Posts

Choosing an accounting basis at your nonprofit organization

How to Choose the Right Basis of Accounting for Nonprofits

/0 Comments/in , /by

Being successful as a nonprofit means that everything needs to fall into place when and where it needs to fall into place. Knowing this, there are many different considerations and moving parts that you can control in order to gain additional visibility, save time, and improve outcomes.

While we discussed some of these factors, including the shift to outcome metrics and things to understand before selecting or changing from a calendar year to a fiscal one, today, we would like to turn our attention to another important consideration: How to choose a basis of accounting.

A recent AICPA article explored the basics on selecting a basis, and how to decide on whether a cash basis, accrual basis, modified cash basis, or tax basis is the proper way to look at the numbers, comparing these options and offering tips on how to select the one that makes the most sense to your nonprofit.

Different Bases of Accounting for Nonprofit Organizations

Whether cash, accrual, modified, or tax year, each basis of accounting listed below poses opportunities and challenges in measurement, disclosure, and reporting.

Cash Basis

If a nonprofit organization uses the cash method of preparing its accounting records and statements, it recognizes income and expenses when they occur. In other words, the nonprofit would record income when it received the funds and not when it is actually earned. It would also record expenses at the time it paid the bill rather than when it incurred the expense.

Example

This is a common approach for smaller nonprofits, as it mirrors a personal “checkbook accounting,” entering debits or credits as they are completed. For example, under a cash basis, if you receive a $10,000 pledge today, you do not record the $10,000 until the money is in the bank.

Pros and Cons

Pros and cons of the cash basis are as follows:

  • Pro: Easier to use on a day-to-day basis as it only requires one entry per transaction.
  • Pro: Due to its straightforward nature, cash basis requires less work and less stress when working with slow-paying funding sources (as opposed to accrual accounting, where money would be booked but the bank accounts could be barren)
  • Con: Must put a disclaimer on year-end reports that you use a cash basis.
  • Con: Presents challenges in visibility, especially for larger nonprofits.

Accrual Basis

Using the accrual method of accounting, a nonprofit recognizes income when they earn it, rather than when they receive it. It would also recognize expenses when they were incurred instead of when the organization paid the bill. For example, using the accrual method a nonprofit would recognize a pledge as income. That would hold true even if it had not yet received all the money, or even any amount of the donation pledged.

Example

Under the accrual method, nonprofits would record revenue and expenses when the transaction takes place, regardless of whether the cash has changed hands. For example, a $10,000 pledge would be recorded immediately and would create a receivables account for outstanding cash.

Pros and Cons

  • Pro: Offers a more complete view for monthly and quarterly financial statements, allowing you to get a more complete picture of your organization’s financial condition.
  • Con: More work—two entries per transaction and necessary cash flow statements.
  • Con: Requires more time and effort to keep books on a pure accrual basis.

Fund Accounting

Funds accounting is a form of accrual accounting that is specific to nonprofits. As a nonprofit grows, its funding sources can become more diversified. It may receive multiple grants, a government contract, personal donations of cash and goods and donations of time. With the funds basis of accrual accounting, each income stream is given its own accounting code. For example, your Department of Education grant would have its own code. Beyond that, you would be able to assign codes within a category so that you could break up DOE funds between general revenue, service revenue and administrative.

Modified Cash Basis

Modified cash basis statements combine elements of cash basis and accrual accounting. Certain transactions are reported on an accrual basis and others on a cash basis (for example, liabilities may be presented, but fixed assets may not).

The modified cash basis establishes a position part way between the cash and accrual methods. The modified basis has the following features:

  • Records short-term items when cash levels change (the cash basis). This means that nearly all elements of the income statement are recorded using the cash basis, and that accounts receivable and inventory are not recorded in the balance sheet.
  • Records longer-term balance sheet items with accruals (the accrual basis). This means that fixed assets and long-term debt are recorded on the balance sheet, and depreciation and amortization in the income statement.

Pros and Cons

  • Pro: Makes accounting for small transactions easier while allowing for a more accurate position when looking at fixed assets or large transactions.
  • Pro: Does not need disclaimer on year-end forms.
  • Pro/Con: Very conservative method of recording income and expenses. In this method, you only report cash which has been received, but include expenses whether or not they have been paid.

Tax Basis

While rare in the nonprofit world, there may be some cases for a tax basis for accounting. The tax method of accounting would ensure the financial statements match the organization’s Form 990.

Factors to Consider When Deciding on an Accounting Basis

AICPA author Marc Kotsonas, CPA, Officer- Mahoney Ulbrich Christiansen Russ shared the following six factors in choosing a basis of accounting.

  • Simplicity. The cash method may be the easiest to maintain and understand. Either the money came in or it went out. There are no accruals or allocations to compute. Cash basis financial statements are most common with very small not-for-profits.
  • Savings. Cash basis financial statements may provide administrative savings. With no accruals or allocations to consider, less time is required for accounting. In addition, if the organization has a financial statement audit, there are fewer statements for an auditor to test and issue an opinion on. This would generally reduce the cost of an audit.
  • Regulatory Requirements. Do you have to use a particular basis of accounting? For example, in Minnesota, the Attorney General’s office requires not-for-profits with more than $750,000 in revenue to have audited financial statements under GAAP. The IRS also addresses accounting method in its Form 990 Instructions, so be sure to consider the tax compliance implications of your choice.
  • Organizational Documents. Like regulatory requirements, a not-for-profit’s by-laws may specify the basis of accounting the organization must use. Consider reviewing your organization’s by-laws before undergoing extensive research to make sure you have the flexibility to choose a basis of accounting.
  • Understanding of Financial Position. Financial statements prepared under GAAP typically give readers a better understanding of the financial position of the organization at year-end. GAAP-based financial statements will show payables and other outstanding obligations, as well as any committed receivables or pledges. Cash basis statements often provide limited information. For instance, a not-for-profit that receives donated supplies and materials used in its programs would not capture their value or impact to the organization using cash basis statements.
  • Established Framework. Financial statements prepared using GAAP are based on a familiar framework. Since GAAP is commonly used, it also allows for financial statement comparability. Modified cash basis financials can be presented in any format management chooses, so they may not be comparable with the statements of other organizations.

Learn More: Nonprofit Success with rinehimerbaker

At rinehimerbaker, we are committed to helping you succeed. This is why we have written a series of helpful articles on running the finances at a nonprofit organization. We invite you to learn more by reading our articles on Outcome measures,  improving reporting, and increasing efficiency. Learn even more by reading these two nonprofit success stories from our friends at Sage Intacct, and contact us for more details.

