Revenue reporting is integral to any business. But it’s not always straightforward to track. Having a system that allows businesses to track diverse revenue streams, ensure accountability as money moves around, and generate cash flow statements and other financial reports is a must as companies look to scale and grow. Revenue reporting software is key to maintaining accurate financial data for businesses with complex revenue—such as ongoing subscriptions or usage-based revenue.
Without accurate revenue data, it’s difficult to calculate gross profits, make strategic decisions, and scale your business. Inaccurate financial revenue reporting can also land you in hot water with the Security and Exchange Commission (SEC), who’ve been increasing the number of comment letters asking for clarification on revenue management reports.
However, with robust revenue reporting software, even companies with hundreds of different fixed and variable income streams can accurately calculate their essential revenue metrics and grow to billions of dollars in annual gross revenue. Let’s explore revenue reporting systems and how they enable such scalability—including key features to look out for, best implementation practices, and crucial metrics for measuring success.
What Is a Revenue Reporting System?
In certain ways, revenue reporting systems function similarly to revenue recognition solutions. They both track revenue to its source, aim to post it to the right account in the general ledger, and are essential to support your company’s financial performance.
Revenue reporting differs from revenue recognition across a couple of key functions, including:
- Bookings Revenue Forecasting: Revenue reporting not only gives you a snapshot of your sales bookings revenue at the current moment but likewise helps you predict future sales performance and bookings revenue. Revenue reporting systems identify trends in your recurring revenue, allowing you to forecast how much you’re likely to make in upcoming accounting periods. These forecasts also help evaluate long-term recurring cash flow trends for better planning.
- Revenue Recognition Compliance: Reporting on recognized revenue is about compliance on the accounting (not sales) side of the business (more on this in our ASC 606 Revenue Recognition Guide). Revenue reporting in compliance with GAAP and ASC 606 is more about following guidelines related to when the customer realizes the transfer of goods/services—regardless of when the sale (booking) was made or paid for.
Modern revenue reporting systems expedite forecasting and compliance, but they must also be able to prepare key revenue reports like:
- Waterfall reports to track revenue across multiple reporting periods to highlight changes resulting from sales, renewals, and other considerations.
- Deferred revenue roll-forward reports show how deferred revenue changes across an accounting period. They track factors like new deferrals, recognized revenue, and adjustments to calculate how much revenue is left to be recognized at the end of the period.
- Contract asset vs. liability reports calculate your potential net profit on a given contract or account by weighing net revenue against the cost of your deliverables.
- The remaining performance obligations report assesses what is left for you to deliver in order to complete your contracts.
How Complexity Introduces Scalability Issues
Scaling is complex for any business. The success many young companies experience as startups doesn’t necessarily snowball into increased sales as they grow. Complex operations often introduce fragmented data and manual processes that hinder progress and compromise profit and loss statement accuracy.
Offering various payment structures, diversifying your services, and expanding to new markets may introduce competitive advantages. Still, they all require nuanced accounting practices—making strict adherence to Generally Accepted Accounting Principles (GAAP) increasingly difficult. Add in expanded operations, and you have a major roadblock to quick, compliant growth.
A couple of complex business models that complicate scalability include:
- Software as a Service (SaaS) companies with contract modifications: SaaS companies often experience frequent contract modifications as their customers upgrade, downgrade, add new products to their contract, or cancel a portion of the contract midway through. These changes affect revenue allocations and must be intricately and accurately accounted for. But doing this manually for hundreds, sometimes thousands, or contracts quickly becomes unwieldy for revenue accountants.
- Usage-based business models: When revenue is variable and tied to customer usage, revenue accountants have a new set of data to manage and reference when determining when and how to recognize revenue. Revenue reporting is less predictable in a usage model and creates more complexity in revenue forecasting.
SaaS companies and usage-based models face a range of accounting challenges, including nuanced revenue allocations and varied revenue timing. They require systems that manage complex revenue scenarios like contract modifications, deferred billing, and hybrid revenue models.
Furthermore, using different technical accounting treatments in your accounting can further complicate reporting design.
Consider how these treatments can affect your overall reporting:
- Variable consideration reporting confuses more straightforward accounting procedures as it doesn’t set a standard price per good or unit but calculates each sale uniquely in a web of discounts, rebates, and other offers.
- Contract modification reporting changes a deal’s terms partway through a reporting period. Whether you edit an agreement prospectively (before the end of the period) or retrospectively (in new reports after the period has finished), contract modification alters expected revenue and leads to extra accounting work.
- Cumulative catchup affects reporting similarly to contract modification: You must make reporting changes partway through a period to reflect the terms of a revised contract.
On top of all these problems, complex, multifaceted businesses also encounter issues with:
- Fragmented data: Using different systems for various aspects of your business can silo information and make it difficult to report on and share across your organization.
- Manual processes: More complexity often means more labor hours poring over spreadsheets and moving transactions from one ledger to another.
Despite all these issues, using a revenue reporting system (such as RightRev) can expedite your accounting processes, eliminate spreadsheet mistakes, and help you maintain ASC 606 compliance.
