The first step to compliance requires a better understanding of the benefits of ASC 606 adoption.
Whenever new accounting regulations go into effect, such as ASC 606, companies tend to go through some growing pains. Unforeseen issues adapting to new reporting standards will occur. The main problem for most companies appears to be a failure in revenue recognition. This is especially troublesome for subscription-based organizations with a variety of business models. Inaction is unacceptable and the first step to compliance requires a better understanding of the benefits of ASC 606 adoption.
Understanding the new regulation.
The purpose of ASC 606 is to standardize the way companies recognize revenue. Gone are the days of endless audits and digging through huge spreadsheets. With proper implementation, these new rules can minimize reporting errors and improve company efficiency. However, simplifying your accounting processes can present various challenges depending on your industry. Managing a wide range of contracts, from usage-based pricing to monthly subscriptions, or including bundle options and discounts can be difficult to streamline.
Before ASC 606, each industry-recognized revenue differently. Now revenue recognition only occurs when an items on a contract has been fulfilled. This change can have significant impact on a company’s net income, total assets and overall cash flow. Creating a revenue comparison chart can help you determine the financial impact the new regulations have on your bottom line. Reviewing past accounting and financial reports to determine what you need to change to comply with the new rules moving forward can also be helpful.
Implementation Challenges.
Rethinking and revising your current accounting practices can help modernize and grow your business. However, the cost and the consequences of poor implementation can be a time-consuming disaster. Seeking out an audit from a reliable third party can help you determine the scope of changes required to get your business on the right path. Your finance department needs to understand the impact of new regulations in order to develop innovative reporting strategies in the future without affecting compliance. Therefore, a company requires a scalable solution that will adapt as the business grows and evolves.
Streamline your Reporting.
Maintaining accurate master records in the event of an external audit is of the utmost importance. However, getting years of historical data from multiple entities ASC 606 compliant can take a lot of time and effort. Fortunately, there are ERP (enterprise resource planning) platforms such as Microsoft Dynamics that can potentially automate the data migration and reconciliation process to generate proper reporting. As a result, accountants can gather the necessary information with relative ease, spending less time manually entering data while ensuring regulatory compliance.
A Subscription Billing Solution.
Before ASC 606, a company selling a 12-month subscription to a service could only mark the amount of months remaining in the calendar year as revenue. The remaining months of revenue is accounted for the following year. This is not the case under the new FASB standard. Companies are now required to correct any past billing variations despite the similarity of the transactions, which can lead to reporting errors. Subscription Billing Suite (SBS) by Binary Stream provides consistent and reliable invoicing for a wide range of pricing models while maintaining accurate financial reporting and enabling compliance with standards.
As a directly embedded solution built to leverage and enhance Microsoft Dynamics platforms, SBS presents a comprehensive answer to how you can cut through the complexity of regulatory compliance. Using our intelligent deferral schedules, you can streamline your revenue recognition process and eliminate your reliance on time-consuming and error-prone manual process with ease. With the ability to recognize revenue and expense at the line-item level and based on different models including straight line and event-based, Subscription Billing Suite provides a clear path towards compliance with ASC 606.
For more information, contact Binary Stream to discover how SBS can simplify your accounting processes.
