New revenue recognition standards are fast approaching and companies everywhere need to begin shifting towards these new regulations now. This is a complex process that affects multiple levels of your organization and early preparation is the key. In order to be ready, you’ll need to analyze your organization thoroughly and then enact policies that put you on a steady path to compliance. The full extent of policy changes needed to get your firm into full compliance may seem daunting so we recommend you begin now and address the necessary issues one at a time. How will you keep track of everything that needs to happen? What are the practical changes your business can begin making immediately and what will the effects on your everyday processes look like? Practically speaking – how can you begin to move towards new revenue recognition standard compliance? We explore these questions below with a company example that illustrates how it’s done.
We recently worked with the VP of Finance at a Saas company, helping to successfully deploy NetSuite ERP to manage their accounting data. In particular the new software was aimed at giving more visibility into the relationship between their costs and revenues. This kind of visibility is exactly what the new revenue recognition standards are all about. What you may find surprising is that our recommended NetSuite deployment was consistent and up-to-date with the 2014 revenue recognition standards and thus not yet fully compliant with the forthcoming 2017 requirements. We wanted to help this client understand that the shift towards a new revenue recognition reporting standard can and should be a stepwise process. The new software rollout represents an important move in the right direction of the new regulations and allows the company’s financial reporting to begin accumulating the necessary two levels of reporting history that the 2017 regulations call for. The VP of Finance was convinced to drive the change incrementally for a few key reasons:
Organizational stability: Making incremental changes helps employee adapt to new protocols over time, without sacrificing productivity. This is a top concern for any transition in an organization, and making small changes over time makes it easier to educate employees on new standards for proper conduct and notations. At the same a complex transition is best organized and approached by a breakdown into more manageable goals and deadlines.
Creating a Sense of Urgency: Because these new standards and practices will have a ripple effect across the organization, the VP needed to ensure that the organization was strategically aligned with the necessary change. This means department-specific explanations and detailed plans for the future. Incremental change gives employees an appropriate amount of time to learn about and accept the coming shift so that they can support the transition in any way possible.
Impact modeling: By shifting practices step-by-step the VP was more easily able to see the downstream effect of changes on other company areas before they had the opportunity to become major roadblocks. Proceeding with caution can in effect bring complex issues to the surface as or before they happen in order to get them resolved quickly.
Impact modeling is the most daunting aspect of a major change like this and one that should be considered thoroughly. This is where a cross-functional ERP software like NetSuite can really shine by showcasing how changes in one department link to and affect changes in another. The new revenue recognition standards are about revising your protocols for accounting but they have implications to every other branch of your organization. Changes to how revenue is recognized can affect your sales team quotas and commission structures – it may even affect your day-to-day operational procedures. And how will all this affect the structure of your contracts coming through the legal group? Impact modeling can help address all this.
The most important point is that to begin making these changes is to take stock of your business and to reassess how the pieces fit together – ultimately in service of making your organization better. If you’re still not convinced that your company needs to make a change now – check out our top 15 benefits of upgrading your business software solutions and moving into the cloud.
You’ve heard about the new revenue recognition standards that will be officially taking effect in 2017, but have you considered all the ways your organization will be affected? Revenue recognition has broad implications for your business but by preparing accordingly you’ll be able to reap a few major benefits. These changes will have an effect on more than just your financial accounting department and are intended to drive your company towards better, more transparent accounting practices. What factors do you need to consider in order to model the full impact in advance?
Revenue recognition practices begin in your accounting department, but where do they end up? Changes to how your company is recognizing its revenue can have a variety of downstream effects on other departments and on your employees – in particular on your sales department. Quarterly revenue numbers are likely to change purely as a result of how your organization recognizes revenue. As a result quotas and commission structures may have to change as well. This in turn means that your incentive system for the sales team may have to be revised. Finally all this information needs to be communicated clearly to your employees so that they know what to expect, how to react, and what their continued performance means to the company.
The new standards are, at their core, about a more detailed understanding of where your revenue comes from. Are you fully prepared to match costs with revenues in your current system? To do this requires a nuanced view of what costs go into generating revenue over time and as part of the new revenue recognition standards you absolutely need to be able to capture the costs of making a sale accurately. Once you do that, the costs must be capitalized and amortized over the life of the sale and linked directly to your revenue recognition of that sale. This can get tricky – particularly if your company bundles services over an extended period of time. The good news is that a robust ERP system (like NetSuite) can handle this level of reporting complexity.
