Boost productivity on revenue recognition with the right tools
Time-strapped accountants are always looking for ways to make their daily work more efficient, and one way of doing that is to more completely automate revenue recognition.
That’s been especially top of mind since the enactment of ASC 606, the somewhat complicated 2017-18 ruling that (among other changes) strictly regulates when public and private companies can count revenue. Of course any changes to revenue recognition practices are a big deal for accountants, since wrong moves can affect the accuracy of the profit and loss margins that dictate company financial health (and investor perceptions).
If you’re still struggling to handle those changes manually, you could be compromising everything from ASC 606 compliance to contract reviews to project management to your ability to scale business operations.
“Revenue recognition is a critical and often complex accounting area that companies can’t afford to get wrong,” notes Dusty Stallings in Accounting Today. She points to a survey of U.S. accounting execs in which most respondents ranked ASC 606 revenue recognition implementation issues, including the increased demands for disclosure, as “somewhat or very difficult.”
With that in mind, here’s a summary of some top revenue recognition challenges mentioned in the survey and ways they can be remediated through a capable revenue accounting automation tool.
Ability to group and aggregate data. Now that greater transparency is called for with ASC 606, it’s more important than ever for your system to quickly and efficiently draw key data from multiple sources and accurately group it into common revenue contracts — without the repeated access to multiple databases often required with old-school accounting software.
Ability to recalculate revenue after contract revisions. The most useful software allows clients to modify their contract agreements at will — without accounting traffic jams caused by ASC 606 stipulations that changed contracts can’t be simply ranked as new contracts. New regulations dictate that such changes must be properly allocated, but that task becomes automatic when you have the right tool installed.
Ability to recognize event-based revenue. To better adhere to stricter regulations surrounding the timing of revenue triggers, the best accounting software allows you to set triggers such as delivery, acceptance, timing or consumption for revenue recognition. Then you can forecast, track and report using helpful waterfalls and audit trails.
Ability to calculate and allocate standalone selling prices (SSPs). New regulations call for applying SSPs to contracts that often include multiple elements and performance obligations. A capable tool can make new calculations and reallocations as often as necessary, no matter the volume of data.
Ability to accurately account for contract procurement. It’s obviously crucial for companies to recognize and track revenue-related costs such as COGS, sales commissions, rebates and accruals. The right tool should be able to seamlessly handle all that.
Gravity Software’s Revenue Recognition module was designed to simplify the process of calculating correct revenues in each period. Users need only post invoices regularly and post revenues monthly. For a free demo, contact us online or call us at 844-464-7284.
Better. Smarter. Accounting.