Whether your business deals in physical products, is a service concern, or is a software as a service (SaaS) platform, manual and outdated revenue recognition strategies can lead to inefficiencies.
It’s even worse if you still depend on the accounting standards codification (ASC) 605. That’s because your competitors and other postmodern business enterprises are probably already running ASC 606.
Why ASC 606?
It is the most recent version of standardized accounting principles for recognizing business revenue. Under this standard, revenue recognition entails:
- Establishing a contract and expressly agreeing to the terms to transfer goods or services to a customer
- Documenting your performance obligation in that contract
- Setting a fixed or custom fair pricing for the good or service
- Allocating the transaction price
- Recognizing your business revenue in line with performance
What does NetSuite have to do with it? NetSuite is an all-in-one enterprise resource planning cloud-based software that gives you an ecosystem architecture to track all the changes and updates in your business in real-time. And the best part is that ASC 606 is integrated into NetSuite’s ARM module.
Here’s how NetSuite and ASC 606 will help you report revenue accurately:
You’ll be able to make quick revenue adjustments easily
The whole point of having an advanced revenue management system is to automate your revenue recognition process. Unlike a manual revenue approach that takes time and is prone to human error, ARM eliminates any problems you can think of that are likely to impede your revenue reporting.
With an ARM module, it’s easy to make adjustments affecting a particular revenue recognition stage. For instance, if you were to offer price concessions, volume discounts, or rebates, change the fair pricing through the rule-based event handling framework in the ARM module. The change creates a template for the system to update and record revenue under the new pricing.
Your sales and support teams can easily share revenue data for better performance
Businesses that lack an ARM module have no choice but to rely on traditional standard operating procedures for their sales and revenue operations. It means running around to other departments and chasing after line managers to get information and seek the approvals necessary to adjust fair prices.
The beauty of a comprehensive enterprise resource planning tool like NetSuite is that it enables customization of business rules so that your team can access and make changes to record and user information. Making the relevant adjustments to the revenue collection process becomes a breeze, less bureaucratic, and hassle-free.
Analyzing revenues is almost effortless
Without automating how you plan, recognize, and collect revenue, you don’t have much choice but to dive into individual customer files and reports to view contract details, fair value pricing information, and keep up with performance obligations. Do you really have that much time on your hands when you could be doing other essential business functions?
With an ARM module, you have all the revenue data you need at the click of a button. NetSuite’s ARM has in-built analytics resources to generate pivot tables, reports, screen grabs, and all sorts of key performance indicators that you can use to create custom revenue-tracking dashboards. Advanced revenue management gives you the power to get an accurate snapshot of your revenue status anytime you want.
You can make better revenues estimates for your sales campaigns
When running a sales campaign or promotion, it helps to look into the future by forecasting the revenues you should expect to collect. Projecting revenues is a crucial ingredient when making strategic decisions for your business—all the more reason why revenue projections should be accurate.
NetSuite’s revenue recognition module is your perfect companion for revenue projections because it enables the swift management of all revenue elements. The elements are the different bits and parts of the performance obligation you must fulfill to get the product to the customer and collect your revenue. So, NetSuite’s ARM makes short and light work of handling your fair pricing system, customer contracts, and satisfaction, making revenue projections much simpler and more accurate.
If you already have NetSuite but lack the revenue recognition module, adding it to business processes will be fast and rewarding. And if you don’t have an ecosystem architecture altogether, talk to us.
Total Dynamics is your all-around NetSuite expert and consultant. We’ve got a NetSuite implementation model for every business, including customizations to suit your specific business needs. We also offer post-go-live support and optimization.