In April 2018, WageWorks (a provider of consumer-directed spending solutions and services) announced it would be restating its revenue and net income for two quarters of 2016, full-year 2016, and three quarters of 2017 due to financial control and reporting issues. Two good articles detailing the matter can be found within the links provided below:
In short, the company identified a lack of internal financial controls, which led to multiple dominoes falling: the CFO, CEO, and General counsel departed, restatements were suddenly required for prior fiscal periods, then a delay of its 2017 annual report, and finally impacts to its valuation detrimentally impacted its investors. Nothing good.
One of the primary causes cited for the decline was the way WageWorks recognized revenue for a sizable government contract in 2016. Whether it was intentional or not is still to be determined, but that’s not in question is the fact that certain conditions existed at the company that allowed this situation to occur in the first place. One primary condition was that it’s likely there was no strong revenue recognition system of record to govern processes of input and output. As a result, whether it was manual work in spreadsheets or some other workaround, the ability to navigate around best practices, checks and balances, and financial controls prevailed.
What the above provides is a practical, real-world, example of the risks of going manual or using hodgepodge efforts in existing systems to meet revenue recognition and ASC 606 requirements. It opens a vault of potential risks and issues that will funnel down a path no one wants to go.
A strong revenue recognition solution, such as SOFTRAX, will prevent the above and send you down the right path to revenue recognition and ASC 606 compliance. The ROI for a revenue management solution is clear if you consider WageWorks’ scenario, and the chain reaction that occurred as a result:
It’s unfortunate that the story outlined above happened, as it had real-life impacts personally, professionally, and financially for all parties involved. With that said, this example provides a roadmap to a path that can be followed to avoid the above and ensure success in adhering to ASC 606’s requirements.
SOFTRAX is the purpose-built application to bring you down the right path address your company’s ASC 606 and revenue recognition requirements. Please contact us today.
What’s your take? Do you agree on the risks associated with manual or makeshift efforts to adhere to ASC 606? What are your thoughts on the conditions that could have led to the above scenario? We’d love to hear from you.
SOFTRAX provides superior experience, knowledge, products, and services to address your company’s ASC 606 needs. We encourage you to visit https://www.softrax.com/about/contact-us to learn more about SOFTRAX and the value we can provide for your company’s ASC 606 adoption and revenue recognition management needs.