A billboard for motor oil claimed that, “Behind every great Champion is great Technology.” This statement is just as applicable to software companies as it is to motor oil, however not in the way that you might think. True, to be successful in a software startup, it is helpful to have a new or cutting edge technology that solves people’s problems. However, the “technology” that can set a software company apart from the competition is not their product, but the backend accounting system that track debits, credits, and other processes. In the software industry, true “champions” have the right revenue recognition software.
Courtesy of tinypic.com
Most people do not consider their revenue recognition software a competitive advantage. They probably feel this way because there current revenue recognition processes are arduous, slow, and hinder the entire accounting department. But it doesn’t have to be that way. One word describes why we believe that the right revenue recognition software can create “champions”: Automation.
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Automation is defined as “the use of automatic equipment in a system or other production process.” In summary, it is the use of computers to perform certain tasks rather than manual labor. The reason that automation is such a game changer is twofold:
- Quality – A computer will consistently execute the same process every time. There are no deviations, no mistakes (assuming it is programmed correctly), and no errors. An automated process will deliver the same results consistently each time.
- Time – Automation is essentially a reduction in the amount of manual time spent on a process. By automating a process, companies are removing the manual labor from the system and replacing it with a computer. Since machines cost infinitesimally less than humans, companies that automate processes usually obtain significant labor reductions.
Companies use automation to increase quality and decrease the amount of manual labor are companies using technology to become “Champions.”
So how does this apply to revenue recognition software?
For most software companies, revenue recognition is extremely painful. First there are all the rules. Accountants have to comply with parts of software revenue recognition rules found within SAB 104, ASC 605, SOP 97-2, and EITF 08-01. Second, there are all the calculations. If a software company is using QuickBooks as the general ledger, then any revenue recognition calculations are performed in a spreadsheet. The use of spreadsheets can lead to human calculation mistakes and errors. Last, due to the complexities of the revenue recognition calculations, closing the books can take longer than expected.
Revenue recognition software like NetSuite can automate the entire revenue process. Automating revenue recognition reduces errors, frees up accountants’ time, and allows for a more timely close.
NetSuite was designed with automation in mind. The system automates revenue recognition following these four basic ideas:
- Transactions are traceable – The entire sales order to ledger process is visible from start to finish.
- Data is Centralized – Customer information is also associated with all customer sales records.
- Efficient – There is no need to transfer information from a spreadsheet to the general ledger.
- Visibility – Financial information is available immediately for forecasting and reporting.
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By using the power of automation found within NetSuite, software companies can become the “champions” they want to be. If you are interested, please contact us.
