Revenue Management Made Simple

Revenue Management Made Simple

Resources

by | Sep 18, 2018 | Resources

Revenue Management Made Simple

By Paul Johnson
CPA, CGMA, MBA

How to Win the Revenue Management Game

Revenue management is a top challenge for many finance professionals—especially those working in software-as-a-service (SaaS) and professional services companies. The new revenue recognition criteria, known as ASC 606, adds even greater complexity. It’s no wonder that companies are seeking to automate their revenue management processes so they can be more efficient, get more compliant, and improve visibility.

a business team of four people sitting at a table to discuss revenue management. A female with short hair leads the discussion

Design better processes

Successfully streamlining revenue management requires a two-pronged strategy, starting with better processes designed from the top down. Since revenue management is an enterprise-wide affair, these processes should be based on input from senior executives across multiple disciplines and functions.

Here’s how:

  1. Define the revenue recognition foundation, such as determining what a subscription is, what falls under “maintenance” or “support,” and what discounts you’ll permit.
  2. Establish fair value pricing criteria using market-tested parameters and centralized data.
  3. Involve auditors in these process designs and policy definitions.
  4. Use standard contracts with defined terms.
  5. Enable collaboration and information sharing across sales, service, and finance.

an older asian man working on his laptop

Invest in the right technology

Automating revenue management yields significant benefits, from faster period closes to greater accuracy and lower costs. To streamline and centralize the management of revenue accounting, businesses need technology that allows the finance team to:

  1. Connect systems. The best accounting systems connect to critical business systems within the organization, such as CRM, services management, and subscription management to create a complete ecosystem for revenue management.
  2. Automate processes. Revenue managers need the ability to codify the applicable rules through flexible templates and schedules that reflect their unique business requirements. The process must drive the automated calculation of both recognized and deferred revenue schedules and forecasts based on contract terms, subscription length, project milestones, and more—and integrate with the general ledger.
  3. Analyze the business. The best revenue management systems deliver a solid picture of both current and deferred revenue by showing a real-time snapshot of future revenues, projected renewals, and total deferred revenue months or even years into the future. You should be able to dig deep to truly understand your business, with visibility into both financial and operating data, and have the flexibility to view the business through multiple lenses to make better strategic decisions.

Master revenue management with Sage Intacct and Atlasphere Consulting

Sage Intacct automates and improves the processes associated with complex revenue recognition. Sage Intacct is the cloud-based technology that allows your finance team to connect systems, automate processes, and analyze your business. Contact us at Atlasphere Consulting; we’re Sage Intacct experts who can develop a winning strategy for conquering the challenges of revenue management for your business.

If You’re Not Early, You’re Late!

If You’re Not Early, You’re Late!

Accounting 101

by | Oct 16, 2017 | Accounting 101

If You’re Not Early, You’re Late!

By Paul Johnson
CPA, CGMA, MBA

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!