How a Revenue Reporting System Supports Scalability
The key benefits of revenue reporting systems that can help you scale your business quickly include:
- Improved decision-making: Real-time reporting and insights empower key decision-makers—like your Chief Financial Officer (CFO)—to steer your organization toward increased profitability. With full visibility of operating revenue at the moment, rather than at the month’s end, they know exactly how much they can spend on various aspects of your operations. Real-time revenue metrics prevent misreporting, delayed financial statements, and other financial pitfalls.
- Enhanced financial transparency: Updated snapshots of your finances are important not only to your decision-makers but also to your stakeholders. It’s essential to provide clear, accurate financial reports so potential investors can decide whether or not to invest in your company. Accurately representing your finances to investors is also a key tenant of GAAP and essential to maintaining legal compliance.
- Streamlined operations: Revenue reporting systems reduce your need for manual inputs and expedite your operations. Posting transactions and generating reports free up time for your accountants to take on more involved, strategic work.
- Enhanced compliance and risk management: Revenue reporting systems adhere to ASC 606 and International Financial Reporting Standards (IFRS) 15. According to the SEC, more comment letters are being sent out with concerns over revenue, segment reporting, inventory, and other issues. Compliant reporting software minimizes your risk of misreporting and helps shield you from SEC scrutiny.
- Faster month-end closes: Do you want to achieve single-day closes? With real-time reporting that automatically reviews and posts journal entries daily, there’s no playing catchup at the month’s end. All transactions are already validated and on your ledger, awaiting confirmation for a record-fast close.
- Quicker go-to-market: With a flexible revenue reporting system, you can get your products on the market with any pricing structure that works for your business. . Want to hit the market with a perpetual software license, then switch to a subscription model after a year? With the right revenue software, it’s not only possible—it’s easy.
All in all, these benefits make your accounting more accurate, minimize reporting errors, and streamline your operations so you can focus on optimizing your scaling strategy.
Key Features to Look for in a Revenue Reporting System for Complex Businesses
When you’re in the market for a revenue reporting system, be sure to look out for a solution that offers:
- Real-time data analysis: Accurate, up-to-date financial reporting enables more informed decision-making.
- Ease of use: The system should be intuitive and user-friendly, with no steep learning curve or specialized Information Technology (IT) team required to produce custom reports.
- Flexible reporting: Out-of-the-box reporting and the ability to quickly slice and dice data to your needs, is essential to tracking revenue streams.
- Integration with your existing systems: A seamless connection between your revenue reporting system and Customer Relationship Manager (CRM), Enterprise Resource Planner (ERP), and other software is essential to share pertinent data, work from one system to another, and expedite operations. RightRev features close integration with a variety of popular programs, including Salesforce, the world’s favorite CRM.
- Scalable infrastructure: There’s no telling how large your business can grow. Choose a system that can scale alongside you so you don’t have to rebuild your back-office ecosystem due to high volumes and scaling operations.
RightRev stands out by addressing every one of these needs. It not only supports robust revenue reporting services but also scales seamlessly with your business.
RightRev really shines at scale. No other tool handles data as quickly as RightRev. With the ability to post nearly one billion transactions in just minutes, it can handle any business’s revenue accounting needs.
Docebo, a SaaS company involved in dozens of industries across five global regions, had major reporting issues after a sudden customer uptick. RightRev was able to simplify its recognition and reporting process, however, and now it closes its books 50% faster than it did before it exploded in popularity.
Considerations for Implementing a Revenue Reporting System
To make the most of your revenue reporting system:
- Evaluate your business’s needs and competencies: Think about your reporting requirements first, then work backward to implement a suitable revenue reporting system. Consider common challenges like disparate revenue streams, contract modifications, shifting revenue structures, and more to ensure you’ve accounted for all possible scenarios.
- Collaborate across departments: Share data, ideas, and expertise between different departments so everyone gets up to speed on the new system as quickly as possible. RightRev makes collaboration easy by freeing siloed data, integrating with other systems, and providing an intuitive platform for collective work.
- Choose the right system: As noted, look out for features like scalability, out-of-the-box reporting, and ease of use to find a solution that fits your needs and budget. That said, there’s only one right choice for revenue reporting: RightRev.
Measuring Success and ROI With a Revenue Reporting System
The success of your revenue reporting system can be measured through:
- Efficiency: Are you committing fewer labor hours to tedious accounting tasks? Are tasks that took a long time in the past either automated or getting done more quickly?
- Accuracy: Are you encountering fewer posting errors than you did before implementing your revenue reporting system?
- Other improvements: Are you able to free accountants’ time to focus on more strategic analysis and high-risk projects? Do you feel more confident about the accuracy and compliance of your revenue process? Also, review how well the system manages your profit and loss statement preparation and helps maintain consistent recurring cash flow forecasting.
Other key financial outcomes—like closing your books faster—also indicate the successful adoption of a revenue reporting system. In general, such solutions should enhance your financial clarity, reduce accounting-related stress, and help your overall operations flow more smoothly.
Trust RightRev for Accurate, Real-Time Reporting
Revenue reporting software is essential to growing your business. It handles much of the tedious work of posting transactions and generating reports, giving you accurate insights into your business’s financial health and the time to focus on your scaling strategy.
Take a look at your current back-office ecosystem and assess how revenue reporting software could benefit it.
RightRev processes transactions as fast as you can feed them into your system—your reports are always up-to-date, and your reporting is infinitely scalable. Request a RightRev demo to learn more about automating revenue reports.
