revenue recognition

Article Dean Dorton

This blog is the January Edition of our CFO Minute: A Sage Intacct ERP Series.

THE PHANTOM OF COMPLIANCE— Whether you’re disguised behind a white, glossy face mask, feeling heartbreak and despair or you’re at your desk, hiding behind a handful of incorrect spreadsheets and silently yelling in frustration- we get it.

Life throws us unexpected daily challenges.

And so do new accounting standards. For many finance professionals, revenue management is among the top challenges today. With its combination of loosely defined regulations, evolving standards—such as the new revenue recognition rules under Accounting Standards Codification (ASC) 606 and stiff penalties for noncompliance, revenue management creates unacceptable levels of complexity and variability that often overmatch the resources and expertise of many finance teams. Faced with these barriers, companies are looking to automate revenue management processes to gain efficiency, strengthen compliance, and improve visibility.

Why compliance can’t wait 

 The Financial Accounting Standards Board (FASB) issued ASC 606 to be effective at the start of 2018 for public companies, and the start of 2019 for private companies… Which happens to be NOW! Some companies have yet to acknowledge that they need to abide by these new regulations, but the reality is that the contracts you are writing today that extend into the 2018/2019 adoption date must be accounted for under ASC 606.

Preparing your business for the shift (and staying prepared when it comes along) is a time-consuming process—especially if your accounting system lacks built-in readiness. If you have a subscription-based business, you likely enter into complex contracts and agreements with customers. The new standard requires your company to capture and report on this information, which your accounting system may not currently track.

As a result, you need to identify and remedy critical data gaps before your organization is subject to the risk of fines from the SEC, increased auditing costs, and rippling relationships with your auditor (who isn’t happy that their client didn’t adhere to GAAP guidelines!)

Overall, your company’s reputation and finance department can be negatively impacted if regulations are not implemented.

How Sage Intacct’s automation can help

Fast-growing businesses are choosing Sage Intacct’s leading cloud financial management technology to automate their subscription management and revenue accounting. This can save you and your staff hundreds of hours each month on calculations, manual entry, and reconciliations.

Check out our free datasheet below to learn how automated revenue management can help you:

  • Scale regulatory compliance
  • Speed quote-to-cash by 30%
  • Forecast revenue and get real-time SaaS and software metrics
  • Gain control over revenue, billing, and contracts

Article Dean Dorton

How the Cloud Delivers Business Agility for the Modern SaaS CFO

Adaptable. Responsive. Flexible. All these are hallmarks of business agility, a company’s ability to quickly and intelligently change to meet customer demands, seize new market opportunities, and maintain a competitive advantage.

Business agility is a critical trait for modern CFOs in all industries, but especially those working in software/SaaS companies. Scaling a subscription-based business, changing criteria for revenue recognition, and other challenges make a powerful, adaptable financial management solution an absolute must-have for SaaS CFOs.

In particular, a cloud-based system like Sage Intacct can help you:

1. Get critical SaaS metrics how and when they’re needed. You can make quicker, more sound strategic decisions with real-time SaaS metrics that go beyond GAAP metrics to include operational metrics. These are captured in an automated process from inside the system and are as complete and accurate as your GAAP financials. Metrics are delivered via a dashboard as performance cards, reports, charts, and graphs that you can use to spot trends, compare to benchmarks, drill down into the source data, and more.

2. Easily manage the complexities of subscription billing. It’s time to eliminate labor-intensive manual calculations with built-in tiered payments and usage-based billing for your customers. You save time and drive revenue with models that keep up with the complexity of your business. From billing across regular periods to non-linear contract billing, like milestones, you have the flexibility to adapt pricing and billing to the best revenue process for your business.

3. Seamlessly integrate your CRM and financial management solutions. Cloud technology lends itself to tight integration, so you can use your CRM system to enter customer and contract information and synchronize with your business financials in real time. Conversely, you can maintain billing templates and subscription schedules in your financial system, while providing billing and payments visibility to salespeople.

4. Automate daily revenue tasks and regulatory compliance. New guidelines for revenue recognition—ASC 606 and IFRS 15—make an already complicated accounting task even more challenging. A good financial management system will include templates and schedules to automatically recognize revenue according to the latest accounting standards. You should be able to recognize revenue and amortize expenses, even as subscriptions and contracts change. Also, dual treatment of contracts according to both ASC 605 and ASC 606 will provide you with immediate visibility into how the new regulations affect your financials.

Business agility comes standard with Sage Intacct and Massey Consulting

With 2019 on the horizon, SaaS companies need a financial management system that enables them to meet new challenges and opportunities as they arise. That’s why modern SaaS CFOs rely on cloud financial management software from Sage Intacct and the business technology experts from Massey Consulting. Take your first step toward business agility with a free consultation from Massey Consulting, your cloud financial management experts.

https://online.intacct.com/WebsiteAssets_ondemand_webinar_tech_savvy_cfo_agility.html?referral=massey

Article Dean Dorton

How SaaS Companies Can Master Revenue Recognition and Compliance with Sage Intacct

For private companies, the compliance deadline for ASC 606 revenue recognition criteria is mere weeks away—starting fiscal year 2019 (or after December 15, 2018). Subscription-based business such as SaaS companies may be feeling some trepidation as the time nears. And no wonder. ASC 606 has been called “a perfect accounting storm, the likes of which has not been seen since the late 1990s.”