Questions to Ask Cloud Accounting Vendor

6 Questions to Ask to Narrow Down Cloud Accounting Vendors

/0 Comments/in , /by

If you’re outgrowing QuickBooks or simply looking to simplify and automate your processes by moving accounting to the cloud, the process for building a long list and then narrowing it down to a short list can be a challenge. As part of the narrowing-down process, you will spend a lot of time demoing the software and discussing it with the sales team for each vendor.

As you narrow down your options, it’s important to understand what you’re looking for and how the solution will fit into the equation. This is why we have developed a non-exhaustive list of important questions to ask—and what you should expect in terms of an answer.

Question 1: How Much Uptime Can You Promise?

The uptime discussion is one of the main things that can separate vendors, and should be one of the first things you look for. Uptime is generally discussed in terms of “nines,” as in “how many nines can you promise,” and shouldn’t be taken lightly, as each nine promised is a testament to the company’s commitment to the customer:

  • Two Nines (99%): 3.65 days per year, 7.2 hours per month, 1.68 hours per week
  • Three Nines (99.9%): 8.76 hours per year, 43.8 minutes per month, 10.1 minutes per week
  • Four Nines (99.99%): 52.56 minutes per year, 4.32 minutes per month, 1.01 minutes per week
  • Five Nines (99.999%): 5.26 minutes per year, 25.9 seconds per month, 6.05 seconds per week

While five or more nines is often reserved (and priced) for mission critical applications like telecommunications, utilities, and more, your cloud provider should be able to promise and deliver more than two nines. Often, the sweet spot for SaaS applications is right around three nines, meaning you will see no more than ten minutes of unplanned downtime per month.

However, the real way to judge a vendor is not by promises made, but promises kept. For instance, a leading vendor in the cloud space promises 99.8% uptime, but delivers a 12-month rolling average of 99.987%—nearing the five nines “promised land.”

Question 2: Have You Worked in Our Industry Before?

While the answer is probably yes (the cloud accounting and ERP market is relatively mature), the real question you should be asking is “have you had success with our industry?” It’s common for a vendor to have product or service pages for many different industries, but few case studies pertaining to the industries. It’s important to look at these case studies and success stories for companies like yours in size, needs, and industry.

Question 3: How Much Will It Cost to Get Up and Running?

Another of the natural advantages of a cloud-based accounting software, there are still differences in start-up pricing and implementation. This is an example in which time is quite literally money, as you will be charged for each hour of migration, training, and other necessary services.

The biggest differentiator in this equation is the scope of the implementation—how deep will the software reach into your organization? Suites will naturally take longer to implement, but it will be a one-time project. Single-focus best-of-breed applications can be done quickly and easily, but you may have to complete multiple, less disruptive projects. We discuss the Implementation process in our blog series, Eight Things to Look for in Accounting Software, Part 2.

Question 4: How Will Ongoing Pricing Work?

Pricing is one of the key advantages of SaaS-based applications, generally allowing a move away from licenses, which in turn helps to offer more transparency and ease decision-making. With this in mind, as you compare vendors, one of the most common structures you will see is the per-user, per-module pricing.

In this, it’s important to know what you’re getting, how much it will cost, and how much it will cost for additional users—some users will need additional access, functionality, and modules. Know what you’re getting, how much you’ll be paying, and how much it will cost to add users, modules, or more as your business expands.

Question 5: Is There a Process for Requesting New Features?

At some point, you’ll be using a software, and think, “wow, wouldn’t it be nice if I can do [this]” or “how much easier would my job be if the software could do [this]?” One of the advantages of the cloud is that updates are much more flexible and frequent. Rather than having to wait a year for new patches, cloud accounting applications offer much more frequent updates—up to four times a year.

Knowing this, it’s important to understand the process for requesting new features. Is it easy to ask? Will you be given the same opportunity to request as a large business? How does the vendor narrow down what will be added in the release?

Question 6: How Often Will These Updates Come Through?

As we said, cloud software updates more frequently and easily than an on-premises offering (updates are hands-off; often you walk in to an update the next day or on a Monday). However, the more moving parts that a software has, the less frequent or focused an update will be. This is a main difference between suites and best of breed offerings—suites add a lot of complexity to the equation, so R&D money is spread across multiple products.

Conclusion

When you look to change accounting software, it’s just as important to plan as it is to find the right software. If you know what you want, you will be able to narrow down vendors with minimal stress. Stay tuned for an upcoming blog in which we discuss some of the internal discussions you will need to have before you even start looking at new cloud solutions, coming early next month. If you’re ready to learn more about the power of Sage Intacct for your growing business, contact us today.

ROI of Cloud Accounting

Exploring The ROI of Cloud Accounting

/0 Comments/in , /by

“What’s our ROI going to be?” If you’re considering moving your company’s accounting practices into the cloud, this is one of the top questions on your mind. You’re making a change to the way you manage your finances—and updating your technology is a big step in the right direction. But how can you be sure that your investment in a cloud-based solution is going to pay off and keep yielding returns?

Why the Cloud Delivers Faster Time to Value

A cloud environment, put simply, affords a growing business more agility and flexibility than any of their traditional alternatives. Consider the on-premise systems and boxed software programs that reside on your business machines (servers and PCs): they require you to maintain an IT infrastructure, which can be costly to establish and take care of. They’re costly from the get-go.

With cloud-based, Software-as-a-Service (SaaS) solutions, on the other hand, users access their apps, tools, and data over the internet. Their computing and delivery models make them inherently more cost-effective and scalable for long-term value. Take a look at these powerful stats:

  • Cloud application projects deliver 2.1x the ROI of on-premise ones, up 24% since 2012. (Nucleus Research)
  • Sage Intacct customers experience an average ROI of over 250%when switching to Intacct. (Sage Intacct)

Let’s take a closer look at what impacts the ROI of a cloud accounting solution:

Lower Implementation Costs

Cloud deployments, finds Nucleus Research, incur 63% lower initial consulting and implementation costs than on-premise ones. As we just stated, adopting a cloud accounting solution doesn’t require the purchase of new hardware and software licenses, or even the hiring of a skilled IT staff.

Moving financials to the cloud is a straightforward process for companies with basic infrastructures. They can upgrade to a best-in-class system without adding complexity to their tech environment. That means getting up to speed with web-based software is a faster, easier, and can provide results in a matter of a few short weeks—sometimes sooner.

Learn more in How Upgrading to the Cloud Lets You Hit the Ground Running.

Lower Maintenance Costs

According to Strategy&, the total cost of ownership for a cloud-based solution can be 50-60% less than for traditional solutions over a 10-year period. And Nucleus Research reports that on an ongoing basis, companies spend an average of 55% less on personnel to support cloud applications compared to on-premise deployments and they use an average of 91% less energy to boot.

