How Revenue Recognition Risks can be Lowered Through Technology

Revenue Recognition is the cornerstone of accrual accounting with the matching principle. They determine when revenues and expenses are recognized for businesses. This is particularly important for industries like software as a service. The stakes are high for companies to ensure proper tracking for EOY reporting and audits. Using technology to automate revenue recognition can eliminate the risks of an employee handling it manually. There are a few common risks that manually completely rev rec comes with, and how technology reduces them.

Event-Based Revenue Triggers:

Revenue release can be deferred until certain events take place such as delivery, acceptance, or consumption. This can be a serious complication for manually tracking revenue recognition and is considered one of the most complicated tracking tasks associated with rev rec. A cloud-based automated solution makes it far more straightforward to rack and report event-based revenue. An automated solution also leaves a complete audit trail and helps complete accurate forecasts.

Calculating Standalone Selling Points:

Standalone selling prices can take accountants weeks out of every quarter to calculate. From there, they have to work out how to apply it to a contract which may include varying aspects and numerous performance obligations.

Automating this task saves both time and labor which enhances visibility. An automation tool allows the calculations to easily be recalculating multiple times and facilitate easier management for large amounts of data.

Contract Changes:

Contracts are rarely static for the customers’ entire life duration with you. As your business grows and their needs change it is necessary to make changes. This task is hard to keep track of through spreadsheets manually. An automation tool can complete this task promptly and accurately.

Automation can transform how a company can accurately track revenue recognition as well as save hours of manual work for your accounting team.

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