Research: New Revenue Recognition Guidance Highlights Need for Software over Spreadsheets

Research: New Revenue Recognition Guidance Highlights Need for Software over Spreadsheets

Bringing the new revenue recognition standards to light required years of hard work; implementing them successfully will require a more sophisticated and error-proof solution than spreadsheets, according to new research.

Fueled by benchmark findings demonstrating the misconceived reliance on desktop spreadsheets in a corporate setting, including a 35% data error frequency, advisory services firm Ventana Research highlighted how the complex new approach to revenue recognition represents the tipping point toward a software-based solution for the sake of consistency, accuracy and agility.

The massive changes at hand made it abundantly clear to Ventana’s Robert Kugel that companies should avoid using desktop spreadsheets as much as possible in handling the revenue recognition process.

“Because of the complexity,” Kugel said, “it will be a nightmare to try to use desktop spreadsheets for all but truly one-off calculations and prototyping work. Our research finds that in many situations spreadsheet maintenance is a burden, and this certainly will be the case here. Revenue recognition will be in a state of flux for years because of the highly predictable spate of rulemaking and ‘clarifications’ of these treatments and maybe even requirements to recast numbers.”

In steering companies away from spreadsheets, Kugel referenced a “natural relation” between the new principles-based accounting standards and software.

“In addition to ensuring consistency in treatment and facilitating governance and control, software also is capable of automating the process of presenting a company’s results from multiple perspectives in a consistent fashion,” he said. “This is important because many companies will find that their statutory books alone will not provide the right numbers to manage their business.”

Noting the various types of errors common to even the most crucial spreadsheets, the article points out the benefit a software-based revenue solution can provide by reducing the workload in preparing the management accounting required by the new standard, in addition to error prevention.

“In the long run, how well a finance and accounting organization uses software to manage contracting, invoicing, billing and the revenue recognition process will have a significant impact on the amount of work involved,” Kugel said.

Today is the day to declare your independence from spreadsheets.

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