These savings can be attributed to the cloud software vendors’ subscription model. Customers pay a per-user subscription fee for use of the software, hosting, and support, making the arrangement highly scalable as the company grows and adds new functionality and users. And vendor’s IT team—not your internal IT team—manages the upgrades, patching, user support, etc. It’s part of the service you pay for, enabling you to focus on building your business, not your IT systems.

“Automatic” Savings and Productivity Gains.

When your business replaces manual processes and workflows with automation, cost savings tend to follow naturally. Automating key financial and accounting processes is essential to saving time, increasing data accuracy, and ultimately, lowering costs. But don’t fail to take into account your employees’ ability to work from anywhere and on any connected device. And this includes users from the back office to the executive suite. There’s a great deal of ROI-supporting “power” in the real-time insights users can uncover 24/7. Take a more detailed look in How the Cloud Provides Real Time Insights for Real Time Decision Making.

Features and Functionality

Cloud-based software solutions are ideal for companies in the midst of growth. A cloud environment is an ecosystem that’s ready for evolution. Cloud accounting software suites typically come standard with core functionality that can be expanded as your business needs change—as your company takes on new clients, partners with more vendors, adds locations or product lines, etc. It’s easy to plug wew cloud accounting software modules into your existing workflow without a great deal of programming or “moving around” of data. This holds true for integrations, too, as cloud software is built with flexible APIs that enable seamless connecting of business systems.

The net result of this scalable product enhancement is that your business can grow without significant additional investments—and with each addition of new functionality, your team is able to add more value. Find out How Cloud Accounting Lets Users Take Control of Process.

Contact us to learn more about our cloud technology services and solutions.

Trade Contractor Accounting Challenges

Three Financial Time Drains for Trade Contractors

/1 Comment/in , /by

There are over 10 million trade service contractors, and while some operate as single independent contractors, many others operate in a larger business unit, with large-scale time management, purchasing, and accounting needs, run either by a business manager or staff who needs to manage purchasing, labor, billing and more.

Whether you’re in the business of electrical work, plumbing, HVAC services, data networking, roofing, painting, carpentry, sheet metal, or one of the many other trades, your industry faces some unique back office challenges.

With this in mind, one of the biggest concerns is likely this: You’re doing more and more work each month, and expected to get it done in the same amount of time. While you used to be making or supporting decisions that positioned your company for growth, nowadays you’re struggling to just complete the basics. In essence, you’re working in your business, not working on it.

Working in vs. Working on Your Trade Contractor Business

For an accounting professional, manager, or other business leader at a trade contractor, working in your business is simple: spending your day completing the necessary tasks in line with your job description.

However, when you’re working on your business, you’re getting all of the necessary tasks done, but also doing work to improve the business. This could include anything from highlighting opportunities for purchasing to save money, finding new opportunities for the project department to improve efficiency, or even finding ways to generate new business. Simply put, working on your business is where the money is made.

Unfortunately, one of the problems that trade contractors face is that leaders constantly get caught up in the minutiae of the daily grind and lose sight of the big picture. With rare exceptions, the people at a business want to help said business grow, but they often lack the processes or technology to do so.

If you really want to start focusing on the big picture, you need to take a step back, look at your everyday tasks, and look for certain things you can automate, so you to get back to working on your business.

Three Necessary Time Drains Preventing You from Working On Your Business

While the trade may differ, the process of accounting for it is relatively similar, and if you’re like most, you waste away on manual processes surrounding one or more of the following tasks.

Contracts, Completion, and Revenue Recognition

Much of your work is based in contracts, and whether you’re looking at the current way of doing business (PCM/CCM) or the ones about to take hold (performance obligation), bringing everything together poses challenges and creates a lot of work.

If the current method seems laborious, the new standards about to take hold will create a new set of challenges, as the contractor task force has been among the most vocal of the AICPA working groups who have noted implementation challenges. For businesses with outdated, manual processes, this means you will be doing a lot more work transitioning to the new standard and managing contracts under it.

The Cure: Technology Designed with ASC 606 in Mind

Revenue Recognition for trade contractor organizations can be a complex series of decisions and paperwork—both under the new and old standard. However, with major changes on the horizon, having plans, processes, and technology in place can be the first step in a successful transition to new standards. Sage Intacct was built to make contract management under the new standard simple, handling the complex requirements and providing peace of mind for accounting and project teams.

Learn more about the new standard and how Sage Intacct is ready to tackle the challenges it presents here.

Project Cost and Profitability Tracking

You have to answer a lot of questions on a daily basis. Will this job be completed on time? On budget? Do we have the people to take this job on this date?

Back-office professionals at trade contractors need to be able to answer these questions quickly, efficiently, and accurately. If your answer to any of these questions was “I don’t know” or “let me get back to you,” you don’t have a complete picture of your business. You need to have a complete view of each project—from materials to labor—before, during, and after the project. More importantly, it’s vital that you can come up with answers to these questions quickly.

The Cure: Speed through Automation, Visibility Through Dashboards and More

By automating your processes and setting up dashboards, you can receive and present information quickly, clearly, and compellingly—when and where you need to present it. Sage Intacct offers the right project insight when and where you need it. Whether in the form of dashboards, analytics, or project accounting-focused design, Sage Intacct can handle anything a finance team at a trade contractor can throw at it.

Cash Flow

Just as you need to look at projects before, during, and after, you need to be able to present a cash flow statement for both these projects and for the organization as a whole. This is the job not only of the back office, but of the project manager as well, who needs to be able to accurately present a schedule of values.

Financially savvy companies use standardized processes to ensure that the ability to be cash flow positive exists earlier in the project. PMs need to understand that their goal is to define a revenue recognition strategy that ensures a good cash position for their projects.

The Cure: Anytime, Anywhere Access for Those Who Need It Most

To make this happen, trade contractors need to combine automation with mobility, allowing project managers to access the numbers, submit costs, mark up the costs based on predetermined standards, and get all of this to billing—whenever and wherever. However, thanks to the cloud, providing access to the people who need it is easier than ever. Sage Intacct was recently recognized for its cash management function. Learn more about the feature and how it can make everything from billing to planning easier here.

The Challenges in Accounting for Trade Contractors Don’t Stop There

These are just a few of the time drains that finance and accounting professionals at trade contractors face every day, month, quarter, or year. However, by taking steps to increase automation, mobility, and reporting, the jobs mentioned above can be completed in less time, so you can get back to working on your business.

Sage Intacct provides the automation, reporting capabilities, and analytics you need to make decisions and prepare for the road ahead. Whether you need to manage a team of 10, 100, or 1,000 contractors, Sage Intacct can grow with you, working with other technology you need to manage your business.

