Why use software for revenue recognition? It can be tempting to update your revenue line in your accounts with cash right away after the cash ends up in your account from a customer. But, you need to understand that treating cash and revenue as the same can be fatal for your business. You might get cash up-front but until you’ve earned it, you don’t get revenue. Until then, the cash is a liability—money that your customer can ask back at any point if you don’t deliver the promised service.
In case you spend their money but don’t deliver their service, it may result in dire consequences for your business. This is the concept of revenue recognition and complying to it is critical for every business owner. If you want to ensure compliance to the revenue recognition standards, then consider using software built for this purpose. Here, we look at the reasons for it.
Accounting is Overwhelmed without the Right Tools
Finance departments face a plethora of challenges today when it comes to recognizing revenue. This necessitates the use of tools that allow these departments to not only communicate more widely amongst themselves, but also with those outside of the department to increase transparency and streamline processes. Additionally, the tools must ensure that reports are readily available and easy to digest for the finance or accounting department.
The use of revenue recognition software has proven to benefit accounting professionals and organizations are finding that this software provides everyone with access to the best numbers reflecting company value. It is important to ensure that the tool or system used for revenue recognition is simple to use. This should be priority.
In addition to making revenue recognition easy, purpose-built software will allow you to make the best use of your time and skills while meeting new demands in the whole new world of value-added accounting.
Report Financials Faster and Accurately
Another benefit of using software for revenue recognition is reporting financials faster and accurately and closing quickly with confidence. A revenue recognition software can help companies to report financial results in a timely manner and comply with accounting standards such as ASC 605, 606 and IFRS 15.
The software uses a rule-based event handling framework to automate many tasks including revenue forecasting, allocation, reclassification, and auditing. A revenue recognition software will help you schedule, calculate and present revenue on your financial statements accurately whether these transactions occur at a single point in time or across various milestones.
Now that it is established that a revenue recognition software is critical for your business, you need to look for the right tech solution for this purpose. The right software for revenue recognition will allow you to track contracts based on the new 5-step revenue recognition model, while providing the required reports and enabling contract modifications. Start with the right revenue recognition software demo today!