ASC606-5Steps 

(image from Idaciti.com)

Revenue management—especially with ASC 606—creates unacceptable levels of complexity and variability that often overmatch the resources and expertise of many finance teams. Faced with these hurdles, companies are looking to automate revenue management processes to gain efficiency, strengthen compliance, and improve visibility. To accomplish this, successful businesses rely on cloud-based financial management software such as Sage Intacct that allows them to:

1. Connect systems. Streamlining the quote-to-cash process by integrating front- and back-office systems eliminates duplicate data entry between finance and the rest of the business, which saves time and reduces errors. Sage Intacct connects to critical business systems within the organization, such as CRM, services management, and subscription management to create a complete ecosystem for revenue management.

In this model, all stakeholders in the company have access to the latest customer data when they need it, in the applications that they use most. This is possible because Sage Intacct is built with open application programming interfaces (APIs) as a central part of its architecture, making it a simple and straightforward task to create integrations among disparate software products.

2. Automate processes. Each company’s revenue recognition process varies according to its unique business model, products, and markets. To automate this complex process, revenue managers need the ability to codify the applicable rules through flexible templates and schedules that reflect the nuances of their business. The process must drive the automated calculation of both recognized and deferred revenue schedules and forecasts based on contract terms, subscription length, project milestone, and more—and integrate with the general ledger.

Automating the revenue recognition process can dramatically cut staff workload, reduce spreadsheet errors, improve accuracy, and eliminate cumbersome calculations and reviews that delay closings. Perhaps, most importantly, automation helps provide a single point of audit and reconciliation.

3. Analyze the business. Sage Intacct delivers a solid picture of both current and deferred revenue by showing a real-time snapshot of future revenues, projected renewals, and total deferred revenue stretching months or years into the future. What’s more, it allows finance to analyze the impact that changes to products and pricing can have on revenue, improving forecast accuracy.

Sage Intacct lets finance teams dig deeper to understand the true dynamics of their business, with visibility into both financial and operating data, and flexibility to view the business through multiple lenses—for example, understanding data and metrics by customer, vendor, employee, product, or project—to make better long-term, strategic decisions.

As your business grows and becomes more complex, Sage Intacct can meet your needs as you add products and services, increase revenue, acquire or partner, expand internationally, or even go public. Sage Intacct’s flexible architecture was built for the cloud and is infinitely scalable and adaptable to meet your needs. And as December 15th draws near, Sage Intacct allows your finance team to connect systems, automate processes, and analyze the business to achieve superior revenue management.

(blog image found on Avanade.com)

Get started on your journey to revenue recognition mastery today—contact the experts at Massey Consulting.

Article Dean Dorton

When your SaaS business is trying to stay on top of all that added work that comes with rapid growth, along with staying compliant with the new ASC 606 regulations, the right financial management software can make all the difference. If you’re still using an on-premises system, limited in its capabilities to handle your financials, you’ll want to read on.

Sage Intacct, a cloud-based financial management solution, offers automation, generous options, customizations, and the snapshot reporting that SaaS companies need, in all the right places. It delivers what SaaS businesses need most for complex revenue recognition, reallocation, billing, renewals and performance metrics.

Contract and Subscription Billing

Sage Intacct’s built-in usage-based and tiered pricing features within their billing module, is ideal for SaaS. Whether your billing is over regularly-timed periods or nonlinear, you control your billing options in the way that fits your unique business.

  • Sage Intacct has an automatic renewals feature that is designed to trigger contracts approaching their end dates, which means renewal processes require less manual labor and run more smoothly.
  • Automated billing schedule options can be set up to fit a wide range of unique contracts, whether billing happens monthly, yearly, or in a non-linear way with milestones.

Contract Revenue Management

Sage Intacct’s Contract Revenue Management module is the first to offer automated solutions to the ASC 606 and IFRS 15 guidelines. SaaS companies can experience faster, more accurate revenue recognition, even with the new revenue reallocation regulations:

  • Sage Intacct handles revenue reallocation automatically– even for closed periods, so compliance is faster, easier and more accurate.
  • View revenue details right in the contract, with side-by-side comparisons of revenues and expenses under the old and new guidelines for at-a-glance comparisons.

Reporting and Dashboards

Because SaaS growth happens fast, growth strategy needs to happen even faster. Sage Intacct’s reporting features are designed for stakeholders and decision-makers who need to see current numbers, in a readily accessible way:

  • Stakeholders and decision-makers see real-time accurate views into profitability and performance with customized reporting options on-screen and in print.
  • Get cloud-accurate KPIs for SaaS metrics on Sage Intacct’s Digital Board Book, like churn, customer lifetime values, annual or monthly recurring revenue, and customer acquisition costs – all the metrics you need, when you need them.