Step 4 ASC 606

ASC 606 Step-by-Step Step 4: Allocate Transaction Price

/0 Comments/in , /by

With just over a year to go for private companies to have their ASC 606 plans in place, many organizations are yet to have done much to get the ball rolling. This is why we began this series, to introduce you to the various steps involved in recognizing revenue under the new standard.

Background

As part of an ongoing series, we are breaking down the 156-page standard and providing key takeaways, including who ASC 606 affects, a brief overview on the five steps, and a look at how ASC 606 will affect different industries, but today we would like to introduce a deeper look at each step:

  1. Identify Contract(s) with a Customer
  2. Identify Performance Obligations in the Contract
  3. Determine the Transaction Price
  4. Allocate the Transaction Price to the Performance Obligations in a Contract (August)
  5. Recognize the Revenue When (or as) the Entity Satisfies a Performance Obligation (September)

ASC 606 Deep Dive Step 4: Allocating Transaction Price to the Performance Obligations

Biggest Impacts: Software, Telecommunications

With considerations including standalone selling price, allocating discounts and variable consideration, and changes in the transaction price, there are certain pitfalls in allocating price to each obligation.

Determine/Estimate Standalone Selling Prices

After Step 3, determining the transaction price as a whole, you will need to determine the standalone selling price of each good and/or service promised in step 4. As is often the case, the way to do this is to determine the price based on standalone sales of the good or service to similarly situated customers.

However, this is not often observable. When this is the case, a seller is to determine standalone prices in one of three ways:

  • Adjusted Market Assessment Approach: Evaluate the market in which goods or services are sold and estimate the price that customers are willing to pay.
  • Expected Cost Plus Margin Approach: Forecast the expected costs of satisfying a performance obligation and add an appropriate margin for that good or service.
  • Residual Approach (rare): Subtract the sum of observable stand-alone selling prices of other goods or services promised from the transaction price. This is only usable if the following two criteria are met:
    • The entity sells the same good or service to different customers (at or near the same time) for a broad range of amounts (that is, the selling price is highly variable because a representative standalone selling price is not discernible from past transactions or other observable evidence).
    • The entity has not yet established a price for that good or service, and the good or service has not previously been sold on a standalone basis (that is, the selling price is uncertain).

Oddly, for US-based businesses, the new standard will provide more flexibility for organizations than the previous standard, a rare occurrence within ASC 606 according to the KPMG Revenue Issues in Depth Article. Under the current standard, standalone selling prices are often established by determining vendor-specific objective evidence (VSOE).

Developing a Standalone Price Determining Framework

Notably, determining standalone prices will require a fair amount of judgement from the selling entity, as many organizations do not have robust processes in place for determining prices. To reasonably establish controls, KPMG recommends organizations follow this five-step process.

  1. Gather all reasonably available data points (cost to manufacture, profit margins, third-party pricing, etc.)
  2. Consider adjustments based on market conditions (demand, competition, awareness) and entity-specific factors (market share, pricing, bundled pricing)
  3. Consider organizing selling prices into meaningful groups.
  4. Weigh available information and make the best estimate.
  5. Establish ongoing processes for monitoring and evaluating prices.

Allocating a Discount

A discount should be allocated entirely to one or more, but not all, performance obligations in the contract if all of the following criteria are met:

  • The entity regularly sells each distinct good or service (or each bundle of distinct goods or services) in the contract on a standalone basis.
  • The entity also regularly sells on a standalone basis a bundle (or bundles) of some of those distinct goods or services at a discount to the standalone selling prices of the goods or services in each bundle.
  • The discount attributable to each bundle of goods or services described in (b) is substantially the same as the discount in the contract, and an analysis of the goods or services in each bundle provides observable evidence of the performance obligation (or performance obligations) to which the entire discount in the contract belongs.

If a discount is allocated entirely to one or more performance obligations in the contract, an entity should allocate the discount before using the residual approach to estimate the standalone selling price of a good or service.

KPMG brings up a few observations, most notably that entities should take a different approach when a large amount of goods and services are bundled in various ways, and to establish a policy for determining what ‘regularly sells’ together.

Allocating Variable Consideration

Variable consideration that is promised in a contract may be attributable to the entire contract or to a specific part of the contract, such as either of the following:

  • One or more, but not all, performance obligations in the contract (for example, a bonus may be contingent on an entity transferring a promised good or service within a specified period of time)
  • One or more, but not all, distinct goods or services promised in a series of distinct goods or services that forms part of a single performance obligation (in accordance with FASB ASC 606-10-25-14(b)) (for example, the consideration promised for the second year of a two-year cleaning service contract will increase on the basis of movements in a specified inflation index)

While discussed after the application of discounts in the standard, variable consideration allocation needs to be completed before allocating a discount. For more information, see our discussion on the differences between variable consideration and discounting in our analysis of step 2.

Changes in Transaction Price

Prices change, and for that, there are certain paths to follow and pitfalls to watch. If and when this does happen, an entity should allocate to the performance obligations in the contract any subsequent changes in the transaction price on the same basis as at contract inception.

Consequently, the transaction price should not be reallocated to reflect changes in standalone selling prices after contract inception. Amounts allocated to a satisfied performance obligation should be recognized as revenue, or as a reduction of revenue, in the period in which the transaction price changes.

Allocating Price Changes to Performance Obligations

A change in the transaction price should be allocated entirely to one or more, but not all, performance obligations or distinct goods or services promised in a series that forms part of a single performance obligation, but only if both of the following criteria are met:

  • The terms of the change in transaction price relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct good or service (or to a specific outcome from satisfying the performance obligation or transferring the distinct good or service).
  • Allocating the change in transaction price entirely to the performance obligation or the distinct good or service is consistent with the overall objective for allocating the transaction price to performance obligations, when considering all of the performance obligations and payment terms in the contract.

A change in the transaction price that arises as a result of a contract modification should be accounted for in accordance with the guidance on contract modifications. However, for a change in the transaction price that occurs after a contract modification, an entity should apply the guidance in whichever of the following ways is applicable:

  • Allocate the change in the transaction price to the performance obligations identified in the contract before the modification if, and to the extent that, the change in the transaction price is attributable to an amount of variable consideration promised before the modification and the modification is accounted for as if it were a termination of the existing contract and the creation of a new contract (in accordance with FASB ASC 606-10-25-13(a)).
  • In all other cases in which the modification was not accounted for as a separate contract (in accordance with FASB ASC 606-10-25-12), allocate the change in the transaction price to the performance obligations in the modified contract (that is, the performance obligations that were unsatisfied or partially unsatisfied immediately after the modification).

