Revenue Recognition Insights

Over the last half-decade, the percentage of software as a service (SaaS) providers utilizing consumption-based pricing models has skyrocketed from 27% to over 60%. Firms riding this forward-thinking wave include scaling startups, tech industry juggernauts, and even eCommerce powerhouses.

For SaaS companies to stay ahead of the competition, they need to quickly show value and a return on investment. Customers who buy SaaS solutions put a high value on quick return on investment (ROI) and ease of implementation at the top of their list of priorities. In fact, 87% of those customers expect to see a profit from their new tools in less than a year.

SaaS vendors are diversifying their pricing structures in an effort to make user adoption easier—now, over 60% of SaaS companies are choosing usage-based pricing or hybrid models over just subscription models. 

Implementing usage-based pricing right comes with a unique set of challenges that span front-office pricing and packaging strategy to back-office systems and processes that can account for the increased amount of complexity and data required to invoice customers and recognize revenue, for example.

As made popular in recent years by companies like Amazon, Snowflake, and HubSpot, consumption-based pricing allows customers to pay for their actual consumption of the product or service.
What’s the benefit of this?

Assess whether your company would be served best by developing an in-house solution or purchasing a ready-made revenue recognition automation solution from a third-party vendor.

Despite their shared objectives, however, the two standards aren’t completely identical. There are nuanced variations between them that affect how businesses account for their revenue streams. Companies must clearly understand these disparities to produce accurate financial reporting and comply with regulations.

With the roll-out of ASC 606, there was a slight adjustment to the terminology for deferred revenue, as well as accrued revenue. Now, if an agreement has deferred revenue, it is referred to as being in the “contract liability” position whereas accrued/unbilled revenue is now known as being in the “contract asset” position.

If your business is looking to stay ahead of the competition but is currently wrestling with the limitations of manual spreadsheets or the inflexibility of your ERP system, it’s high time to undertake a comprehensive reassessment of your revenue management strategy.

Commonly used by construction companies and other businesses that carry out long-term projects, this method determines revenue and expenses based on the amount of work completed. In this article, we’ll dive into a detailed explanation of the percentage of completion method, why it’s important, and ways to calculate it, in addition to providing some real-world examples of when it can be used. Keep reading to learn more!

In this guide, we’ll discuss the key principles of professional services revenue recognition, the various accounting methods generally employed by these organizations and the challenges they often face. We’ll also explore how technology can make this process much easier. Continue reading to gain a more comprehensive understanding of revenue recognition for professional services companies.

A recent webinar, “Navigate Inflation Risk with Streamlined Lead-to-Revenue Operations,” examines how the current economic conditions impact Quote-to-Cash and how technology can help collect cash faster and automate revenue recognition for more efficient operations.