New revenue recognition standards are coming soon – is your ERP system ready? The switch officially takes effect in 2017 but in order to be prepared you need to begin planning now. This shift is about more than just financial accounting and you need to fully understand how your business will be impacted before making a plan. It’s a great time to reassess your financial practices and internal impact modeling capabilities in order to come out the other side a stronger organization. Single function accounting software simply won’t work any longer – instead you’ll need a robust ERP system like NetSuite to help with this process. NetSuite can help you to create and foster more transparency in your organizational goals and to craft a better vision for the future. The point is that the new revenue recognition regulations have the potential to affect your organization across all departments and functions – how can you ensure that your teams will be ready? The answer lies in the software solution you choose.
Revenue recognition has historically varied by industry and across products – the new regulations are seeking to bring businesses closer to a global standard for how revenue is recognized and reported. More similarity across industries and functions means that reporting is in general going to get a bit less complex. Although this means your protocols need to adapt in the short-term, there is an inherent benefit to the more detailed reporting requirements that are now being requested. The goal is more transparency on your company’s financial health and less potential for fraud. These goals benefit all. The question is – how exactly can your ERP software help you prepare to make the necessary changes?
For starters, you need an ERP that is able to integrate your back-end financial data with your front-end sales reporting. Revenue recognition for modern products can be complex – particularly if your company sells a bundled offering involving maintenance, subscriptions, or support over extended periods of time. Your ERP needs to be able to identify appropriate cost structures for your revenue streams and then match them with your cost accounting reports in order to properly comply. Having a solution that can do this is a major benefit to your company as it provides a much deeper look at exactly how your revenue is being generated. Knowledge is power.
Is your finance team still using spreadsheets to keep the ledger? Or perhaps using a single function software like Quickbooks to balance your accounts? This is strong indication that you are in need of an upgrade. The new regulations demand more granular reporting – reconciling revenue recognition with multi-book accounting is the key. Not only will a software solution like NetSuite bridge this important data gap and give real-time reporting updates across your company, it can be almost infinitely customized to suit your specific needs. The 2017 revenue recognition standards require this kind of detail – but aside from that requirement, understanding your organization on both the micro and the macro level in a way that this cross-functional reporting allows is something you definitely want.
There are a few more key elements to ensuring that your ERP system is ready for the new revenue recognition standards which we’ll dig into in another post. The most important thing is that you take the time to assess your company’s financial health by looking at how the pieces all fit together. You need a nuanced and holistic view both to be in compliance and to continue growing. NetSuite offers versatile and powerful software that can help you achieve this. If you’d like to read about other businesses using NetSuite ERP software to succeed – check out our success stories.