Get on the revenue recognition ball with budgeting and forecasting software

Soccer, called association football or just football in most countries, is the world's favorite sport. As such, it is no surprise that this so-called "beautiful game" has left a big mark on the English language (a lingua franca of international sport) by introducing a ton of colorful terms, sayings and turns of phrase into common usage:

• For example, overzealous football fans are often labeled "hooligans," a word that is now used to describe any sort of rowdy crowd of protestors or partisans that engage in heckling, taunting and/or other disruptive behaviors.
• A goaltender who allows no goals in a game is said to have kept "a clean sheet," which offers up an interesting image of coaches and bystanders still keeping score by hand (sort of like finance teams trying to keep all of their old Excel sheets pristine).
• "Doing the wave" is now common practice at almost any team sporting event, but its origins are soccer-specific, with the sequential crowd-wide cheer having first come to broad public attention at the 1986 FIFA World Cup in Mexico.
• The odd metaphor "moving the goalposts," meaning to change the objective/rules in the middle of a process to favor one side over the other, has roots in soccer (the goal is two posts and a net), even if the literal action it describes almost never takes place.

That "goalposts" saying in particular hits uncomfortably close to home for a lot of small and medium-sized business and their accounting teams. Many of them have struggled to adjust to the new industry-wide standards for revenue recognition in recent years, due to their ongoing reliance on a combination of spreadsheets, homespun tools and legacy ERP systems at a time of huge regulatory and technological change.

Moving the goalposts of revenue recognition: Challenges in adapting to change

Back in 2014, the Financial Accounting Standards Board and the International Accounting Standards Board together unveiled major updates to revenue recognition guidelines. A dozen years in the making, these fresh standards set forward sweeping new guidance for putting together financial statements under U.S. Generally Accepted Accounting Practices as well as International Financial Reporting Standards.

All told, more than 200 specialized and industry-specific requirements were replaced under U.S. GAAP alone, according to AccountingWEB. That is a huge number of "goalposts" to be moved at one time. We could even say that too many SMBs are currently in "man down" situations (the soccer term for having fewer players on the field than the opposition, due to a red card) and ultimately won't be able to keep "a clean sheet" of their numbers due to those error-prone, Excel-driven manual processes.

A 2016 survey by KPMG underscored the scope of the challenge:

• Only 29 percent of corporate financial preparers said their organizations had clear plans in place to implement the new FASB/IASB revenue recognition standards.
• More than half (55 percent) said they were still assessing the specific impact of the revised standards, and 27 percent had not taken any action yet, as they await revisions to lease standards as well.
• Most respondents believed that their firms would revise their approaches to revenue recognition by 2018 or 2019; only 9 percent expected implementation in 2016 or 2017.

"Both standards will require significant effort, and these results demonstrate the complexity of implementation across entire organizations," KPMG managing partner John Ebner explained, according to the Journal of Accountancy.

"Few organizations have clear plans in place to adapt to new revenue recognition guidelines."

Adapting to significant regulatory change is hard in any industry. Health care providers, for instance, are still having difficulties complying with the 20-year-old HIPAA legislation, while software-as-a-service companies have had to move quickly to keep up with their customers' expectations around encryption and other forms of security.

With accounting, though, the troubles with revenue recognition have a more obvious solution than in either of those scenarios. More specifically, many companies need to overhaul their budgeting and forecasting software, so that they have a stronger technical foundation for handling new revenue recognition workflows.

Golden goal: How cloud financial software can come through in the current pinch

In soccer, a "golden goal" is a score during a sudden-death (i.e., "the next goal wins") situation, which of course wins the match. Undoubtedly, many companies are in similarly tense scenarios as they look to transition away from legacy financial systems to something newer, like cloud-based software, that can better handle modern revenue recognition.

Accounting standards for revenue recognition have changed since 2014.

Cloud accounting solutions such as Intacct, offer the breakthrough that SMBs and other firms need to adjust to the evolving FASB/IASB rules:

• It can connect accounting to your Salesforce.com or other CRM system to provide a completely seamless quote-to-cash process.
• It can recognize revenue independently of customer billing arrangements, so that its requirements are kept separate from the economics of any particular deal.
• It provides quick and easy insight into revenue recognition, deferred revenue, billings and collections.
• It is flexible. The cloud infrastructure at its heart can scale as workloads increase and it also frees the organization from having to rely on IT to put out fires, update hardware and software and run reports. Plus, it automatically keeps you up-to-date with the latest changes to accounting guidelines.
• It pays off. Return on investment for a SaaS platform like Intacct can be enormous compared with the Excel status quo. Buyers also get lower total cost of ownership and the flexibility of free trials and phased implementations.

Legacy tools were not built to handle the 2014 revisions to revenue recognition, since they were originally designed mainly for manual data entry, along with order fulfillment and invoicing (in the case of ERP systems). Cloud accounting software goes much further, using automation, straightforward application integrations and scalable infrastructure to keep pace with current guidelines and technologies.

As a sport, soccer has evolved well over the centuries to maintain its popularity, keeping things simple while updating its rules as necessary. In a similar way, you can ensure the sustainability of your company's finances by taking up a cloud ERP system that can deliver in any situation.