Automation in Revenue Recognition: the advantages of automating resource intensive processes
Ever since the IT growth almost 20 years ago, there have been so many new technologies that have transformed the way the world works. Businesses around the world have been transformed by technical enhancements. There’s a huge assortment of office productivity tools that have completely transformed the way we look at commerce. Communication tools based on VoIP services, workflow and automation tools and advanced payroll softwares, have all impacted how efficiently and how easily we run payment processes. The rise of such tech has not only brought the world closer where clients and stakeholders are easier to connect, it has also helped streamline businesses and standardize processes, effectively enhancing revenue generated, positively impacting bottom line.
One such technological concept has been in the limelight for the last few years – automation. With the seemingly endless advantages it offers, automation has been the subject of heavy speculation. There have been several discussions on the impact it can have on the way businesses work, how workforce functions, job creation, etc., It’s fair to say automation, coupled with AI and ML, is beginning to have a revolutionary effect on how the world works.
With the availability of Big Data now, Automation has become a bigger revolution than when first conceptualized. Every business sector and every profession across the world has been impacted by the combination of these technologies. Whether it be document transfers, or risk management processes, it has become so much easier to run business processes with the help of Automation.
One particular software that has been widely adopted by accounting firms and businesses worldwide is Revenue recognition software. The use of this software, like several other automation tools, simplifies processes and takes the focus away from mundane, repetitive tasks, allowing businesses to focus on productivity.
So what exactly is revenue recognition?
Revenue recognition is defined as a generally accepted accounting principle that identifies the specific conditions under which a revenue indent is recognized. Revenue recognition is generally recognized whenever a revenue event occurs. Sometimes this event can be complicated – it might involve a contract which might be liable to change and renegotiations.
Revenue reporting is always rushed. Revenue Reporting is a herculean task that involves a lot of human resources all focused on working on one task before the close of deadlines: getting all the calculations right for all the revenue generated. Taking away all that human resource power can definitely affect any organization, with other tasks being affected heavily during that time. This is one of the main reasons organizations are looking at alternatives that may otherwise free up time and resources at organizations, so that these resources may be directed elsewhere.
Also, automated revenue reporting brings with it a plethora of advantages, namely faster calculation rates and increased efficiency in the process. Eliminating the human factor in such an effort intensive task removes the risk that human effort brings along with it. Automation tools promise to eliminate and errors that might happen in revenue reporting altogether.
5 risks that automation tools eliminate in revenue reporting
1. Contract Costs
Cost Efficiency is a serious thing that organizations have to consider. Unseen costs or revenue leaks can have serious effects on every decision that the organization has to take. Contract costs are something that is something of a bigger concern for organizations, as there is a lot that can be missed in the fine print.
It can be difficult to look at all the nuances and calculate the associated costs, making it a titanic job to commit to manual revenue recognition. This is exactly why automated revenue recognition could be a value add investment for any organization.
2. Contract changes
Changes in a contract are no rare occurance. Contracts are ever-changing and terms are negotiated throughout the duration of the contract. Stakeholders, from time to time, may consider changes necessary due to changing circumstances or needs.
With no easy way to track or manage such changes, it becomes an increasingly difficult task. To manually keep track of all the changes that might come up over the time of the contract. Automation ensures that this task is run and completed without any hiccups, on time and efficiently.
3. Aggregating data
With the complexity of contracts and contract management taken into account, it becomes easy to understand how difficult and resource consuming it would be to aggregate relevant data for resolving the revenue reports.
Since there are so many systems that are feeding data to consolidate the process, it can be easily understood that the difficulty of collecting and aggregating such data is no easy human task.
With Automation, the entire process can be sped up to be made more simple and error-free. Automated revenue recognition softwares can help aggregate all the data from all the different sources, seamlessly. This makes it so much easier to handle revenue contracts Using automation, you can free up time and resource, allowing you to focus on other tasks and operations.
4. Event-based revenue triggers
Revenue recognition is tricky business, and as we discussed earlier, is connected to the certain events that take place. These events can be delivery, acceptance or consumption. Understandably tracking these event triggers and keeping track of the exact timing of these events can be quite taxing.
With Automation, it becomes much easier to sort this, as automation would have flag based rules, that would activate on these event-based revenue triggers. With an automated system tracking this, you have an error free audit trail, and enough data to make predictive analysis.
5. Calculating standalone selling prices
Many businesses struggle with this particular aspect. This process could consume several weeks’ worth of time and labour. Manually calculating standalone selling prices and then reconciling the selling prices with a contract is a nightmare for many organizations.
It couldn’t be a better deal than to automate this process. Automation here, like all the other aspects discussed, allows to free up time and resource, substantially. Also, since automation ensures you have a clean audit trail, there is increased visibility.
With Automation technology, Revenue recognition and Contract management becomes so much easier and error-free. Organizations can focus on where they can allocate time and resource to improve operations and processes, instead of squandering resources on such mundane tasks. By eliminating all of the above risks, Automation becomes a god-send for Organizations across the world.