Endless spreadsheets, data silos, and human errors—these unavoidable aspects of manual revenue recognition delay accounting processes even in the best-case scenarios, where they’re caught before it’s too late.
However, in the worst cases, the risks of manually recognizing revenue include legal and regulatory noncompliance, financial restatements, loss of investor trust, and more. Financial restatements—50% caused by inappropriate or misapplied accounting standards, like proper revenue recognition—significantly damage stock prices for public companies.
The most surefire method to avoid these challenges is through a revenue recognition system that automates processes and integrates data from relevant systems. In particular, RightRev’s advanced revenue recognition solution automates these time-consuming processes, ensuring accuracy so accountants can focus on high-value tasks.
Regardless of your revenue model, RightRev is a top revenue recognition software.
Started by a pioneer in the revenue recognition automation space, RightRev is built on decades of revenue accounting experience. We’ve taken all of the learnings from building our first revenue solution, RevPro, and used that knowledge to build a truly, next-gen revenue recognition subledger.
Why Businesses Need an Advanced Revenue Recognition System
Revenue recognition is a fundamental principle of accrual accounting—ensuring that businesses record revenue when it is earned and realized, not when cash is received. This revenue recognition concept is at the core of accurate and compliant financial reporting.
While the concept sounds simple, managing revenue recognition in practice is anything but. With the rise of complex business models like subscriptions, usage-based pricing, and multi-year contracts, accounting teams and CFOs face increasing challenges in accurately recognizing revenue.
For example, when a customer purchases a year-long subscription, the monthly fee paid needs to be distributed accordingly within the ledger; six months in, only half of the revenue can be recognized, while the rest must be acknowledged as deferred revenue (with associated, remaining performance obligations to fulfill).
But what happens if a customer changes or cancels their contract? The recorded revenue, forecasts, and financial statements must all be adjusted accordingly.
At scale, accurate revenue recognition quickly becomes too complex for manual management—especially when 60% of accountants responding to a Gartner survey report making “several errors” per month, partially due to their growing workloads.
Stat call out?
Implementing a platform that automates the entire revenue recognition process effectively becomes necessary to keep up with the pace of business. Even in ideal scenarios by the most diligent, error-free accountants, too much time is lost to manually retrieving, transferring, and working with revenue data.
Automation should be a priority.
Distinctive Core Features of RightRev’s Revenue Recognition Software
While RightRev isn’t the only platform, the solution remains one of the very few purpose-built software dedicated to streamlining this accounting process.
Conversely, most of the somewhat good revenue recognition software alternatives consist of bolted-on functionality or customizations to existing offerings that specialize in related (but distinct) processes, like enterprise resource planning (ERP) solutions.
Being one of the few purpose-built solutions, RightRev provides best-in-class features —even (no, especially) for the most complex revenue recognition scenarios. These features also support alignment with your organization’s broader revenue recognition policies, ensuring standardized treatment across departments and subsidiaries.
Here are a few features and capabilities that make RightRev an advanced revenue recognition solution:
Contract Modifications
As briefly noted in the example above, contract modifications result in changes to revenue that need to be reflected in the revenue waterfall and, therefore, recognizable revenue. Understanding the impact of the contract modification is critical when determining how to adjust the revenue schedule. A proper analysis also includes evaluating standalone selling prices to ensure accurate transaction price allocation and maximize financial performance.
However, with RightRev, these adjustments occur automatically.
Whenever a contract is amended—via modifications or new transactions added to an existing contract—RightRev flags the entire revenue contract to which the transaction is attached. Then, all affected revenue gets reallocated across the contract and treated accordingly (i.e., prospective or retrospective changes).
Bundle Explosion
Bundling products and services is becoming increasingly common—especially among software-as-as-service (SaaS) vendors.
Manually accounting for products and services sold as a bundle adds extra complexity for revenue accounts that have to break out the bundles. However, RightRev ‘explodes’ these bundles, taking single revenue line items and expanding them into multiple performance obligations that can receive different revenue treatments (when and how to recognize the revenue).
SSP Calculation
‘Exploding’ bundles only streamline processes when the standalone selling price (SSP) of each individual product or service is known. Unfortunately, SSPs aren’t always easy to determine; methods may involve market assessments, comparisons with remaining bundle items, calculating expected costs, or other means.
RightRev makes these SSP determinations effortless. There are three ways to allocate SSPs within RightRev:
- SSP Calculator: Automatically calculates accurate figures for all individual goods or services by analyzing historical data with out SSP calculator.
- Formula: In Formula method, users can compute SSP by a simple formula. The SSP Policy can be created by using this method.
- SSP Upload: In Upload method, user can manually calculate SSP and upload the SSP data using CSV file format into the RightRev system. The SSP Policy and SSP Batch can be created by using this method.
Event-Based Revenue (Including Usage)
Recognizing revenue at the time of a sales booking or with billing can be relatively straightforward, but some businesses may meet performance obligations when an event takes place.
