Revenue Recognition: Are you Ready?
Revenue Recognition (Rev Rec) is becoming a standard feature within many billing systems as it becomes a focus in response to new policies and regulations. In 2014, the Financial Accounting Standards Board (FASB) issued an update to the Generally Accepted Accounting Principles (GAAP) that took effect this year, and will continue into 2017 and 2018. These new standards (ASU No. 2014-09) will change the way companies can recognize and report revenue. This means that enterprises will need a Rev Rec tool that allows them accurately report and track financial obligations, complies with the new GAAP standards, and is flexible enough to quickly evolve to meet future standards. This all needs to be done efficiently in a way that easily conforms to your unique business model and strategic initiatives. This is what BillingPlatform’s Rev Rec accomplishes.
BillingPlatform Rev Rec
Rev Rec in BillingPlatform is broken down into three categories:
1) Point-In-Time Rev Rec,
2) Scheduled Rev Rec
3) Obligations Rev Rec – a special feature unique to BillingPlatform
Point-In-Time Rev Rec is the most basic feature and allows companies to recognize revenue as soon as an invoice goes out or when a service is rendered to the customer.
Scheduled Rev Rec allows companies to recognize revenue based on a set interval of time. This could be daily, weekly, monthly, or a custom time interval and can be different for each individual contract, customer, or group of customers.
Obligations Rev Rec allows companies to recognize revenue based on milestones set in the system. These revenue events can be anything that’s relevant to each individual company or contract, such as the completion of a job, a purchase order, the creation of an invoice, a usage threshold, etc. Revenue recognition can also be broken down into segments, with each part of the revenue recognized during a different event or timeframe.
This can be helpful during installations, for example, when a customer is charged half upfront and half when the installation is completed. The system can be configured to recognize the revenue up-front or upon completion of the installation, and the possibilities far exceed this simple example.
Because of our metadata model, Rev Rec in BillingPlatform can be defined based on any element of the system, making it easy to customize to any scenario. We understand enterprise needs and accommodate extreme complexities in billing, rating, and invoicing. Now, we extend that same capability to revenue recognition making it possible to stay compliant and keep business running regardless of industry, geography, or strategic objective.