Today’s ERP Systems Just Won’t Cut It for Revenue Recognition

By Erika Malzberg April 24, 2017

Contributed guest post from Leeyo Software

Leeyo Software, the leading provider of solutions for revenue recognition automation and management—and a Gold Partner Sponsor of our upcoming Subscribed San Francisco 2017—explains why your ERP system is insufficient for Rev Rec.

In the “old days,” revenue recognition rules were simple enough to be managed using spreadsheets. And ERP systems didn’t need to support revenue recognition beyond providing the basic underlying data to be manipulated by revenue teams. Now revenue recognition is so complex that spreadsheets and ERP systems can’t cut it.

In 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) jointly released the decade-in-the-making, converged revenue guidance, ASC 606, “Revenue from Contracts with Customers,” which will forever alter the accounting standards landscape for most corporations across every industry. The complex, principles-based approach to revenue recognition requires everyone to re-think existing contracts, disclosures, pricing and the bottom line.

In today’s altered landscape, the computations have increased dramatically in complexity, and as a result processes involving manually computed spreadsheets containing data from ERP systems have reached a breaking point. Revenue teams relying on manual processes can face audit issues, errors, and delayed reporting as a result of the inherent limitations of ERP-based revenue recognition.

ASC 606 magnifies the pre-existing issue even further, as the 2018 effective date looms. Moving from manual processes to an automated revenue recognition system is clearly the answer to ensuring compliance with ASC 606 as ERP systems can’t deliver the complete and integrated revenue recognition needed.

Many companies are planning to try to get by on the new revenue recognition guidelines by using functionality within their existing ERP systems. But the reporting capabilities for your ERP are geared toward invoicing and other standard financial system activities, not revenue-based activities contingent on calculations done outside of the system. Your ERP system was never designed to go beyond the simple act of provisioning the necessary data to the revenue teams.

There are 6 fundamental ways in which your ERP is inadequate as a revenue management solution:

  1. No concept of fair value or relative selling prices
  2. No concept of arrangement linking/grouping
  3. No concept of revenue allocation
  4. No complex deferred revenue management
  5. No out-of-box revenue-specific reporting
  6. No easy path to forecasted revenue

ASC 606 accentuates an already existing gap in ERP systems. As companies face the daunting reality of adopting the guidance, challenges will only increase. Right now is the time to find out more about your options and how to mitigate the potential risks.

Download Leeyo’s free ebook now with details on (and solutions for) Why Your ERP Can’t Manage RevRec: The Top 6 “No No” List.

And don’t miss out on the opportunity to learn more about ASC 606 standards from Leeyo in person at Subscribed San Francisco, June 5-7 2017….plus our ASC 606 hands-on workshop (limited space, register by May 10th to reserve your space), 4 breakout tracks, CFO Summit, advanced user training, Subscribed Showcase, networking, Diversity in Tech breakfast, and more!

Register now!