In a recent article, ASC 606 Is Nearly Here: 4 Ways to Turn Burden Into Opportunity, the author breaks down how the work that goes into preparing for ASC 606 will actually help companies to improve their processes for years to come.
There’s a certain sense of missing the bigger picture of how these regulations will actually end up benefiting companies, this is especially true for subscription-based businesses. As with any change that impacts processes, people see the new accounting standards as a burden. But although the guidelines are disrupting revenue recognition and are forcing change, the looming deadline can also act as an opportunity to reexamine and optimize inefficient accounting processes to better position businesses for long-term growth.
A few things to consider when preparing for ASC 606:
Data, data and more data!
Accurate, high-quality data is critical to ensuring compliance of the new standards. Subscription-based businesses can expect an influx of data under ASC 606. Imagine how much data will be created because a waterfall amortization schedule will be required for every line item, for each person that gets compensated, on every contract. It will be nearly impossible to manage all of this information manually.
Automate = Better Decision Making
Automating decisions will help ensure compliance with ASC 606, but it will also lead to better business outcomes. Successful finance teams realize that by automating processes based on real and predictive analytics leads to more profitable decisions for the entire organization.
Communication is Key
“Any change to a customer characteristic can affect the value of an associated sales event. Mergers and acquisitions, for example, can dramatically change the risk profiles of involved companies. Even a quarter of poor performance on the part of a client can call the company’s collectability into question, risking deferral of revenue due.”
This means that under the new standards, companies are no longer only reporting on the state of the accounts receivable, but also the state of the companies themselves. Through consistent monitoring and communication, the finance team will be able to ensure this.
By introducing tools that will not only help to streamline but automate commission accounting, organizations are better preparing themselves to scale their business and increasing transparency across the board.
Download the ASC 606 Survival Guide for everything you need to know about cost-accounting under the new Revenue Standards.