How revenue recognition risks can be reduced with technology


    Revenue recognition is the cornerstone of accrual accounting. They determine when revenues and expenses are recognized for businesses. This is especially important for industries such as software-as-a-service. The stakes are high for companies to ensure proper tracking of EOY reports and audits. Using technologies automating revenue recognition can eliminate the risks of having an employee process it manually. There are several common risks that occur manually and how technology can reduce them.

    Event-based revenue triggers:

    The release of revenue may be delayed until certain events such as delivery, acceptance or consumption occur. This can be a major complication for manual tracking of revenue recognition and is considered one of the most difficult tracking tasks associated with rev rec. An automated, cloud-based solution makes event revenue counting and reporting much easier. The automated solution also leaves a complete audit trail and helps make accurate forecasts.

    Calculation of offline points of sale:

    Individual sales price calculations can take accountants weeks from each quarter. From there, they have to figure out how to apply it to a contract that may have many different aspects and multiple performance obligations.

    Automating this task saves time and labor, which improves visibility. The automation tool makes it easy to recalculate multiple times and makes managing large amounts of data easier.

    Changes to the contract:

    Contracts are rarely static throughout a customer’s lifetime with you. As your business grows and their needs change, changes need to be made. This task is difficult to track in spreadsheets by hand. An automation tool can accomplish this task quickly and accurately.

    Automation can transform the way a company can accurately track revenue recognition, and save hours of manual work for your accounting team.

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