They say that desperate times call for desperate measures. Now that we’re in the midst of 2018, many companies materially affected by the new revenue recognition criteria are scrambling toward compliance. Experts at PwC note that while many organizations have chosen automated approaches, others may find their only option is a “largely manual ‘brute force’” method.
Since implementing an end-to-end automated revenue management system can take months, what PwC calls an “accelerated manual approach” may be required. This likely includes a “combination of manual process and enabling technology and tools, such as spreadsheets or a tactical database solution…that supplement existing systems and processes to achieve near-term compliance.”
Beware the risks and complexity
By their very nature, manual processes present a higher level of risk and are resource-intensive. For these reasons, analysts caution that a brute force solution shouldn’t replace a long-term, sustainable method. Instead, it should be considered as an interim approach or a complement to future automation. To achieve this, PwC recommends that you:
- Evaluate your accounting assessment and understand your data.
- Build a model based on a fit/gap analysis against existing data, process, and system capabilities and implement a properly tested and controlled “brute force” solution and business processes.
- Communicate and involve relevant stakeholders, particularly the auditor, throughout the process.
- Execute your manual process.
- Plan for longer-term automation solutions that will address GAAP changes.
A case in point
PwC presented a case study of a company that decided to adopt an interim, manual solution using its existing financial reporting tools and tailored spreadsheets. To minimize risk yet still be functional, the organization agreed on a vetted set of requirements from the start. Involving broader stakeholders was also critical. This required the following:
- Focus on planning, including a development of a comprehensive project plan to identify dependencies, potential resource constraints, and key milestones, to set up the project for success.
- Develop robust use cases and requirements to make sure manual solutions are designed not only to handle the basic scenarios, but also common complexities that are likely to arise.
- Involve resources with diverse skillsets working in an agile manner to develop solutions to address identified gaps.
- Involve the other stakeholders early and often, including other functional groups (e.g., tax, reporting, IT, etc.) and the external auditor to identify additional requirements and gain consensus on approaches selected.
This short-term solution lays the foundations for a fully automated system and will enable timely compliance with ASC 606.
Call in the experts
Perhaps, most importantly, the analysts at PwC recommend turning to outside specialists for help implementing both the short-term and sustainable solutions. They point out that ASC 606 compliance “is a transformational level of change that involves changes to processes, controls, systems, and data. And it’s a change that requires (1) technology and industry expertise and (2) an accounting mindset—a combination that can be hard to source internally. Finally, experienced resources can help in the avoidance of missteps, because there is little time to remedy for those.”
If you’re not yet compliant with the revenue recognition criteria, there’s no need to despair. A call to the experts at RKL eSolutions is all it takes. We provide the services and software to get you to ASC 606 compliance in the near-term and down the road.
Contact us today to get started.
