In business, timing is everything

Courtesy of quotesinfluence.com

In business, timing is everything. A well timed market release can mean substantial revenue growth while a poorly timed release can lead to missed sales goals and costly inventory. Most software companies recognize the importance of timing for every aspect of their business, except when it comes to the accounting system. QuickBooks is designed to gather data inputs until the month-end close, and then batch load these to generate the necessary management reports needed to run the business. On the other hand, NetSuite was designed to run system processing in real time and provide management reports on demand. Today, we are going to compare the different types of system processing found within the two systems and their effects on business processes such as VSOE revenue recognition.

QuickBooks

The QuickBooks accounting system was designed to perform system updates based on “batch processing.” With batch processing, transactions are received by the system and grouped together for processing at a later time. These groups are then processed all at once depending upon when the batch is set to run. The timing of batches can be variable. They can be set to run once a month, once a day, or once an hour.  It is important to note that the updated transactions are not available to other users until after the batch is run.

NetSuite

On the other hand, the NetSuite system is designed to process transactions in “real time.” This means that the transaction is not grouped together and processed later but is updated immediately within the system. With real time, information is written to the database once it is entered and is then available to be accessed by others.

Important Differences

Does batch processing versus real time processing matter to business? It does if you want to be better than the competition. To understand this better, it might be helpful to compare the two processes trying to perform VSOE revenue recognition calculations.

Difference between batch and real time processing

Courtesy of geekandpoke.typepad.com

Batch Processing – VSOE revenue recognition is necessary for software companies to maintain GAAP compliance. It is usually calculated via the bell curve method. To calculate the bell curve, a clerk would enter the final sales price for each element into the system. With a batch system, these data inputs would be grouped together and updated when the batch is run. Let’s assume that the clerk entered 50 transactions and the batch is run at night. This means that the clerk would not be able to determine whether a sales quote is VSOE revenue recognition compliant until the batch is run the next day. For a salesperson in the field, this may not be quick enough.

Real time processing – On the other hand, real time processing produces the VSOE revenue recognition calculation immediately after the inputs have been entered. With real time updates, the clerk can report back to the salesperson within minutes, informing him whether his desired quote is still within the VSOE revenue recognition range.

Althought outdated, illustrates the growing demand for real time data

Courtesy of i.cmpnet.com

The key to business intelligence is obtaining information in real time and responding to it. Real time processing allows managers to react to the changing business conditions as they happen, rather than at months end. If you would like to understand more about how real time processing can help your business, please give us a call.

[subscribe2]