Whether you’re just noticing your financials becoming harder to manage lately, or you’ve been thinking about making the move to the cloud as a logical next step in your growth, contact us.

Why are SaaS companies moving off legacy systems?

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Article Dean Dorton

Private companies that offer subscriptions and contracts might not have to account for properly allocated revenues and amortized expenses until next year, but to be compliant for next year, the planning starts now.

This is because any contracts starting up today that will be active in 2019 will also require ASC 606 compliance.

With so many allocation variables muddling the new compliance standards, knowing how to modify your processes can reduce errors, save your financial department undue headaches, and help your company avoid the risks associated with non-compliance, come 2019.

Companies that handle contracts and subscriptions expected to adhere to the ASC 606 compliance guidelines will need to modify their financial processes with these 5 steps to stay compliant:

1) Ensure contract and collectability threshold transparency – Multiple related contract agreements may require recognition as one contract, and contract collectability requires tracking, with revenue being recognized as it meets the collectability threshold. Companies need an accounting system designed for automated contract management to speed and simplify the new, in-depth tracking processes required for compliance.

2) Outline performance obligations for uniformity and clarity – Goods or services must be shown as distinct, or as distinct within a contract. An accounting system with contract management automation is critical to help identify, track, flag and break out performance obligations, to be allocated and recognized at the right time.

3) Identify variable pricing terms – Refunds, incentives, discounts, and flexible financing all impact revenue valuations under the new ASC 606 guidelines. Use consistent methods, and automation wherever possible to flag contracts with non-standard terms.

4) Allocate part of the transaction price to performance obligations –You must identify your performance obligation based on a relative standalone price. For companies that still use spreadsheets, allocating this pricing on a per-contract basis leaves a large margin for error and countless hours of manual work. Companies that must account represent performance obligations within contracts need an accounting system that takes manual spreadsheets out of the equation to avoid serious allocation errors

5) Properly recognize revenue – Under the new ASC 606 rules, revenue needs to be tracked and recognized as the good or service is consumed. Companies need automated systems that synchronize billing and revenue recognition to work in time, so as customers consume goods or services, the system is properly tracking and recognizing revenues and amortized expenses.

With so many changes coming, companies can’t rely on old, outdated systems without inviting the risks of task overwhelm, massive allocation errors, and hours of retracing steps through complicated contracts.

Sage Intacct, a best-in-class financial management solution is designed to be ASC 606 compliance-ready, with deep automation to detail out contracts, track revenues easily, break out expenses over time, and eliminate the need for error-prone spreadsheets.

Reach out to us for more information. Let’s help you find the right solution to prepare your business for what lies ahead.

Need More Information?

Discover the basic guidelines of ASC 606 compliance and try the next steps your company needs to take to prevent any risks.

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Article Dean Dorton

Complex by nature, subscription-based businesses have a lot on their plates when it comes to revenue recognition. For them, complicated customer contracts paired with the new ASC 606 and IFRS 15 guidelines pile on mountains of work and create legendary reallocation headaches for SaaS companies everywhere.

This is because SaaS businesses have more complicated revenue recognition requirements to follow, not just for new contracts, but for existing ones as well. For subscription-based businesses, add-on’s, renewals, and complex subscription modifications, pauses, and cancellations, all add into the revenue recognition scope.

This means a lot more work to track varying revenues in order for financial teams to keep the company compliant, and a lot more work as a result of all the new subscriptions coming in.

Subscription-based businesses need a best-in-class financial management solution like Sage Intacct, that takes compliance seriously, to offer strong revenue recognition support for SaaS companies, to help them meet the ever-changing accounting compliance guidelines.

Sage Intacct speeds, automates and simplifies compliance in four ways:

1) Sage Intacct’s ASC 606 and IFRS 15 compliance built into the software. This helps SaaS companies manage their contracts, and control deferred revenue transactions more effectively in order to adhere to new recognition, reallocation, and expense amortization changes.

2) Customizable dashboards with real-time visibility offer deep, drill-down options showcasing SaaS metrics to see revenue transactions, and data related to changing subscriptions and renewals to calculate the impact they have on reporting.

3) Deep automation and product options mean Sage Intacct picks up where spreadsheets leave off. All in one place, SaaS teams can speed month-end closings, simplify reallocations, track subscriptions and make changes, simplify and streamline the auditing process, and strengthen compliance to adhere to the new guidelines more easily.

4) Sage Intacct uses VSOE and full FAS 52 support so SaaS companies can stay current with ever-changing accounting rules. This means Sage Intacct users always have the most up-to-date accounting guidelines at work in the software solutions, so they can feel confident in their financial compliance.

When you consider the volume of SaaS industry challenges and then add in rapid growth, it can almost feel like too much to handle.  A financial management tool with the right kind of options, however, can support SaaS teams, and ease the pains of subscription complexities.

Put the aspirin away and contact us instead. We want to help you find the best management solution to free you so you can focus on your customers and your growth.

In the Meantime

If you’re a SaaS company and aren’t aware of the risks that come with not complying with the new ASC 606 guidelines, check out our free eBook.

why compliance can’t wait