ASC 606 (or IFRS 15 internationally) compliance—the biggest accounting guidance change in recent history—is already past due for public companies. It became effective at the beginning of this year, but many private companies still haven’t even started implementation.
While that’s certainly not an ideal situation, it’s also no reason to give up hope or make any panicked moves. Instead, view it as an opportunity. Compliance with ASC 606 provides a “moment of truth” for organizations to finally face and deal with inefficient and outdated manual processes to automate revenue recognition.
In an August 2017 white paper, PwC warned that companies that could not implement an automated revenue system by the January 1, 2018 effective date “may have to take a ‘brute force’ manual approach” to reach compliance by the deadline. “While there is an increased risk in a brute force approach because of its manual nature, some companies may find no other feasible solution in the short term,” the report said.
One reason why the firm advocated a manual approach—at least for the immediate short-term—is that it “typically requires more than 12 months (sometimes as much as 18 months) to implement” an end-to-end automated revenue management solution, which it recommends as the long-term solution.
Well, that’s not always true. RevSym from CallidusCloud implements in three to six months, compared to six months to a year or more for alternative solutions, including cloud or on-site enterprise resource planning or other alternatives.
In fact, maintaining or even reverting to a manual spreadsheet-based process can obstruct your organization from adopting an automated system, which PwC advocates as the only “sustainable long-term solution.”
Why automate revenue recognition?
There are certainly plenty of reasons to switch to an automated solution if you haven’t already. ASC 606 is only the most urgent.
“Because of a manual approach’s higher level of risk and resource-intensive process, it shouldn’t be considered a replacement for a sustainable long-term solution,” the report said.
Using spreadsheets to manage the additional calculations required by the new 606 guidance is fraught with problems, starting with input errors. Fidelity Investments once accidentally transcribed a $1.3 billion loss as a gain, resulting in missed shareholder dividends. It happens to even the biggest companies.
Even simple typos can wreak havoc on your financials if they’re not caught in time, and hunting down mistakes to the source can be a costly and time-consuming process. Spreadsheet-based revenue systems also suffer from a number of intractable issues, including version control, suspect security, a lack of easy connectivity to other systems, no audit trail, and difficulty in scaling. Manual approaches also complicate the auditing process, costing time and money.
Automating revenue recognition saves your finance department from spending hours double-checking spreadsheets. It also creates a more efficient way to meet the new 606 standards, ensuring compliance. Further, it enables finance to better understand how revenue trends can be exploited to improve corporate performance.
Automated revenue recognition enables companies to close their books more quickly and reliably and eases the audit process. Once a revenue recognition system is in place, audit prep becomes largely automated, as it’s constantly running in the background on a virtually real-time basis.
RevSym by CallidusCloud is purpose-built to address the revenue recognition challenges posed by ASC 606. RevSym enables accurate, timely, and automated rule-based revenue recognition management. See why modern finance organizations use RevSym to automate the process of consolidating data from multiple systems and delivering real-time GAAP reporting, increasing finance organizations’ productivity and improving controls.
Like all CallidusCloud products, RevSym is built to be managed and configured by the typical business user. There’s no need for complicated coding. You configure policies to support your current and future needs.
Automating Revenue Recognition
A Way Forward with a Modern, Automated Approach
Download this white paper to see how automating revenue recognition eliminates human error, enable audit readiness with operational benefits, and understand why strategic benefits offer more detailed financial reporting.
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