The Importance of Revenue Recognition Software

It’s no secret. Revenue is critical to the success of your business. Without revenue, your organization can’t continue to operate. Bringing in revenue may be difficult enough, but tracking it can be even more challenging. Calculating revenue and knowing where your organization stands financially certainly takes some work and some understanding of one of the generally accepted accounting principles: revenue recognition.

At times, revenue recognition can get complex. Ensuring you are following the new revenue recognition standard is also a major consideration. There are a number of rules and regulations to consider when it comes to recognizing revenue, and complexities can abound.

In this article, we’ll dive a little deeper into revenue recognition by first giving a revenue recognition definition. Next, we’ll talk about why accurate revenue recognition is so crucial. We’ll then uncover what revenue recognition software is and why it’s so critical for a business. From there, we’ll delve into the specific benefits of revenue recognition software, and then help you determine what to look for in a revenue recognition software solution.

What you’ll learn:

• What is revenue recognition in business?
• Why is revenue recognition so important?
• What is revenue recognition software?
• Why do you need revenue recognition software?
• What are the main benefits of revenue recognition software?
• What should you look for in a revenue recognition software solution
• Things to look for in a revenue recognition software
• Revenue recognition through Salesforce CPQ & Billing
• Revenue recognition software: giving you freedom to grow

Let’s start with a simple revenue recognition definition. Revenue recognition is a generally accepted accounting principle (GAAP) that is critical when determining the financial standing of a business. Revenue is generally recognized when certain conditions are met. The new ASC 606 and IFRS 15 standards set principle-based specifics for how revenue should be recognized from contracts with customers. Revenue recognition is a key element that helps businesses achieve an understanding of where they stand financially.

Accurate revenue recognition is crucial for a number of reasons. The first is compliance. The new standards handed down from the FASB require all to now recognize revenue when services or goods are provided to the customer in an amount equal to what is delivered at that point. The new standard can be difficult for services and subscription businesses to implement, as the exchange is less cut and dried and concrete than handing over a tangible product. Cloud software revenue recognition, for instance, can become difficult, particularly if users are on a subscription plan.

Revenue recognition and the way it is calculated is also critical to a company’s financial planning. It could affect everything from product strategy to sales commissions and compensation structures. Sales decisions are often affected by how much recognized revenue can be expected from a sale. In fact, 77% of sales reps say estimated revenue is a useful insight when prioritizing leads and opportunities.

Simply put, if you don’t know how much revenue you have, it’s difficult to make financial decisions. Not to mention, investors want to see accurate revenue recognition numbers so they can make informed decisions. If you miscalculate revenue recognition, all kinds of problems can arise. Thankfully, there’s software to help with revenue recognition.

Revenue recognition software is software that is designed to make revenue recognition simpler. It’s meant to help business entities or companies organize their financials and ensure they are remaining compliant with FASB standards. Often, revenue recognition software is part of a larger end-to-end revenue management solution.

Many revenue recognition software solutions have tools that help you automate even the most complicated revenue calculations and situations. Often, with revenue recognition software, you can set standard methods and rules that recognize revenue in a specified way. You can also typically use the software to automate amortization schedules or easily sort and analyze revenue by specific criteria.

Revenue recognition is a complex principle, particularly with new standards that have introduced changes to some industries. With so many moving parts and different revenue streams, it’s difficult to stay on top of it all. Your accounting department could put in long hours painstakingly evaluating contracts and statements and ensuring proper reporting. Or you could instead set specific rules and have a software solution handle a lot of the grunt work for you.

Key is that revenue recognition software saves time. And it saves time for many different departments. Sales reps often have to manually input customer info, taking extra care to ensure the right numbers get recorded in the right places for proper revenue recognition to occur. In fact, research shows that sales reps consume 17% of their time manually logging customer or sales info, or on administrative tasks. With the right software in place, sales reps and accountants alike can be freed up to focus on more important tasks.

Revenue recognition software does more than just save time. It also improves accuracy. No matter how you slice it, human error is always part of the equation. And when fatigue and deadlines come into play, accuracy can suffer. Cloud-based software, on the other hand, doesn’t get tired. It is precise and accurate in its calculations and does them very quickly. Accuracy is key when it comes to recognizing revenue. Trust it to a software that will get it right every time.

You need a revenue recognition software that is powerful, but also simple to use. You need a solution that can easily handle a number of subscription or product contract durations. You need a solution that’s customizable and scalable. In short, you need revenue recognition software that works for your unique situation. Here are some general things to look for when choosing software to help with revenue recognition.

You can’t improve processes if you don’t know where you stand. Find software that helps you see the entire revenue generation and recognition process. The right software will give you the ability to see how much revenue will be recognized monthly. Beyond that, though, it should allow you to drill down and get granular. Some software solutions will allow you to break down revenue by product, customer, and even business unit.

Implementation issues are far too common when you’re introducing a new software. Find a solution that has all the functionality you need, but that is still simple to implement. If you build on an existing platform, you may find the implementation process easier. This is the case particularly if you add Salesforce CPQ to your existing Salesforce solution. Salesforce CPQ on the Customer 360 Platform may be able to give a more robust view of each customer and their standing in the revenue recognition process.

The right solution will be easy to manage. Gatekeepers should be able to input rules and track and analyze revenue without too many complex steps. A good revenue recognition software should run well on its own, but also be easily configurable to your specifications.

If you’re looking for a rich software solution that does the heavy lifting when it comes to the complexities that surround revenue recognition, then look no further than Salesforce CPQ & Billing. It helps everyone from the sales rep to the finance department, with easily configurable rules and automation capabilities that make building custom contracts a breeze.

Customer relationships evolve, and customer needs change. As they do, contracts need to be added to or amended. Salesforce CPQ & Billing takes the headache out of contract changes and automatically updates invoices as changes are made. With Salesforce CPQ & Billing, issues with revenue recognition around changing contracts vanish. Salesforce CPQ & Billing stores data and provides a quick and complete view of customer payments to make revenue recognition simple.

Increasing revenue is a key part of growing your business. And to get an accurate picture of revenue, you need to understand where you are when it comes to revenue recognition. You shouldn’t need an accounting firm to keep your revenue recognition tidy and accurate. Instead, you can turn to a revenue recognition software solution.

With the right tools, keeping customers and employees happy is simple, and solving your revenue recognition pain points is possible. Salesforce CPQ & Billing is a robust solution built by, and for, the number one CRM. To put it simply, Salesforce CPQ & Billing is designed to help you boost revenue. Watch a Salesforce CPQ & Billing demo today and see how the powerful solution can help you stay compliant and recognize revenue. It’s time to take your business to new heights with a software solution that’s built to help you soar.