What is revenue recognition software? Who needs it and why?
Compliance with financial accounting standards for revenue recognition, specifically ASC 606 or IFRS 15, can be cumersome and risky to manage manually for companies with complex revenue streams, long term contracts, or elements of deferred revenue. Here are some common examples:
- Subscription based services such as SaaS companies, magazines, and streaming services
- Long-term contracts such as contruction projects, consulting services
- Multiple-element arrangements such as bundled products and services
- Usage-based billing such as telecommunications, cloud storage provicers
- Deferred revenue management such as prepaid services, gift cards
Revenue recognition software helps your business automate the process of recognising revenue in accordance with accounting standards such as ASC 606 in the US and IFRS 15 internationally.
These standards specify that your company must recognise its revenue when earned, not just at the time of invoicing.
Tracking the correct amount of revenue to recognise can be time consuming and error prone.
Revenue recognition software can automate this process, saving time and improving accuracy while ensuring compliance with regulatory standards for reporting.
Key features to look for in software for revenue recognition
- GAAP compliance (ASC 606/IFRS 15). Having a revenue recognition solution with complies with generally accepted accounting standards is essential in providing a robust, scalable solution for your business, whatever the size.
- Integration with your tech stack. Having a solution which integrates with your accounting system or systems and other sources of contract information, such as your CRM, is essential in creating a seamless and efficient revenue recognition system.
- Audit trail. When replacing manual spreadsheets with automation, having detailed reporting aligned with journal entries, invoicing and financial reporting is critical to maintaining financial control and efficiency.
- Reporting capabilities. Best in class revenue recognition software is able to provide both GAAP compliant financial reporting of revenue and analytic views of sales and customer metrics such as monthly and annual recurring revenue (MRR and ARR), customer churn, lifetime value and other key revenue related metrics key to understanding revenue streams. Automating these metrics take out time and labour requirements to get real time accurate results.
- Visibility of future revenue streams. Some revenue recognition software provides a foward-looking view of either invoiced or contracted revenue or both. Best in class software platforms are able to integrate this information into metrics and forecasting.
Potential benefits of revenue recognition software
Accuracy in financial reporting: By automating the calculation and recording of revenue, this software reduces the risk of errors and ensures financial statements are precise, which is crucial for accurate financial disclosure and analysis.
Compliance with accounting standards: Revenue recognition software is specifically designed to adhere to strict standards such as ASC 606 and IFRS 15, thus mitigating the risk of compliance breaches and the penalties that can accompany them.
Audit readiness: Systematic and accurate record-keeping facilitated by revenue recognition software ensures that businesses are always prepared for audits, with easily accessible and verifiable financial data.
Time and resource efficiency: Automating the revenue recognition process saves significant amounts of time and frees up resources, allowing finance teams to focus on more strategic tasks rather than routine data entry and calculations.
- Scalability: As businesses grow and transactions become more complex, revenue recognition software can scale to meet increased demands without the need for additional resources, maintaining efficiency and control.
- Clear reporting of MRR, ARR, and other sales-related metrics. Best in class revenue recognition software is able to provide a variety of reporting solutions. Automating financial reports and sales-related financial metrics take out time and labour requirements to get real time accurate results.
- Support for revenue forecasting: Advanced revenue recognition tools often include forecasting capabilities, which allow companies to project future revenues based on current contracts and historical data, supporting effective budgeting and financial planning.
Finding the right revenue recognition software
Choosing the best software for revenue recognition can be a daunting task as there are many possible options. It is important to understand your specific requirements and how they fit with the capabilities of the options on offer.
Here are some key points to consider when selecting software for recognising revenue:
- Specific business needs
- Integrations
- Ease of use
- Reporting capabilities
- Flexibility / customisation
- Customer support
- Research your chosen product further: See reviews and references and take advantage of free trials and demo
Revenue recognition software options
1. ScaleXP
ScaleXP specialises in automating month end tasks for SMEs using common accounting and CRM packages such as Xero, QuickBooks, Hubspot and Pipedrive. It uses text recognition to fully automate revenue recognition and provide journals directly into your accounting system.
Reasons to choose ScaleXP:
- GAAP compliant revenue recognition with automated journal entries into Xero, QuickBooks
- Tap into ability to read service dates direct from invoices as well as set account rules to minimise manual intervention
- Covers flat, rule based, and useage based use cases for revenue recognition
- Ability to consolidate revenue recognition across multiple entities and currencies, even across accounting systems
- Simple, easy to set up interface
- Comprehensive and fully configurable smart reporting including Excel downloads, dashboards, and presentations that can be shared online or in PowerPoint
- Automated ARR, MRR, and other SaaS metrics like customer lifetime value and CAC payback; great customer reporting on churn, customer numbers as well.
