If You’re Not Early, You’re Late!

If You’re Not Early, You’re Late!

Accounting 101

If You’re Not Early, You’re Late!

By Paul Johnson

My dad used to “coach” up the stairs at us in the morning before school with cautionary advice and dad slogans like “jockey into position or get left behind,” and my favorite, “If you’re not early, you’re LATE!”

Well, I am passing on that particular pearl of parental wisdom to you right now because it applies to what we’re facing this year with the upcoming ASC 606 changes. As you might be thinking, “I still have more time,” let other forward-thinking subscription companies remind you otherwise.

We are seeing companies that have clients up for renewal, add-on products to their subscriptions, and companies with a lot of deferred revenue already building the changes into their contracts today. Many recognize that while they are signing on and renewing well before the changes are happening, the contracts they are signing today will be affected as they renew in the coming months or years.

These companies are doing things smart because come January, they won’t be scrambling. They already will have done their legwork, and by the time the regulations are enforced, the changes, to them, will be part of the routine.

What’s Involved?

Trickiness, for sure, but let’s clarify. If you’re a SaaS company with client subscriptions, you won’t just be doing a few tiny contract tweaks to stay compliant. You may also be looking at revisions to the way you do tracking, processes and internal controls.

Here are the 5 main areas where you need to focus for recognizing revenue:

  • Contracts: More details needed for multiple agreements, modifications, and renewals
  • Payment Terms: Special renewal terms and variable discounting
  • Collectability: Minimum thresholds and reseller agreements
  • Fees: This includes activations and added services
  • Expenses: Sales commissions and royalties

And here is where you should focus for your revenue recognition to ensure compliance:

  • Treating multiple contracts with one vendor as one.
  • Establishing collectability thresholds and track collectible revenue until it meets those thresholds.
  • Identifying and clarifying your promise to deliver goods or services to your clients. The ASC 606 is expecting that your promise – or performance obligations – are a benefit on their own or with other resources. The new guidelines also expect that the promise to deliver is distinctly separate and identifiable in the service contract.
  • Itemizing details for transaction price breakdowns – things like refunds, credits, performance-based incentives, bundling discounts, and flexible financing.
  • Allocating some of the transaction pricing to each performance obligation. Think standalone pricing.

We realize many changes hang in the balance, and these changes are far from simple. Still have questions? That’s okay! Luckily, we know compliance like jockeys know horses, and we would like to know you too, so we can help you get ready for the new ASC 606 guidelines.

Give us a call! We are here to help!

How to Choose the Right Accounting Software

How to Choose the Right Accounting Software

Accounting 101

How to Choose the Right Accounting Software

By Paul Johnson

Lately, it seems like your financials are making things difficult by demanding more work for less accurate data, and forcing your team to spend hours tweaking spreadsheets to get answers you need for strategic decisions.

But changing to a new software solution can seem scary. How do you choose?

To get you started, here are some tried-and-true ideas to help you find the right software solution that will support your company now, and scale with it as it grows.

Know Your Requirements

The best software in the world won’t do your business an ounce of good if you don’t know what your company needs. Know where your current software lacks performance by asking these questions:

  • Do you see higher operating and maintenance costs to support your on-premises software?
  • Is staff compensating for the software’s capabilities with too many spreadsheets, or unable to accommodate growth because of software limitations?
  • Is your CFO able to get accurate data to make informed decisions and strong business strategies?

Next, focus on your company’s functional requirements:

  • Does your business have multiple entities? Complex hierarchy, or require drum-tight GAAP, IFRS, FASB, SOX or other regulatory compliances?
  • Is your quote to cash process too slow or do you have a serious disconnection in your time and expense management systems?
  • Do you need support for AR, AP, order, project or cash management?

Good cloud accounting solutions can speed consolidations, and offer custom dashboard metrics with real-time data. They can also reduce security risks, lower IT costs, and boost productivity. But beware! Not all cloud accounting software solutions are made alike.

Best-in-class software offers solid customization and integration options, while suite software has more of an out-of-the-box feel, which is something to consider when you start weighing your choices.

Do Your Homework

For as many software solutions out there, you can find more companies who sell them. Not doing your homework can lead to a purchase that may have short-term value but lacks the chops to scale with your company for the long haul.

Consider these key tips when evaluating who to partner with:

  • Build an RFP/RFI that includes your requirements.
  • Prioritize your wish list into perks and deal-breakers, and focus to avoid unnecessary fluff options that distract from your goals.
  • Call references, find out what others say about the vendor online, and check out their infrastructure to be sure they meet your needs and standards.

Next, think about your return on investment. For example, choosing a best-in-class solution like Sage Intacct can potentially save your company $120K a year by ramping up productivity. Listen to what the vendor has to say about the cost-saving benefits up against your current expenses to see how that new software solution may offset them.

We get that choosing a new accounting solution isn’t an easy process. So, if you’re ready to start talking about the right fit, give us a ring. And when you do, make sure to run all your questions by us. We’re here to help your financials behave!