This scenario is common for many SaaS companies, 60% of which now offer some type of usage-based pricing, according to OpenView’s “The State of Usage-Based Pricing: 2nd Edition.”
RightRev handles unlimited revenue events, such as:
- Product delivery
- Completed milestones
- Percentage of completion
- Provisioning
For usage-based pricing models, RightRev can satisfy revenue for:
- Consumption-based revenue
- Pay-as-you-go
- Peak loading
- Tiered
- Time-based
- Volume-based
Many subscription businesses with usage models rely on recurring revenue streams that must be recognized dynamically as usage occurs.
Variable Consideration
Aspects of some business deals and contracts may stipulate pricing that fluctuates depending on certain conditions, events, or other variables. Properly recognizing related revenue becomes tricky, as is often the case with media companies managing royalties, licensing, subscriptions, viewership-based pricing, advertisements, merchandise, and other revenue streams.
RightRev’s integrations and functionalities enable businesses to automatically recognize revenue while allocating the appropriate SSP when contract-specified variables affect pricing.
Revenue Forecasting
Traditional revenue forecasting based on billings and Generally Accepted Accounting Principles (GAAP) revenue forecasting isn’t quite the same due to compliance with ASC 606, Financial Accounting Standards Board (FASB) guidelines, and International Accounting Standards Board (IASB) regulations, which affect the periods when revenue is recorded.
But what do you do when the business operations catch up to the forecasted date, and the anticipated numbers based on billings don’t reflect reality?
Forecasting revenue without considering how ASC 606 and IFRS 15 revenue recognition standards will impact the numbers only results in forecast inaccuracies when revenue is finally recorded.
With RightRev’s revenue forecasting capabilities, CFOs gain the real-time insight necessary for decision-making—from market opportunities to resource spending and allocations. Additionally, these forecasts can be used to maintain transparency and grow investor confidence.
Lease Accounting
Challenges with lease accounting increased after ASC 842 began requiring lessees to recognize these contracts as assets and liabilities if the duration exceeds 12 months.
Within RightRev, businesses can easily recognize and track these liabilities (represented as the sum of lease payments at present) and assets (adjusted by the lease liability and any factors, such as prepaid rent or incentives).
Support for High-Volume Transactions
RightRev’s capabilities seamlessly manage high-volume transactions with ease across all revenue recognition approaches and methods. This flexibility across volume and business models is only possible because of RightRev’s purpose-built design.
The platform’s modern architecture eliminates any reductions in speed or processing. RightRev has proven to process nearly a billion revenue transactions within minutes without sacrificing accuracy in revenue calculations. With this kind of speed, you’re able to see the bigger picture faster and make time-sensitive decisions with confidence.
How RightRev Transforms Revenue Recognition for Finance Leaders
Through automation and real-time insights, RightRev revolutionizes accounting with efficient revenue management. Let’s examine what this could mean for you.
Streamlining Daily Revenue Operations
Identifying contracts and performance obligations, calculating SSPs, allocating transaction prices, recognizing revenue, and more—RightRev automates the entire end-to-end process with triggered actions. It enforces consistent revenue recognition practices that reduce risk and improve audit readiness.
Moreover, RightRev’s revenue recognition automation helps close the books quickly, and financial information and insight reach decision-makers equally fast.
Accelerating Strategic Decision-Making
With the insight unlocked by RightRev’s real-time, GAAP-compliant financial reporting capabilities, CFOs, controllers, revenue analysts, and other decision-makers don’t need to spend all their time gathering and curating data. Instead of dealing with tedious data management, they can begin driving higher-level strategic initiatives and reinforcing the business’s financial health.
Decision-making is only ever as good as the information at hand; RightRev inherently improves both.
Handling Complex Revenue Scenarios
No other revenue recognition platform or tool provides out-of-the-box capabilities for complex revenue scenarios like RightRev. The no-code, fast configurability enables businesses to set revenue recognition rules within RightRev for any revenue models that include:
- SubscriptionsConsumption-based
- Hardware and delivery-based POBs
- Professional Services Milestones
- Percentage of completion
- And more
Differentiating RightRev From Traditional ERP Revenue Solutions
Unlike most of RightRev’s competitors, the platform is a specialized revenue recognition tool. That’s why RightRev efficiently manages complex scenarios that others cannot. ERP, customer relationship management (CRM), billing, and similar tools that bolt-on revenue recognition modules or basic functionality will always encounter limits in flexibility or scalability.
Experience Cutting Edge Revenue Recognition With RightRev
Revenue operations and GAAP-compliant revenue recognition that align with ASC 606 and IFRS 15 have grown complex enough that manual efforts simply can’t cut it at scale. Revenue recognition systems should be viewed as a necessary component of your tech stack.
Modern CFOs and accounting teams require a platform capable of integration, automation, flexibility with revenue models, and a rules-based, systematized approach to contracts, performance obligations, contract modifications, and more.
And that’s precisely what RightRev delivers through its purpose-built design and stand-out functionality.
To learn how RightRev can revolutionize your RevOps and automate revenue recognition processes, request a demo today.
