At its core, revenue recognition is a relatively simple concept and practice: recording revenue in the period in which it is earned. However, the concept and actual application are often worlds apart. Just about every industry, every type of business, regularly oversees transactions in which services are paid for in advance of receipt of the actual product or service.
Imagine you’re ACME Event Planning, and you’ve booked a client for that Autumn Harvest's event months in advance. Most likely, you received a deposit or down payment, with an agreed schedule of future payment dates already lined up. Or maybe your business is comprised of booking a year’s worth of hotel event rooms across the country in which audience members clamor to listen to the next great motivational speaker. The question is, when does each transaction get recorded?
FASB new standard
The problem with Revenue Recognition has become so important that the Financial Accounting Standards Board (FASB), the industry’s regulatory body, has implemented its new standard. The new standard states that revenue is recognized when control of the goods or services transfers to the customer. For either of the above scenarios, you could probably buckle down and sort through each transaction to ensure that the corresponding revenue is properly recorded.
Imagine having to sort through every transaction for every week, month or quarter. You'll be neck deep in reporting in hopes that each transaction is correctly recorded. Do you really want to spend that much time on how you report and record revenue? How about the many other associated costs?
Revenue automation
Chances are, you and your staff do not have the time or energy to sort through every transaction to ensure proper revenue recognition. What is you had an accounting solution already in place that could streamline the process? Well, you can!
Gravity Software® (Gravity) introduced its Revenue and Expense Recognition module that automates the whole process and make it as simple as creating an invoice. It’s as if Gravity’s Recognition module has the FASB standard in mind each time it’s put into action. Based on recognition templates, Gravity's will create the deferral schedules automatically. All you have to do is post the monthly entries.
Gravity's cloud-based accounting solution is written on the Microsoft Power Platform (aka Dynamics 365 CRM). A robust and open platform that hosts over 4 million users worldwide. Gravity helps companies grow by unlocking information and reducing friction. And with real-time insights into all your lines of business, leads to better decisions made by management, investors and others.
If your business is outgrowing your current entry level accounting software and needs to properly recognize revenue in the period it's earn, consider Gravity Software. Learn more and schedule your online demo today.
Gravity Software
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