How to choose the right revenue recognition software
As companies continue to incorporate subscription-based business models, they start facing unique revenue recognition challenges that spreadsheet accounting can no longer support.
A revenue recognition platform is crucial for accurate and timely accounting–helping you streamline accounting processes, minimize errors, and ensure compliance with ASC 606 and IFRS 15 standards.
In this article, we'll share a step-by-step guide on choosing the right revenue recognition software for your subscription business based on your specific needs.
Why is revenue recognition automation important?
Traditionally, the revenue recognition process has been manual and time-consuming, requiring finance and accounting teams to sort through numerous transactions.
Automating the revenue recognition process–especially in recurring revenue businesses–can significantly reduce the risk of errors and fraud, save time and speed end-month close, and improve financial reporting with real-time insights into revenue streams.
What to look for in revenue recognition software
Recognizing revenue correctly is essential not only for compliance but for making informed business decisions, and selecting the right revenue recognition software has become more critical than ever.
Here are five key factors to consider when choosing the revenue recognition software that better suits your business:
Ease of use and implementation: Look for software with an intuitive user interface that implements quickly without disrupting your business operations and creates monthly journal entries.
Ability to handle complex billing and revenue recognition scenarios: Find a platform that can handle all your different pricing tiers, discounts, and promotions.
Compliance with accounting standards: Choose revenue recognition software compliant with ASC 606 and IFRS 15 to ensure that your accounting practices are up to date and you’re accurately accounting for revenue.
Automated dashboards and reports: This helps access all the data in one place, making your subscription billing platform a single source of truth for consumer insights.
Ability to adapt and grow with your business: Choose a platform that covers your current and future business needs.
Choosing the right revenue recognition software
Selecting the ideal platform requires a thorough analysis. We get it. The key points outlined above can guide your teams toward a solution that aligns with your business.
It’s time to review the process of picking the right tool. Here’s a step-by-step guide on choosing the right revenue recognition software for your subscription business.
Step 1: Identify your revenue recognition needs
Revenue recognition for subscription businesses can be complex. Before reviewing any options, you must determine your revenue recognition needs.
Understand the accounting standards that apply to your business, your revenue streams, and the types of reports and data you’ll need to generate. You may need to account for deferred revenue, recognize revenue over the life of a subscription, and handle cancellations, upgrades, and downgrades.
Read now: Revenue recognition in subscription bundles and discounts
Step 2: Research revenue recognition software
Now that you’ve determined what the revenue recognition challenges of your own business are, it’s time to review options. Look for software explicitly designed for subscription-based businesses, as you want a tool that can handle these complexities.
Recurly, for example, is a subscription and billing platform that handles revenue recognition for subscription businesses–automating compliance with multiple revenue reporting standards with a fully configurable solution.
Step 3: Consider the integration options & reporting capabilities
You need a platform that can easily integrate with your existing ERP and other accounting systems. This will make it easier to share data between systems helping you find and analyze subscription data in just one place.
Step 4: Consider the costs
Make sure to evaluate the cost of the software against its features and benefits–including all the implementation, training, and ongoing support costs.
Step 5: Request a software demo
Before making a final decision, see the software in action to evaluate its user interface, reporting capabilities, and integration options. You get a glimpse of what your revenue recognition activities would look like.
Watch on-demand: Recurly platform demo and Q&A
How does Recurly make revenue recognition easier?
There are many reasons why revenue recognition automation makes life easier for your finance and accounting teams. With Recurly, you can:
Comply with revenue recognition standards: Ensure ASC 606 and IFRS 15 compliance with speed and confidence.
Reduce audit risk and costs: Automate revenue recognition processes complicated by diverse sets of subscription contracts and pricing models to reduce compliance risks and audit costs associated with accounting guidelines.
Support multiple revenue models: Streamline revenue management for complex, diverse pricing and product bundles with a single solution that easily scales and integrates with your ERP and accounting systems.
Report and forecast revenue accurately: Close the books faster and forecast monthly recurring revenue more accurately and predictably.
Choosing the right revenue recognition software for your subscription business requires careful consideration of your specific needs and evaluating software options based on implementation and integration options, reporting capabilities, and costs.
With the right software, you free your subscription business from revenue compliance complexities to focus on growth.