CFO Insights: The Top 4 Revenue Management Challenges

Today we're kicking off a series of posts focused on insights for CFOs and other top finance executives. In industries like software and services, revenue management is one of the most challenging issues for financial executives. For years, finance teams have struggled with time-consuming, error-prone spreadsheets to handle increasingly complicated — and critical — revenue recognition tasks. But those outdated methods are no longer sufficient to handle the greater complexity of contemporary revenue management.

The thicket of loosely defined regulations, evolving interpretations and stiff penalties for non-compliance create levels of complexity and variability that outstrip the ability of controllers, CFOs and finance VPs to stay on top of revenue management. The challenges revolve around several key items:

1. Automating the deferral and recognition of revenue – When your financial management and accounting solution can’t automatically defer and recognize revenue for Software products and services, you have to use complex spreadsheets which:
• reduces finance team productivity with manual processes 
• increases the chance for errors 
• blocks visibility into future revenue, deferred revenue, and renewal streams 
• complicates audits and compliance
2. Accurately forecasting revenue, deferred revenue and renewals in real time – The use of offline spreadsheets for revenue management makes accurately forecasting future revenue, deferred revenue, and renewals nearly impossible. Finance spends too much time aggregating data from multiple sources trying to pull together a comprehensive revenue picture. 
3. Recognizing revenue for multi-element arrangements – Software companies often bundle and sell multiple products and services together with potentially varying delivery schedules. This complicates revenue management as each element needs to be accounted for separately based on an estimated selling price (e.g. VSOE) and recognized separately based on individual fulfillment status. Otherwise, companies risk having to defer more revenue than they would like. Most systems today don’t support this level of complexity and software companies are again forced into manual processes and spreadsheets.
4. Automating billing in compliance with the terms of a customer contract – The process of invoicing a customer for a specific product or service is often too closely tied to revenue recognition in many accounting systems today. As a result, software companies have limited flexibility to accommodate products and services with increasingly complex revenue recognition rules. As an example, you may bill your customer in advance annually for a subscription-based service but recognize revenue monthly over the lifetime of the subscription term. This complexity drives you outside of your system into inefficient manual workarounds. 

There is a Better Way…
Faced with these challenging hurdles, companies are looking to break free from spreadsheet hell and automate revenue management processes to achieve better compliance, improve visibility and lower their costs. Automating the management of revenue recognition can yield tremendous tangible benefits from a variety of perspectives — from faster closes to greater accuracy and lower costs. However, there’s much more to automating revenue accounting than simply deploying a more robust spreadsheet or more powerful macros. To achieve improvements, decision-makers need to focus on implementing a financial management system that can handle a lengthy list of requirements, including support for:

• Complex contracts and products 
• Integration with CRM 
• Translating revenue recognition rules into templates and schedules 
• Automated revenue recognition and deferred revenue management 
• Greater visibility into deferred revenue forecasts 
• Subsequent modifications 
• Billing 
• Improved sales management 
• Easier add-ons 

Streamlined, centralized and automated revenue management can generate a range of benefits for companies. Intacct Revenue Management automates and optimizes the financial processes associated with complex contractual relationships. It can free your staff from managing revenue through complicated spreadsheets, which lead to inevitable errors, lost revenue and compliance risks. In the video below, you’ll hear how several software/SaaS companies have benefitted from automating revenue management with Intacct…

Can't see the video - watch it on YouTube at http://bit.ly/Maj8Ec

I would encourage you to learn more about how Intacct can help solve your revenue accounting challenges. Also, be sure to download our whitepaper: Managing the Complexities of Revenue Management.

In our next installment of CFO Insights, we'll dive deeper into the issues around using spreadsheets for revenue management. Be sure to subscribe to the Intacct blog to stay updated, and follow Intacct on our social media channels: Facebook, LinkedIn, and Twitter.

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