Conclusion: Time to Get Moving

16 months may seem like a long time (it’s only five if you’re a public entity), but many organizations are seeing challenges in making the move to implement new processes and systems to meet the requirements of the new standard.

Even if we’re posting monthly blogs leading up to the effective date, you should already be looking at transition methods and other industry-specific considerations that you need to make. To address this, we’ve compiled a list of resources for companies looking to prepare for the upcoming standard:

On Demand Webcasts: ASC 606/IFRS 15

Sage Intacct recently presented a three-part series on the new standards, which you can view on-demand.

We welcome you to peer through the full text, the AICPA guidance, and to get in contact with us to learn more about preparing for ASC 606 with outsourced accounting services and/or a new accounting software designed with new RevRec Standards in mind.

Security in the Cloud

Intacct Delivers Security and Peace of Mind to Today’s Financial Teams

/0 Comments/in /by

For some, making the move away from traditional financial and accounting management systems toward an automated, digital solution can feel like a leap of faith. There’s a level of perceived security in something you can hold in your hands—the paper spreadsheets, for instance—and imagining your data floating out there in the cloud is might make you feel apprehensive. But in reality, cloud-based systems offer more control, security, and peace of mind than any manual system ever could provide. Let’s find out why.

There are Inherent Risks in a Paper-Based System

Consider an environment that depends on paper. Paper invoices, paper expense reports, paper payments, paper-filled drawers and filing cabinets, etc. Offices operating in a paper paradigm are vulnerable to data compromise and loss due to human error, misplacement of files, and even theft. What’s more, the technology they do use may run with sub-optimal environmental and system security measures, including out-of-date software, insufficient redundancy and backup, and weak firewalls.

Related: Stop Relying on Spreadsheets and Luck—There’s a Better Way

Cloud Solutions Offer Outstanding Application Security

It was uncovered at a 2013 Digital CPA Conference that information security is the primary barrier of adoption for starting to use cloud accounting services. Even so, nearly half of survey takers said they were using cloud-enabled business services to some degree in their firms, up from 44% 2012. Fast-forward to 2017, and cloud-based solutions are even more popular, as professionals get the message that the technology is sound and technology vendors are doing their due diligence to keep their customers’ data secure.

As for lingering concerns about web-based data storage, “Cloud-based accounting systems don’t actually store your data in a vapor mist in the sky,” CPA J. Carlton Collins explains in Journal of Accountancy. “Rather your accounting data are stored in world-class data centers with fortified concrete walls, steel doors, retina scans needed for entry, world-class firewalls, state-of-the-art anti-virus technology, continuous backups, and often a mirrored backup of the entire data center.

A Closer Look at Intacct’s Secure Solution

Intacct’s world-class financial management and accounting system is built on the highly reliable Oracle database infrastructure. It includes various security features that help prevent outside attacks as well as unauthorized user and program access into system processes, resources, and data—ensuring optimal safety of your digital assets.

Highlights of Intacct’s Security Features:

  • A data center that’s monitored around-the-clock and is equipped with backup power supplies and redundant network components.
  • Applications that require 2-step user verification every time a user signs on through an unrecognized device, enforced password changes and automatic session timeouts, and the option to set acceptable user log-in IP ranges.
  • System security that’s SSAE 16 SOC1 Type II and PCI DSS Level 1 certified, designed to protect your business via restricted access to production data, hardened networks and firewalls, real-time activity log tracking, automated security scanning and third party white hat penetration testing, and minimum 128-bit encryption for all data transmission.
  • Data that’s safeguarded through full daily backups to multiple locations, Continuous backups of transaction data, and secure streaming of transaction data to remote disaster recovery center.

Get full details here.

The Best Cloud Services from the Trusted Team at rinehimerbaker

As an Intacct Partner, we are proud to help growing businesses implement technology that makes it easier to manage their finances in the cloud. If you’re interested in upgrading from QuickBooks to Intacct, don’t miss the informative white paper, Outgrowing QuickBooks – How to Know When It’s Time to Change. Learn more about our services, and get in contact with us for more information.

ASC 606 Determining the Transaction Price

ASC 606 Step-by-Step Part 3: Determine the Transaction Price

/0 Comments/in , /by

A lot to cover, and not a lot of time to make it happen. ASC 606 is bearing down, and public organizations are in the final countdown. For private organizations, 17 months is not that long of a time, because you will need to get your accounting, legal, sales, and others on board, decide how you intend to transition, and make the move. Simply put, it’s not easy.

This is why we are breaking down the 156-page standard and providing key takeaways, including who ASC 606 affects, a brief overview on the five steps, and a look at how ASC 606 will affect different industries, but today we would like to introduce a deeper look at each step:

  1. Identify Contract(s) with a Customer
  2. Identify Performance Obligations in the Contract
  3. Determine the Transaction Price (Today)
  4. Allocate the Transaction Price to the Performance Obligations in a Contract (August)
  5. Recognize the Revenue When (or as) the Entity Satisfies a Performance Obligation (September)

ASC 606 Deep Dive Step 3: Determining the Transaction Price

Biggest Impacts: Aerospace and Defense, Asset Managers, Construction, Building, Engineering, Healthcare, Licensors, Software

From variable consideration to financing components to noncash considerations, there are many pitfalls that occur in determining the transaction price that make step three a complicated one.

In simple terms, the transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring goods and/or services to a customer. ASC 606 gives attention to the following factors in transaction price:

  • Variable Consideration
  • Constraining Estimates of Variable Consideration
  • The Existence of a Significant Financing Component
  • Noncash Consideration
  • Consideration Payable to the Customer

Variable Consideration (and the Constraint)

An entity estimates the amount of variable consideration to which it expects to be entitle, taking into account the risk of revenue reversal in making the estimate. 602-10-32-5 through 606-10-32-9 look into some of the determinations of variable consideration, which we look into below.

Fixed vs. Variable Consideration

The first, most obvious determination that needs to be made in this is whether the consideration is fixed or variable.  If the consideration is fixed, include the consideration in the transaction price. However, if the contract includes discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items, there are different steps to determining the price.

Expected Value vs. Most Likely Amount

There are two methods in estimating the amount of variable consideration, depending on whichever one better predicts the amount of consideration to which it is entitled.

  • The expected value—The expected value is the sum of probability weighted amounts in a range of possible consideration amounts. This method is best used when an entity has a large number of contracts with similar characteristics.
  • The most likely amount—The most likely amount is the single most likely amount in a range of possible consideration amounts. This method is best used when the amount of variable consideration has only two possible outcomes.