The bottom line is that more granular, detailed reporting of your company’s revenue and cost structures is a positive step forward. Doing this correctly provides you with a much clearer picture of your organization’s financial health and makes it much easier to track important trends over time so that you can not only understand the present but predict the future as well. Public and private companies will both benefit from the added transparency to investors while adapting their practices to comply with the new regulations. Still a bit confused about how to prepare appropriately for the new revenue recognition standards? Reach out to us anytime for a more personalized look at how great ERP software can help, or check out some of our amazing company success stories here.
New revenue recognition standards are coming soon – is your ERP system ready? The switch officially takes effect in 2017 but in order to be prepared you need to begin planning now. This shift is about more than just financial accounting and you need to fully understand how your business will be impacted before making a plan. It’s a great time to reassess your financial practices and internal impact modeling capabilities in order to come out the other side a stronger organization. Single function accounting software simply won’t work any longer – instead you’ll need a robust ERP system like NetSuite to help with this process. NetSuite can help you to create and foster more transparency in your organizational goals and to craft a better vision for the future. The point is that the new revenue recognition regulations have the potential to affect your organization across all departments and functions – how can you ensure that your teams will be ready? The answer lies in the software solution you choose.
Revenue recognition has historically varied by industry and across products – the new regulations are seeking to bring businesses closer to a global standard for how revenue is recognized and reported. More similarity across industries and functions means that reporting is in general going to get a bit less complex. Although this means your protocols need to adapt in the short-term, there is an inherent benefit to the more detailed reporting requirements that are now being requested. The goal is more transparency on your company’s financial health and less potential for fraud. These goals benefit all. The question is – how exactly can your ERP software help you prepare to make the necessary changes?
For starters, you need an ERP that is able to integrate your back-end financial data with your front-end sales reporting. Revenue recognition for modern products can be complex – particularly if your company sells a bundled offering involving maintenance, subscriptions, or support over extended periods of time. Your ERP needs to be able to identify appropriate cost structures for your revenue streams and then match them with your cost accounting reports in order to properly comply. Having a solution that can do this is a major benefit to your company as it provides a much deeper look at exactly how your revenue is being generated. Knowledge is power.
Is your finance team still using spreadsheets to keep the ledger? Or perhaps using a single function software like Quickbooks to balance your accounts? This is strong indication that you are in need of an upgrade. The new regulations demand more granular reporting – reconciling revenue recognition with multi-book accounting is the key. Not only will a software solution like NetSuite bridge this important data gap and give real-time reporting updates across your company, it can be almost infinitely customized to suit your specific needs. The 2017 revenue recognition standards require this kind of detail – but aside from that requirement, understanding your organization on both the micro and the macro level in a way that this cross-functional reporting allows is something you definitely want.
There are a few more key elements to ensuring that your ERP system is ready for the new revenue recognition standards which we’ll dig into in another post. The most important thing is that you take the time to assess your company’s financial health by looking at how the pieces all fit together. You need a nuanced and holistic view both to be in compliance and to continue growing. NetSuite offers versatile and powerful software that can help you achieve this. If you’d like to read about other businesses using NetSuite ERP software to succeed – check out our success stories.
New regulations around how your business recognizes revenue are coming and everyone needs to be in compliance with the new standards by January of 2017. You need to understand the new regulations and your company needs to begin preparing for the shift. Here we look at an overview of the new requirements in order to help you answer the most pertinent questions: How do these changes affect you? What are the short and long term benefits? What does this all mean for your business?
In simplest form, the new regulations are about providing clearer, more detailed information about your company’s financial accounting practices. The new policies are also an important step towards more global principles of accounting and a move away from the industry or business-unit specific practices your company may be used to. In the long run these general standards will make compliance a simpler proposition but for now they are likely to involve significant changes from what you’re currently doing.
There are changes to the specific ways in which your company will now be allowed to recognize different types of revenue – and this will have a trickle-down effect on more than just your finance department. For instance, revenue recognition protocols could change fiscal quarter budget constraints and sales commission payouts. These changes also have potential to benefit you and your customers on a financial level, allowing you to recognize revenue sooner than you would have before. The important thing is for you to analyze your business processes in order to understand the full impact.
