If you don’t deal in subscriptions or contracts, spreadsheets or QuickBooks might be sufficient for managing revenue recognition criteria requirements under the new ASC 606 and IFRS 15 standards. If you have revenue coming in from even a handful of contracts or subscriptions, however, achieving compliance using these limited tools will be difficult—if not impossible.
- Revenue recognition and expense management are based on contracts. Contract information and terms must be stored electronically so they can be used to calculate revenue.
- If a contract changes because of add-ons, discounts, or upgrades, you’ll have to reallocate revenue and expenses across the contract. Beware—this requirement also applies to accounting periods that are already closed.
- Dual reporting will become a way of life during the transition to the new guidelines, which means having two sets of financial books. You will be required to record revenue and expense under both the old and new sets of rules.
Spreadsheets + ASC 606 = nightmare
Abiding by the new guidelines will only make your accounting more complicated, and managing these complexities with spreadsheets or QuickBooks is the stuff of nightmares. Do you really want to attempt the following with only error-prone macros and formulas?
- Changing contracts that have tiered pricing
- Producing two sets of financial reports
- Demonstrating the impact of the new guidelines on your business to upper management
- Providing details of all calculations and recalculations to auditors
Gain control, get compliant with Sage Intacct ERP
There’s a better, easier way. Today’s cloud technology is truly amazing, offering integrated solutions that handle revenue from contracts and subscriptions seamlessly and automatically. For example, you can:
- Automatically reallocate revenue and expenses when a contract changes
- Apply the old and new sets of rules to each transaction
- Get dual financial reporting functionality that will help you transition to the new reporting rules when contracts span the cutover period
The new standards will take effect sooner than you may realize—in 2018 financial reports for public companies, and in 2019 financial reports for private companies. With the deadlines fast approaching, it’s definitely time to ditch the spreadsheets and QuickBooks in favor of cloud accounting software.
Sage Intacct, the best-in-class accounting cloud solution, offers a Contract Revenue Management module that meets the new revenue recognition criteria requirements, including reallocations for changes, deferral of expenses, and dual treatment during transition. With Sage Intacct Contract Revenue Management, you can:
- Get sophisticated reporting and metrics to produce P&Ls by contract
- Track unbilled, billed, and paid revenue
- Streamline billing and revenue forecasting
- Pass through audits with minimal hassle, thanks to contract checklists and sign-off audit details
Trust RKL, the compliance experts
With the new revenue recognition criteria, you don’t need the headaches of spreadsheets and the limitations of QuickBooks. Instead, turn to the professionals at RKL. With expert knowledge of the new revenue recognition criteria guidelines, we’ll design a technology solution that can simplify the complexities of contracts and subscriptions management, and achieve ASC 606 compliance. Contact us today.