Additional Determinations in Variable Consideration

In this, there are some additional observations made by KPMG that can impact the variability of the transaction price:

Consideration Could be Variable Even if Price Stated in the Contract is Fixed

Promised consideration could be determined to be variable if an entity’s customary business practices indicate that the entity may accept a price lower than stated in the contract (for example, an implicit price concession). To address this, the entity needs to determine whether it has offered an implicit price concession or has chosen to accept the risk of default from the customer.

Variability of Consideration in the Event of an Undefined Quantity of Output

In the event that a contract is for an undefined quantity at a fixed contractual rate, consideration may be variable. In this, it’s important for the entity to determine how to treat the consideration under the new standard (distinct series of goods and/or services, stand-ready obligation, or an obligation to provide specified goods and services)

Is it a Customer Option or Variable Consideration?

This is an important note, as an entity needs to determine whether purchases of additional goods and services are variable consideration or customer options.

Customer options exist when the customer is not contractually obligated to pay consideration and the entity is not obligated to transfer goods or services. In this event, an entity needs to evaluate the options to determine whether they include a material right.

Comparatively, if the terms of the contract require a vendor to stand ready to transfer the goods and/or services, and the customer does not make a separate decision to purchase, the future event results in additional consideration.

Volume Discounts and Rebates May Convey a Material Right

Different structures and rebates may have different effects on the transaction price. In the event that a vendor offers discounts or rebates, pricing, variability, and the existence of material right is determined on when the discount is applied (retroactively upon customer meeting threshold vs. discount beginning after customer meets threahold)

KPMG provides additional looks at exchange rates and whether liquidated damages represent variable consideration or warranty in their Revenue Issues In Depth Article.

Reassessment of Variable Consideration

At the end of each reporting period, an entity shall update the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period. The entity shall account for changes in the transaction price.

Constraining Estimates of Variable Consideration

An entity shall include in the transaction price some or all of an amount of variable consideration estimated in accordance with paragraph 606- 10-32-8 only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

To determine the impacts of the estimates, an entity needs to determine how likely and how impactful a revenue reversal would be. Factors in determining this probability include:

  • Factors outside the entity’s influence (market factors, third-party factors, weather)
  • Time period surrounding the uncertainty
  • Entity’s experience with similar contracts
  • Entity business practices (i.e. entity has a history of offering concessions or changing terms)
  • A broad range of consideration amounts

Examples of possible constraints are discussed in the KPMG Revenue Issues in Depth Guide.

The Existence of a Financing Component

If a significant financing component exists, the entity will need to adjust the promised amount of consideration based on the time value of money. To make this assessment, the entity must consider relevant factors, including:

  • Difference between promised consideration and the cash selling price
  • Combined effect of the expected length of time between the transfer of goods or services and the customer paying for those goods or services.
  • Interest rates in relevant markets

Observations Pertaining to Significant Financing Components

Some important implications exist in determining whether significant financing components exist and should be accounted for, as discussed below:

Assessment Taken at Individual Contract Level

When looking at whether or not a financing component is significant, the entity determines the significance of the financing component at the individual contract level as opposed to the portfolio level.

No Significance if Transfer of Goods or Services is at Customer’s Discretion

In the event the customer pays for goods or services in advance (e.g. prepaid phone cards, gift cards), it is at the customer’s discretion on when he or she purchases said goods or services. In this event, there is no significant financing component.

Long Term or Multiple-Element Arrangements

In long-term or multiple arrangement contracts (transfers at various points in time, cash payments throughout the contract, changes in estimated timing), an entity faces complexity in determining the time value of money.

There are many additional observations discussed, including the fact that contracts with interest rates of zero may contain in one way or another a financing component, the presentation of income interest as revenue, and determinations on whether it is important to use an interest rate explicitly stated in the contract.

Noncash Consideration

To determine the transaction price for contracts in which a customer promises consideration in a form other than cash, an entity shall measure this, depending on whether the noncash consideration can be measured:

  • If it can be reasonable estimated, noncash consideration is measured at fair value.
  • If it cannot be reasonably estimated, an entity is to use the stand-alone of selling price of the good or service that was promised in exchange for noncash consideration.

Consideration Payable to a Customer

In the event there is consideration paid back to the customer, an entity needs to determine if the consideration payable back to the customer should be accounted for as a reduction in transaction price, a payment for a distinct good or service, or a combination of the two.

The following table shows how an entity needs to look at consideration payable to the customer, and whether the consideration payable is a reduction in the transaction price or a purchase from suppliers:

Q1. Does the consideration payable to a customer (or the customer’s customer) represent a payment for a distinct good or service? (Yes/No)

Yes (Move to Q2)

No (Move to Conclusion 3)

Q2. Can the entity reasonably estimate the fair value of the good or service received? (Yes/No)

Yes (Move to Q3)

No (Move to Conclusion 3)

Q3. Does the consideration payable exceed the fair value of the distinct good or service? (Yes/No)

Yes (Q3): Excess of consideration payable is accounted for as a reduction in the transaction price, remainder is accounted for as a purchase from suppliers.

No (Q3): Consideration payable is accounted for as a purchase from suppliers.

Conclusion 3: Consideration payable is accounted for as a reduction in the transaction price and recognized at the later of when

  • The entity recognizes revenue for the transfer of related goods or services
  • The entity pays or promises to pay the consideration.

 

Additional Observations

In addition to the relative complexity of the above flowchart, there are additional situations that need to be analyzed by legal and accounting teams.

Payments to Distributors and Retailers

A common practice in the CPG industry, payments from brands to distributors or retailers are sometimes accounted for as identifiable goods or services. In these cases, the goods and services provided by the customer may be distinct from the customer’s purchase of the seller’s products. Refer to questions 2 and 3 on the flowchart above.

Scope of Consideration Payable to the Customer is Wider than Payments Made under the Contract

In the event that an entity pays a customer consideration, and the scope of the consideration payable is wider than the payments made under the contract, the entity will need to develop a process for evaluating whether any other payments made to a customer are consideration payable to a customer.

This adds more complexity if payments are made to a customer’s customer and if the amounts paid are outside the direct distribution chain (client/agency relationships, etc.).

Conclusion: Time to Get Moving

17 months may seem like a long time (it’s only five if you’re a public entity), but many organizations are seeing challenges in making the move to implement new processes and systems to meet the requirements of the new standard.

Even if we’re posting monthly blogs leading up to the effective date, you should already be looking at transition methods and other industry-specific considerations that you need to make. To address this, we’ve compiled a list of resources for companies looking to prepare for the upcoming standard:

On Demand Webcasts: ASC 606/IFRS 15

Intacct recently presented a three-part series on the new standards, which you can view on-demand.