The changes to revenue recognition standards and reporting have a lot to do with more detailed financial reports. These will include being able to match costs to revenues effectively across your entire organization. Modeling the true cost of a revenue generator can be a complex task – particularly for companies that deal with subscription models, Saas products, or that long-term customer support plans. Keep in mind however that the new regulations are primarily designed to reduce fraud by making reporting simpler – not more complex. In preparation, prepare to take a deeper appraisal of your income statement to understand how to be in full compliance.
The bottom line is your SOPs will have to change and you’ll need tools to properly analyze the full impact of the proposed changes across your organization. Robust ERP software can be extremely handy in this regard because it’s able to coordinate data across functional areas and geographic offices to offer up-to-the-minute detailed analysis. To effectively model the changes’ impact you’ll need software that combines multi-book accounting with your revenue recognition sheets – this means a spreadsheet is likely no longer sufficient. And this is only the beginning of the story of how the new revenue recognition standards will affect your organization as a whole. To make these changes without losing significant productivity you’ll need to analyze how your front and back end departments integrate and are affected by revenue recognition. If you’re not in a position to understand your organization on a granular level like this, a change is likely called for and you need to get started now.
On the whole more thorough and more transparent financial reporting will be a good thing for everyone. Keeping your shareholders up-to-date and informed means keeping them happy. At the same time companies looking for funding will have an easier time conveying their key accounting data to potential investors and showcasing your financial health in a more transparent way. If you’re still confused, or want to hear more about how excellent ERP software can take your business to the next level, try a free trial!
Moving your data services to the cloud is a big decision – you’re putting your company’s data assets in a 3rd party’s hands and trusting that they’ll be protected. While cloud services are in general significantly more data-secure than your average on-premise server, it can be difficult for businesses new to the cloud to fully understand why. Google cloud security has a commitment not just to best-in-industry security but to full transparency about their best practices so that you, the customer, can fully understand how your data is being protected. Here we take a deeper look at just how Google cloud security works to keep your data assets safe.
Google fully understands the diverse needs of industries throughout the world – they currently serve over 5 million business clients worldwide with a wide range of regulatory needs. Different industries means different compliance standards and Google cloud security is here to bring your business a customized solution that fits your exact needs. They’re able to do this because of their industry-leading knowledge of all things technological as well as their massive scale and resource set. Google has spent years developing a highly advanced, security-focused infrastructure in order to keep your data safe.
With Google cloud security you own your own data – not Google. They never sell your data or company information to 3rd parties, use your data for advertising purposes, and will never access your data outside of fulfilling their contractual obligations to you. They will delete all record of your data within 180 days of your own deletion from the system and provide comprehensive tools which make it easy for you to take your data with you should you choose to stop using Google Cloud services altogether. Google cloud security also allows for quite a bit of customization by your company’s administrator. You can adjust permissions and privacy settings for your user profiles and document-sharing capabilities, as well as restrict user access to documents created externally.
How exactly does Google create this environment of best-in-class security? They employ over 400 full-time employees specifically assigned to data protection including some the world’s top experts in the field. They are able to invest millions of dollars into ensuring that security remains a top priority and that it is baked into the development of all future projects. This is the primary reason why the cloud is so much more secure than an on-premise or internally-managed and maintained server – nearly unlimited resources. Google cloud security is able to employ custom-built hardware which has been optimized over decades to be secure and reliable. Google’s data centers are spread throughout the world – their systems contain redundancy after redundancy to keep you up and running 24 hours a day, 365 days a year with no scheduled downtime. What’s even more important is that Google’s systems are consistently being scrutinized by privacy and security experts across the globe for vulnerabilities and that Google is committed to continually strengthening their data security and services going forward.
Transitioning your company’s data to the cloud may feel frightening but Google is a company you can trust to keep your assets safe. Their commitment to transparency and to top notch security means you can rest easy in their hands. Making the switch can be a complex and daunting process but once completed your business will get a boost – not just in security but in productivity as well. If you’d like to read more about the success stories of businesses switching to Google Cloud services, check out this article or reach out to us anytime for a free consultation.