ASC 606 revenue recognition standard is now mandatory for companies that want to maintain their listed status in the United States. Companies also need to follow if they are looking to switch to a publicly traded model soon. However, with most accountants only familiarized with the use of GAAP (Generally Accepted Accounting Principles) accounting, it can be difficult to avoid mistakes.
Here, we describe briefly how 606 revenue recognition brings an improvement and then share information on how automation may eliminate the possible errors.
What is New with 606 Revenue Recognition?
This revenue recognition system depends on the customer contracts. It uses the terms, performance obligations, and the discharge of service elements that are fully presented in a contract. This forces companies to set up better contracts that describe an exchange of products and services. This revenue recognition method follows a set of steps that result in producing the required revenue recognition information.
The first step is to identify a customer contract, then different performance obligations are identified. These obligations are then recorded in an accounting system employed in the organization. A partial recognition of the revenue and the expenses is recorded as per the percentage of achievement presented by the individual obligations.
Eliminating the Errors
The ASC 606 revenue recognition can produce errors by the work of junior accountants and other employees that may be working under a senior accountant. This is because some employees will not feel confident in using a manual system that they are currently learning. All these issues are resolved when you employ an automated solution like RevSym.
These software tools provide an integrated set of policies that ensure that you can create financial documents that fully observe the ASC 606 revenue recognition. They allow you to automate the process, allowing the achievement of the following benefits:
Quick Record Sharing
Automated ASC 606 revenue recognition is excellent for quickly producing the required record that can be used by multiple departments and sections of a business entity. This is possible by creating a system where the accounting records are prepared periodically by using the ideal revenue recognition practices with each achievement of performance obligation.
Automated ASC 606 revenue recognition is great for decision-making elements. With accurate financial information about the current status of the customer contracts, it is possible to create the optimal contracts for the next fiscal period. Decisions can also be incorporated within a software tool, especially one which is available on a cloud network. This way, company associates can use and work on the financial reports regardless of their geographical locations.
Another possible function from automating your revenue recognition is that you can perform detailed financial research. This occurs by comparing the results of the current contract obligations with the previous ones and identifying the weak points that you can improve. This is an excellent way of using automated software solutions to achieve the best benefits of performing revenue recognition in an integrated manner.
CallidusCloud is helping its clients offer the ideal automated 606 revenue recognition software tools. With RevSym, you can quickly attain the benefits of automating your organizational functions!
Webinar: Accounting for Commissions and Other Contract Costs under ASC 606
In this webinar, Matt Svetich of Effectus Group will discuss what to consider when preparing for the commission accounting changes under ASC 606 and ASC 340-40.
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