We welcome you to peer through the full text, the AICPA guidance, and to get in contact with us to learn more about preparing for ASC 606 with outsourced accounting services and/or a new accounting software designed with new RevRec Standards in mind.

Cloud Accounting Diocesan Organizations

How Diocesan Organizations Can Unleash the Power of Cloud Accounting

/0 Comments/in , /by

If running the finances at a religious organization is a challenge, running the finances at a diocesan organization takes that challenge and multiplies it. Not only do you have to lead financial decision making for multiple funds within one organization, you have to oversee the financial decision making for multiple funds in multiple locations.

The Diocesan CFO Oversees Dozens, if not Hundreds of Separate Entities

While each parish, school, or charitable entity may have its own finance manager and board to whom he or she must answer, the financial team at the diocesan level has to be able to roll up all of the information into a single source of truth. For example, the financial team at our local Catholic dioceses receives reports from:

  • 50 Parishes (some dioceses have over 100)
  • 3 High Schools
  • 13 Elementary Schools (often intertwined with parishes), 2 Private Elementary Schools, 3 Pre-Schools
  • A regional Seminary
  • 3 Missions
  • A Diocesan Cemetery (not including parish cemeteries)
  • A Newspaper, a Television Program, and more.

Simply put, managing a diocese is not only vast, it is complex—with different levels of control and autonomy for each entity, different financial structures and reporting needs. In addition to this, the diocesan CFO may have partial or complete financial oversight for one or more Catholic Charities, which in turn have multiple funds and programs.

Managing Multiple Entities is a Challenge in Itself, Doing So on the Strict Budget of a Faith-Based Organization Makes it Tougher

Not only are you managing all of this, you are managing all of this on a much stricter budget, with stricter oversight, and more stakeholders. You need to report quickly and accurately, address problem areas immediately, and find a balance between unity and granularity.

What makes this harder is that you often don’t have the massive budget for an upgrade and implementation project with huge upfront costs. This leaves you with two options:

  • Keep on with the status quo:
    • Put faith into your ability to roll up all of the numbers with outdated, manual technology
    • Try to push forward with disparate systems and processes across multiple entities
    • Attempt to get a unified, single source of truth each month.
  • Leverage the Power of the Cloud:
    • Take advantage of an accounting and ERP software designed to provide low upfront costs and transparent monthly pricing.
    • Get real insight into the numbers with configurable, easy, point-and-click filtering of real time data.
    • Drill down into the numbers of each parish, school, cemetery, or program.
    • Unify processes across every entity to save time each month.
    • Track the performance of multiple entities, gaining real insight into the metrics and performance of each on your schedule.

Intacct: Accounting Software for Diocesan Organizations

Intacct has provided accounting software for both faith-based and multi-entity organizations for nearly two decades, and has handled everything from single-location churches to multinational, multi-entity companies. Consider this: Intacct is built for growth, able to handle the needs of organizations with:

  • 100s of entities: Intacct automates multi-entity management and financial consolidations for customers with hundreds of locations in their organization
  • 1,000s of users: Our biggest customers are improving productivity with up to thousands of users on Intacct
  • 100,000s of transactions: Customers are quickly and securely processing hundreds of thousands of daily transactions with Intacct

The only cloud financial management system endorsed by the American Institute of CPAs, Intacct can help you to strengthen stewardship, gain efficiency, and grow funding.  The video below shares with you just how effective Intacct is at managing the finances at your diocesan organization:

Leverage the Cloud: Webcast for Diocesan Organizations

As a reseller of Intacct for religious and multi-entity organizations, we are well positioned to help you leverage the power of cloud accounting. We invite you to learn more about the software and its functionality by registering for an upcoming Intacct webcast, How Diocesan Organizations are Improving Stewardship with Modern Technology, in which experts will present challenges and opportunities for diocesan organizations, sharing:

  • How to reduce manual processes
  • How to automate financial, compliance, and operational reporting
  • How to gain real time insight for outcomes, performance, and impact
  • How to remain GAAP compliant under old and upcoming rules

Running the finances at a diocesan organization is complex, but by leveraging the power of the cloud, you can take control of diocesan fiscal management. Register here for the webcast, learn more about Intacct for diocesan organizations, and contact rinehimerbaker for more information.

Real Time Information Cloud Accounting

How the Cloud Provides Real Time Insights for Real Time Decision Making

/0 Comments/in , , /by

Financial professionals at growing organizations face a ton of challenges. From ‘doing more with less’ to ‘taking on more roles to support the company and inform executives,’ there is little time to waste. Unfortunately, with this rapid growth comes the fact that there will only be more work to do in the future, and with the talent gap that exists, it’s unlikely you will have the help to do it. This is why it’s important to save time wherever you can and improve the speed and confidence in the way you make decisions.

The Need for Speed

One of the biggest challenges that growing organizations face is that employees need to do more without adding staff. However, as an organization grows, there are more transactions, more requests from stakeholders, and more numbers to crunch. This means more work inputting data into the accounting software (or worse—spreadsheets), manipulating the data into something useful, and creating actionable outputs in the form of reports.

Speed and automation were just a couple of the eight things you should look for in an accounting software solution. Click the aforementioned link to see part 1, and read part 2 of that blog here.

Three Reasons You Need Accurate Real-Time Information At Your Business

We briefly recognized lack of speed as one of the top challenges in our blog on knowing when QuickBooks no longer makes the cut, but would like to talk today about why speed and real-time decision-making is so important for organizations looking to jump on new opportunities when the time is right.

The Agility You Need

The beauty of working at a small business is that you can move faster than an enterprise. Unfortunately this agility can’t be recognized without the right information at the right times.

If you are spending too much time crunching the numbers that your company can’t recognize the first-mover advantage that exists when there are no committees and sub-committees of decision makers and influencers. Real-time decision making requires real-time information, when you need it, where, you need it, and how you need it:

  • When You Need It: With smarter accounting from Intacct, organizations can generate reports with the click of a button—no downloading of files or manipulation of data within Excel.
  • Where You Need It: Out of the office? Generate a report. On your phone? Approve an expense. Thanks to its cloud-based design, you can access Intacct securely wherever and whenever you need.
  • How You Need It: Slice and dice your information how you see fit. Intacct is the only mid-market cloud financial application that shows business and operational metrics by any dimension that matters to your business.

Accuracy You Can Rely On

Did you know that nearly every spreadsheet contains errors? If you are driving the decision making at your business with financial metrics, you need to make sure that the numbers are right, as an incorrectly calculated number could mean that you are jumping at an opportunity that you can’t fund, or taking a holding stance when you actually could make a move.

With over 11,000 customers, Intacct has a repeatable, accurate, and efficient way of stacking up the numbers, and has the development capabilities to provide the answers you need.

