A new accounting standard ASC 606 that defines guidelines on how international companies recognize revenue from contracts with customers, was released in May 2014 but was mandated for public entities, certain non-profits and private entities on Dec 15, 2017. The implementation of the new standard has a substantial impact on all accounting and ERP systems. The revenue recognition principle is the key foundation of accrual accounting and the corresponding principle which states that expenses should be recognised in the same reporting period as the related revenues.
ASC 606 rule is designed to replace a few industry-specific guidelines with a single standard. The principle of this rule is that an entity may recognize revenue when it satisfies its obligation under a contract by transferring goods or services to its customer i.e the entity should recognize revenue when it actually delivers the product or service.
The entity may recognize the amount to which it expects to be entitled under the contract. To implement this new standard, NetSuite Cloud ERP came up with new revenue recognition module. It’s called Advanced Revenue Management (ARM). NetSuite ARM Module fully automates revenue recognition processes. It provides complete support to all the important revenue recognition standards, that too as a cloud solution.
This solution can help your finance teams increase visibility, productivity, accuracy, and compliance with automated revenue recognition calculation, reporting, and dashboards for continual monitoring.
Key Benefits of NetSuite Advanced revenue management module include :
A. Clear Visibility, Reporting, and Monitoring of vital statistics and processes :
- NetSuite ARM helps to instantly generate key reports such as revenue recognition forecasts, deferred revenue, and revenue by customer or item.
- NetSuite dashboards give real-time visibility into each aspect of revenue recognition with continuous monitoring along with exception reporting to identify and clarify issues.
- It enables you to see the detailed reports which covers details up to the transaction level ensuring that the information you are viewing is correct and accurate at most ground level.
- NetSuite’s Advanced Revenue management module will help you to explore your data with respect to various parameters as it is capable of creating complex interactive reports on revenue and deferred revenue.
B. NetSuite Advanced Revenue Recognition helps you
- To extend your existing Oracle Financials, SAP R/3 or any third-party ERP deployments.
- To efficiently meet the revenue recognition standards as it helps in complying with the regulations like AICPA, FASB and SEC (including SOP 97-2 and 98-9, SOP 81-1, SAB 101, EITF 00-21, EITF 08-01 and EITF 09-03).
- Reduce or even eliminate the use of spreadsheets which in turn reduces errors and helps in better compliance.
- NetSuite ARM helps in preparing Reports in simplified manner which improves finance productivity and reduces the time of complex calculations.
- Gain clear visibility in the recognition process, with proper monitoring from start to end.
C. Easy Integration with SAP or Oracle
- If you’re already using NetSuite, the NetSuite Advanced Revenue Recognition easily integrates with it as it is a NetSuite ERP add-on module.
- Any existing ERP system such as Oracle Financials, SAP R/3 or another third-party ERP system can be quickly deployed and integrated with NetSuite Advanced Revenue Recognition.
- The integration between NetSuite ARM module and any existing ERP system will be bi-directional as you can import orders and invoices from your ERP and export journal entries to your ERP system.
Key features of NetSuite ARM
A. Flexible Revenue Recognition Capabilities
- NetSuite ARM supports recognition schedules for all sales transactions and provides immediate notification when revenue is due to be recognized.
- NetSuite ARM enables you to meet the global business management needs with multi-currency and multi-subsidiary intelligence.
- It also enables you to use an integrated workflow for simultaneous revenue recognition and billing.
- It enables you to recognize revenue using a separate process from billing.
B. Effective Revenue Recognition on Multi-Element Sales
- NetSuite ARM facilitates to help you get exception reports by comparing actual selling prices versus ESPs which is vital for accuracy.
- NetSuite ARM helps you to track and support “units of accounting” and selling prices for all elements of multi-element arrangements by VSOE, ESP and Third-party Evidence(TPE).
- It also enables you to track and manage ESPs for every SKU across multiple business channels and dimensions.
- NetSuite ARM gives you the flexibility to customize schedules on a per-item basis as this enables automatic reallocation of order value to each line item.
C. Support for all important Revenue Recognition rules and regulations
- NetSuite ARM facilitates automatic recognition of revenue for each and every line item according to the suitable revenue recognition method.
- The solution delivers complete support and management of ESPs.
- It provides complete functionality for compliance with the latest recognition standards.
- It accommodates the Vendor Specific Objective Evidence (VSOE) perfectly, including Residual method and separate VSOE for each and every item.
D. Pre-Packaged or Custom Revenue Recognition Templates
- NetSuite Advanced Revenue Recognition module provides you the facility to use pre-packaged templates for common recognition methods, or customize templates to your specifications.
- NetSuite Advanced Revenue Recognition provides revenue-recognition templates to define revenue recognition methods and apply them at the line-item invoice level.
- You can associate a template to goods or services for related recognition rules to apply whenever it is sold. The NetSuite ARM is not an upgrade over the existing Revenue Recognition, it’s a new and different module altogether. The current Revenue Recognition may not be discontinued as of now.
The new NetSuite ARM requires a complex migration process and none of your current settings will carry on to the new module, so you will need to implement ARM from scratch. Tvarana, a NetSuite ERP implementation provider can help you in this pursuit so that your business can attain great heights.
If currently, you’re not using NetSuite, which is presently the best Cloud ERP solution in the world, try a Demo with Tvarana, a NetSuite partner. We understand our clients’ business needs & processes and design the ERP system befitting their requirements. You can mail us at firstname.lastname@example.org and for any feedback or concern, you can call us at +914049513884.