A recent report by Gartner titled “New Revenue Recognition Rules Will Impact Finance, Business and Technology” (January 2018) identifies the impact of the new ASC 606 revenue recognition standards on the modernization of finance systems.
According to the report, not complying with the standards can result in a range of material impacts to your business. Most notable among them include:
The report highlights three primary areas of impacts:
For many businesses, their existing solutions may be unable to support the new regulations and future business plans. “Relying on spreadsheets or manual calculations, or trying to reconcile information across multiple systems is often error-prone and less-than-adequate, causing later restatements.”
The report predicts that “by 2022, 70% of mid-to-large enterprise businesses will be using an automated revenue management solution to support complex billing and revenue recognition compliance.” Zuora Revpro is a great example. Our solution helps companies of all sizes automate their revenue recognition processes and helps them comply with the new guidelines.
Gartner offers the following recommendations for application leaders responsible for modernizing finance applications:
According to the report, “over time, even more sectors will be impacted as digital business drives the evolution of new business models in which more businesses will sell services alongside physical goods and embrace usage-based and subscription billing.” These include companies in the Subscription Economy with usage-billed billing, professional services, and other service-based offerings.
Gartner subscribers can download the entire report here.