NetSuite Revenue Recognition
A well-known term in accounting, revenue recognition is a financial concept to describe revenue that is recognized after a particular event. For example, when a product is delivered to a customer or when Company A pays Company B for a service.
NetSuite monitors this aspect through automated revenue scheduling, allocation, and reports. Users can easily create rules for each product or service that is offered and subsequently link it to customer contracts.
In compliance with standards such as ASC 606 and IFRS 15, NetSuite customers can automatically recognize revenue based on these schedules and milestones.
Not to mention, automated processes scraps the manual time-consuming process for recurring revenue.
What is Revenue Recognition?
Revenue recognition falls under the generally accepted accounting principle (GAAP) that defines the conditions in which revenue is recognized and how to account for it. In most cases it is recognized when an event has occurred; for example, when a product is delivered to a customer or a service has been completed.
The revenue recognition is based and measured on the dollar amount gained.
Within NetSuite, the product for revenue recognition accounts for recurring revenue, compliance, as well as audit reports.
Within NetSuite, users can be in full control of their financial statements should there ever be an issue with audits. The audit dashboard helps pinpoint contract inconsistencies and avoid delays as well as extra fees by standardizing the process.
For companies who must monitor compliance on a daily basis, the NetSuite revenue recognition product provides automated and real-time financial data, even for the most complex situations.
Its automated capabilities feature assets such as scheduling, allocation, and reporting, enabling users to easily create specific rules for each product or service offered.
The Importance of Revenue Recognition
In terms of staying compliant with federal and state regulations, it’s important for companies to stay on top of their revenue recognition. Especially as fraudulent financial cases are becoming more and more common.
Additionally, it’s a principal concern for investors, board members, and shareholders to stay on top of financial statements.
More so than keeping up to date with sales transactions and financial statements, revenue recognition is a crucial component of any organization. It’s used to determine the value of a business. And when it comes to analyzing probability and smooth business operations, accurate accounting and deferred revenue are always on top of the list.
Companies can also gain invaluable insight into their cash flow and revenue in order to make informed decisions for long-term and short-term investments.
Implementing a good revenue recognition software can avoid any negative image due to incorrect data and financial statements. This can be particularly damaging for companies who are eventually planning on going public.
Features of Revenue Recognition in NetSuite
Tied directly into the integrity of an organization as well as the financial reporting, revenue recognition is a crucial feature for all industries and businesses that want to ensure standardization, compliance, and consistency among revenue.
NetSuite features for revenue recognition help companies allocate transaction prices and obligations in a contract. It’s the best way to avoid unnecessary and costly audits down the line.
Distributes revenue across all types of contracts by applying specific rules, with either a constant or dynamic formula.
Users can simply modify, add, make changes, and cancel all different allocations.
Rules and Regulations
Streamline revenue records with rules based on triggers that you can set up for project milestones and obligations.
No matter the revenue recognition principle, NetSuite identifies different types of revenue: subscription, project completion, material-based pricing, and fulfillment.
Revenue Plan Management
Plan ahead but also know that you can modify individual or group plans. Whether it’s a project that is near completion or it’s a project that hasn’t begun, you can automatically update and adjust different aspects of the revenue plan.
Forecasting and Reports
Automated forecast plans are created within each contract based on the designated revenue recognition schedule. This helps improve all forecast accuracy thanks to error-free data and updated projects as different revenue streams are recognized.
Reports have powerful features that can adjust deferred revenue and update contract balances based on invoices and revenue.
Benefits of NetSuite Revenue Recognition
No More Spreadsheets
The time of spreadsheets may not be coming to an end, but their use is slowly becoming less noticeable thanks to ERP solutions like NetSuite.
Minimize manual data entry and redundancy with an automated revenue management process, that is built directly into NetSuite. Meaning you can have all the financial reporting from NetSuite as well as the intricate information with revenue recognition.
Managing revenue can be a tricky situation without accurate reports. And when errors arise it can cause concern for potential audits and business credibility.
With revenue recognition you can automatically update contracts based on earned revenue and invoices as well as projects and revenue plans.
There’s something about being able to have accurate forecasts to better plan projects and potential revenue.
For all types of revenue - committed, deferred, and recognized - NetSuite guarantees real-time and accurate updates to help business plan ahead.
Standardized allocations reduce errors as well as the risk of costly audits with predefined rules and regulations.
If there is ever an issue with the sales order, users can easily manage project holds, delayed shipments, or any other potential revenue allocation issues.