Core features of revenue automation software
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04 Minute Read
Are you automating enough?
According to research, 74% of revenue accounting teams perform manual interventions on a daily basis to process transactions and 68% report not having the right technology to address growing demands from the business.
While accounting leaders or executives may assume that their revenue process is already completely automated, manual processes tied to spreadsheets and system customizations are actually quite common and can increase risk, delay close, and place an extreme amount of stress on employees.
So what exactly do we mean by end-to-end revenue automation?
- 90-98% of revenue is automated in the system
- Minimal manual interventions to process transactions
- Real-time access to data and reporting
- Support for new products and pricing models
We know what you’re thinking: this level of automation is anything but easy. But with the right solution and support, the benefits of greater revenue automation far outweigh the challenges.
In this chapter, we’ll share the core revenue automation software features that your business should prioritize.
Contract grouping
Look for software that supports the following capabilities:
- Define and configure a hierarchy of rules to group transactions based on any attribute or set of attributes across data sources
- Process revenue contracts across multiple sets of books and rules without double entry
- Combine or separate contracts individually as required based on rules defined by the user
Performance obligations
Look for software that supports the following capabilities:
- Automate revenue policies for when and how to recognize revenue with performance obligation templates
- Map transactions to performance obligations based on user-defined rules and automatically expand bundled transactions to their distinct performance obligations for recognition
- Assign forecasting, cost, and variable consideration rules to match policies
Contract modification management
Look for software that supports the following capabilities:
- Match rules to policies for initial contract review versus contract modifications or revisions and SSP derivation dates
- Use pre-built, configurable rules to respond to different contract changes such as changes in price, quantity, and term, including their different rev rec implications, prospective or retrospective allocations, and revenue rescheduling
- Perform unlimited contract modifications, with categorization and tracking of modifications through revenue contract versions
Standalone selling price (SSP)
Look for software that supports the following capabilities:
- Define SSP using formulas, uploaded values, derived residual or calculated by an SSP analyzer
- Use historical transactional data to analyze and determine SSP, as well as see trends of SSPs over time
- Perform transaction price allocations across all eligible performance obligations in the revenue contract as defined
Delivery-based rev rec
Look for software that supports the following capabilities:
- Use a rules-based engine to define revenue events for complex pricing models, such as consumption-based pricing
- Automatically ingest event information from any source and automatically process events as received
- Create revenue journal entries to be recorded in the general ledger based on events, and automate the accounting for unbilled receivables, contract assets, and contract liabilities
Close process dashboard
Look for software that supports the following capabilities:
- Navigate through contracts in real-time to identify and validate data exceptions at the source
- Proactively resolve variances in revenue recognition and identify the causes of period over period revenue changes with account and trend analysis
- Get access to a continuously evolving trial balance to ensure your revenue accounts tie-out
Revenue reporting
Look for software that supports the following capabilities:
- Use a rules-based engine to define revenue events for complex pricing models, such as usage-based pricing
- Automatically ingest event information from any source and automatically process events as received
- Create revenue journal entries to be recorded in the general ledger based on events, and automate the accounting for unbilled receivables, contract assets, and contract liabilities
Cost management
Look for software that supports the following capabilities:
- Create multiple cost types to manage and track contract costs, set up individual rules, formulas, capitalization methodologies, and margin impact
- Align cost types to performance obligations and set cost treatment to follow revenue or recognize costs independently
- Capture costs and adjustments, upload costs as part of revenue transactions or on their own and link to revenue, automatically account for changes to costs as they occur
- Track and report costs using cost specific reports including Cost Waterfall, Cost Capitalized Rollforward, Cost Insight, and Cost Transactions
Variable consideration (VC)
Look for software that supports the following capabilities:
- Create multiple VC types to manage and track transaction price adjustments for items such as revenue share, rebates and service level agreements (SLAs), and set up individual rules for calculating estimates, accrual timing, clearing, and expirations
- Adjust estimates, process actuals, and clear balances, as well as view changes and impact over time for transactions and contracts
- Flag transactions as variable consideration and set rules for including/excluding from allocations both upfront and as changes occur
Exploring the value of greater levels of automation
When we talk to CAOs, controllers, and revenue accounting leaders, they often say, “Our revenue process is automated.” However, when we investigate, we discover a web of spreadsheets combined with a customized ERP revenue recognition module. This is not automation.
What is true revenue automation and what are the benefits for your business?
9 benefits of revenue automation for your business
Based on customer feedback from hundreds of implementations, we’ve compiled a list of nine key benefits of end-to-end revenue automation — no matter which solution you end up choosing.
Learn more about revenue automation software
Now that you have a better understanding of the capabilities you should be looking for in a revenue automation solution, how do you know when or if your business needs greater levels of automation?
In the next chapter, we’ll cover some common challenges and business initiatives that may signal or trigger the need for a revenue automation project.
