Modernising Accounting Processes to Enhance Revenue Recognition Efficiency. Here is how.
Outdated accounting processes and systems like legacy ERP software can drastically hinder revenue recognition, especially for growing businesses. Efficient compliance with ASU 2014-09 and IFRS 15 is critical to ensuring accurate revenue reporting. Here’s how outdated systems prevent companies from achieving that.
1. Identifying Contracts with Customers
Older ERP systems and manual processes like spreadsheets struggle to manage complex contracts. The lack of flexibility makes it difficult to identify all contract components, increasing the risk of mistakes in recognizing contract initiation.
Our solution integrates contract management, pricing, and terms into a single system, ensuring accurate tracking from the start.
Impact of outdated processes: Manual data entry leads to errors, making compliance with the first step of ASU 2014-09 and IFRS 15 difficult.
2. Identifying Performance Obligations
Manual intervention is required when using outdated processes, often causing delays and errors in recognizing performance obligations. This issue becomes more severe with contracts that have multiple deliverables.
Our advanced ERP automates the identification of performance obligations, ensuring every obligation is tracked properly.
Impact of outdated systems: Incorrectly identified obligations result in non-compliance with ASU 2014-09 and IFRS 15.
Outdated accounting processes slow down revenue recognition, reduce efficiency and cause compliance risks. It is also a blocking point to scale operations as hand-based processes are cumbersome to scale and improve.
3. Determining Transaction Price
Legacy ERP systems can’t handle the dynamic pricing models required for variable consideration, such as rebates and discounts. Without automation, price calculation is often inaccurate, leading to compliance issues.
Our modern ERP solution simplifies the calculation of transaction prices and accounts for discounts, rebates, and customer incentives.
Impact of outdated systems: Slow manual price determination increases the risk of errors, negatively affecting revenue recognition and audits.
4. Allocating Transaction Price to Performance Obligations
Manually allocating transaction prices to performance obligations can lead to mistakes. Automated systems reduce this risk by efficiently handling price allocation.
Our solution automates price allocation according to predefined rules, increasing accuracy and compliance.
Impact of outdated systems: Without automation, manual allocations delay financial reporting and risk revenue misstatements.
5. Recognizing Revenue at the Right Time
Real-time insights are critical to recognizing revenue when performance obligations are met. Outdated systems often fail to provide this functionality, resulting in errors in revenue recognition timing.
Our ERP system provides real-time data, triggering automatic revenue recognition when obligations are fulfilled, ensuring compliance.
Impact of outdated processes: Premature or delayed revenue recognition causes financial misstatements, leading to audit challenges.
Scaling Challenges
As businesses grow, the inefficiencies of legacy systems become more evident. Handling larger volumes of contracts, pricing, and obligations across regions is nearly impossible with outdated systems.
Our solution provides scalability, real-time data, and compliance checks, ensuring seamless growth without operational bottlenecks.
#GOATConsultants™-Level Insights:
Outdated accounting processes slow down revenue recognition, reduce efficiency, and cause compliance risks. Our advanced ERP solution ensures full compliance with ASU 2014-09 and IFRS 15, supporting company growth with real-time financial data, streamlined processes, and improved decision-making.
Learn more about how modern systems can drive innovation and growth in your company’s finance and accounting operations by visiting our Change Management and Innovation page.
For more information on ASU 2014-09 and IFRS 15, visit:
Financial Accounting Standards Board (FASB) – www.fasb.org
International Financial Reporting Standards (IFRS) – www.ifrs.org
