of Sales)

• Alternative 2: the language which can be approved in certain cases (i.e. net 90)

• Approver: the approver of the alternative #2 language (i.e. CRO)

• Approval for Alternatives Not Listed: the approver of any other alternatives (i.e. CFO)

• Finance Risk Level Impact: a scale of low, medium or high to help inform the decision of approvals in aggregated. This can help with training. 

While complex, this can also be automated in tools like CLMs but it is incredibly important an administrator of the system is assigned and tasked with maintaining and updating the system on a recurring basis. It is also important to maintain documentation of system configuration elsewhere in the case the administrator is unavailable in any manner. 

If you are just starting a deal desk function or looking to optomize the contracting side of your revenue process, start here. This document is iterative and can be started with just asking your colleagues a few questions about their pet peeves in contracts. It can start as a brainstorming type document that you use to build automated approvals in your CRM or a ticketing tool like Jira. And if you don’t have time, reach out to me!