Public and private companies alike are at varying stages in adoption of the new revenue recognition standard, Revenue from Contracts with Customers. Many finance and accounting departments have experienced challenges in understanding and implementing the new rules as it applies to their business because the new ASC 606 guidance has proven to be more complex than initially anticipated.
When it comes to revenue recognition and billing, ERP systems do not have the depth of functionality needed to process revenue under the new ASC 606 and IFRS 15 guidelines. Many finance professionals must use manual methods outside the ERP system to address these challenges.
Enterprise Resource Planning Systems are vital to a company’s success. However, these systems need to be maintained and enhanced to protect their value and serve a company’s changing regulatory needs in an ever changing business landscape. For instance, new business models such as IoT, recurring revenue, and changing regulations (ASC 606 and IFRS 15), all put pressure on back office processes to keep up.
In today’s marketplace, revenue information is under heavy scrutiny, and is frequently audited. Reliable, accurate revenue reporting is absolutely essential for any business, particularly when it comes to complying with government regulations such as Sarbanes-Oxley.
For younger companies, spreadsheets can be an excellent stop-gap solution for many different applications. They perform valuable mathematical functions and are easy to use, store and access. In smaller companies, they can even be successfully used to identify revenue and manage billing. However, in larger organizations, such methods simply can’t deliver the level of functionality required.
Many companies use a variety of spreadsheets or home-grown applications to sort out, store, and manage their financial data. Either approach is very flexible and capable of doing almost anything. Unfortunately, that very flexibility makes it difficult to develop reusable reports or dashboards that provide the correct visibility into the business, and that are readily available. When executives or auditors require information on the financial state of a company, getting that information usually entails a high-value resource with strong knowledge of the spreadsheets used to track this information developing a custom, one-time report. Though this report can provide a great deal of intelligence on where the company stands, it typically requires time and effort to construct, and often has limited reuse potential. Too, this report will often represent a snap-shot in time; by the time the report is constructed, it is very possible that the financial picture has already changed.