Time Savings to Deliver Better Strategy

With APQC estimating that nearly half of a financial professional’s time being spent on transaction processing—making sure the lights are on—they also estimate that only 18% is spent on control, 17% is spent on decision support, and 16% on management activities.

With all this time spent on basic activities, and so little being spent improving the business, there is a lot of room for improvement. Executives want fast, reliable, and concise information about how decision A will impact outcome B.

APQC found that successful companies have worked hard to boost the productivity of their transaction processing, simplifying systems, reducing the number of vendors, employing workflow automation for processes like invoice approvals, streamlining ERP environments, and standardizing to a single chart of accounts.

If you hope to take the steps to reduce the time spent processing transactions so you can get back to improving the business, you need to automate what you can so you can put those skills to better use.

Learn Even More

Our latest whitepaper, Taking Your Accounting System to the Next Level, explores some of the warning signs, challenges, and opportunities that organizations face when they outgrow entry-level accounting software. Download the whitepaper here, take your understanding even further by reading the 2017 Buyer’s Guide to Accounting Software on Intacct’s website, or learn more by reading the preview of our whitepaper below.

Magic Quadrant Cloud ERP

Gartner Releases New Magic Quadrant for Cloud Financial Management

/1 Comment/in /by

Some shockers, some expected results, and some huge news in the latest Magic Quadrant from the global analyst firm Gartner. In recent weeks, Gartner released a new Magic Quadrant (MQ)—Cloud Core Financial Management Suites for Midsize, Large and Global Enterprises—to help businesses understand the evolving and expanding market that is Cloud ERP.

First Ever Gartner Magic Quadrant for Cloud Core Financial Management Applications

Up until recently, Gartner avoided building a Magic Quadrant for core cloud finance, due in part to the buying cycle that goes with core financial management applications. Many customers were not looking for an ERP upgrade in recent years, and the immense global players weren’t yet ready to move to the cloud. Now, however, there is a market shift to cloud applications, and CIOs, CFOs, and boards are finding that the cloud offers the security, uptime, and flexibility that they need.

What is Gartner’s Magic Quadrant?

Gartner’s Magic Quadrant reports are a culmination of research in a specific market, giving companies a wide-angle view of the relative positions of the market’s competitors. The reports help prospective buyers quickly ascertain how well technology providers are executing their stated visions and how well they are performing against Gartner’s market view.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation.

The Evolving Cloud ERP Market

Gartner saw this, noting that there is a shift from static to dynamic, and there is soon to be $31B in play for cloud financial management and “postmodern ERP.”

“The market for core financial management suites has been static for many years. However, over the last 12 to 18 months, cloud core financial management suites have matured to such an extent that they have disrupted this static market. This reflects the increasing prevalence of postmodern ERP strategies (see “Schrödinger’s Cat: How ERP Is Both Dead and Alive”). Postmodern ERP is the deconstruction of suite-centric, monolithic, on-premises ERP deployments into loosely coupled applications, some of which can be domain suites (such as core financials or HCM) or smaller footprint applications that are integrated as needed.”

How Gartner Compared Core Cloud Financial Management Applications

For this Magic Quadrant, Gartner defines core financial management suites as follows:

  • The core functional areas of general ledger (GL), accounts payable (AP), accounts receivable (AR), fixed assets (FA), project accounting, project costing, and project billing.
  • Financial analytics and reporting, including provision of financial information (such as P&L and balance sheet) and the ability to provide financial information such as KPIs to managers and executives.
  • Basic indirect purchasing functionality (from creating a requisition through to purchase order processing and AP invoice matching and payment), because many organizations — especially midsize organizations — need some basic procurement functionality as part of a core financial applications deployment.

Visual: Magic Quadrant for Cloud Core Financial Management Suites

Magic Quadrant Cloud Core Financial Management Applications

The Results Are In: Upsets, Expectations, and Big News

First? The shockers: Some of the largest and well-known players (SAP, Epicor, Deltek) found themselves in the “niche players” category—something that surprised Enterprise Irregulars contributor Vinnie Mirchandani, who said “I honestly cannot remember the last time SAP showed in the lower left quadrant – for niche players – in a Gartner MQ”.

The Expected Results? Global Player Oracle showed up highly on the list for its Oracle ERP Cloud—a solution built to meet the needs of the largest enterprises in the world. This comes as no surprise, as the company displays immense market presence and had begun to make moves to the cloud earlier than many other global software players.

The Big News: Intacct Named a Visionary

The big news? Intacct was named a visionary, receiving high marks both for its completeness of vision and its ability to execute receiving the third and fourth highest marks, respectively.

Intacct’s Completeness of Vision Blows Away the ‘Old Guard’ of Vendors

Completeness of vision, the more qualitative of the measures, is based on eight components: Market Understanding, Marketing Strategy, Sales Strategy, Product Strategy, Business Model, Vertical/Industry Strategy, Innovation, and Geographic Strategy.

This is a notable victory, but is one that plays into Intacct’s strengths and internal focuses. Intacct has a well-defined mission and business model, and has been known for its success within its market.

Ability to Execute Only Surpassed by Two Giants

While Intacct’s completeness of vision was impressive if not expected, the company’s position on ability to execute is notable, as it exceeded industry giants like SAP, Epicor, Deltek and Microsoft; companies whose operating budgets, global scale, and therefore visibility dwarf Intacct’s.

In fact, when the only companies exceeding the ‘ability to execute’ are two massive publicly traded companies:

  • Oracle, with two options higher on the ‘ability to execute’ axis, does business on all seven continents (including Antarctica) and has a 209.97B market cap.
  • Workday, who has approximately a 20.5B market cap.

Still, with only three vendors who exceed Intacct in ability to execute, Intacct’s notable focus and ability to meet the needs of customers demonstrates the company’s ability to compete and provide a powerful product to growing companies in the middle market, scaling with these customers as they grow.

Conclusion: The Right Size and the Right Focus for Your Midsized Organization

While many reports will focus on “ERP as a whole,” noting the largest platforms—both cloud and on-premises—this is one of the first reports that looks at applications ranging from midmarket to global, as well as looking at qualitative measures like vision.

One thing Gartner does focus on when talking about Intacct is that while it is able to handle the midmarket, it can also scale with organizations, noting that Intacct’s successes:

  • Supporting individual clients that have up to 3,000 users, 600 entities, or 250,000 transactions per hour.
  • Supporting local reporting in over 80 countries.
  • Supporting companies like Guidewire, Marketo and GrubHub as they’ve grown revenues 5 – 10x and gone public.

This report is normally available only for Gartner clients, but for a limited time, those interested can get the report for free from Intacct’s website.