- Contract management including invoicing from HubSpot and sales forecasting from your CRM, ensuring one version of the truth
- Additional month end automations such as prepaid expenses
Reasons ScaleXP might not be right for you:
- You are using an accounting package not supported by ScaleXP
- Your business is B2C rather than B2B
- You have extremely complex, bespoke individual contracts that require a lot of manual intervention for revenue recognition even with ScaleXP
2. Flowrev
Flowrev specialises in cost and revenue recognition for accounting purposes.
Reasons to choose Flowrev
- Simple to use
- Inexpensive
Reasons Flowrev might not be right for you:
- You want reporting and analytics as well as accounting journals
- You need flexibility
- Your requirements are complex
- Your business is B2C rather than B2B
3. Maxio (formerly SaaSOptics and Chargify)
Maxio combines revenue recognition with subscription management and some metrics reporting.
Reasons to choose Maxio:
- Complex contract level requirements
- Looking for comprehensive, end to end billing and subscription management and reporting, not just revenue recognition
Reasons Maxio might not be right for you:
- Complex, time consuming to set up and maintain
- Expensive
- Your business is B2C rather than B2B
4. Chargebee RevRec (formerly RevLock and Chargebee)
Chargebee is a billing and collections tool with an added revenue recognition module, but not full accounting integration.
Reasons to choose Chargebe:
- B2C sales
- Main requirement is around billing and collections
Reasons Chargebee might not be right for you:
- It doesn’t provide accounting integration or journal entries
- You have complex revenue recognition needs
- You are looking to automate revenue recognition in your accounts, including journals
- You are looking for reporting
- You are looking for automation of prepayments
5. Recurly
Recurly is a billing and collections tool with built in revenue recognition using rule based inputs; its focus is not on accounting automations.
Reasons to choose Recurly:
- B2C sales
- Main requirement is around billing and collections
Reasons Recurly might not be right for you:
- You have complex revenue recognition needs
- You are looking to automate revenue recognition in your accounts, including journals
- You are looking to work across multiple entities
- You are looking for automation of prepayments
6. Subscript
Subscript is a billing and collections tool with built in revenue recognition.
Reasons to choose Subscript:
- Main requirement is around billing and collections
- Simple to set up
Reasons Recurly might not be right for you:
- Your business includes B2C
- You are looking for integrated financial reporting
7. Synder RevRec
Synder RevRec automates the revenue recognition process for Stripe transactions.
Reasons to choose Synder RevRec:
- Main requirement is around revenue recognition from Stripe
- Simple to set up
Reasons Synder RevRec might not be right for you:
- Your business includes other billing sources
- You are looking for integrated financial reporting
8. Salesforce RightRev, part of Salesforce Sales Cloud
Salesforce Sales Cloud is a cloud based CRM providing a full suite of financial operations and reporting tools with a focus on sales, service and marketing. RightRev applies rules about contracts to generate recognised revenue for accounts and associated proposed journal entries.
Reasons to choose Salesforce Sales Cloud:
- You have complex CRM requirements and have already decided on Salesforce for other functionality
- You are looking to consolidate your tech stack under Salesforce
Reasons Salesforce Sales Cloud might not be right for you:
- Its core purpose is not revenue recognition and it is not simple and easy to implement for this purpose
- It is expensive
- It is time consuming and complex to implement
9. Sage Intacct
Sage Intacct is a cloud based accounting and management system providing a full suite of financial operations and reporting tools including a module specifically for revenue recognition.
Reasons to choose Sage Intacct:
- You have the time and budget to invest in a fully integrated accounting and management solution
- You have other requirements that require a comprehensive reporting system like Sage Intaact
- You already use Sage or are looking to replace your accounting system
- You are looking for highly specialised tools for your industry which you know Sage Intaact provides
Reasons Sage Intacct might not be right for you:
- It is a whole new integrated system
- It is expensive
- It is time consuming and complex to implement without being the most comprehensive ERP system on the market
10. Oracle NetSuite
NetSuite is a cloud based ERP providing a full suite of financial operations and reporting tools.
Reasons to choose NetSuite:
- You have the time and budget to invest in a fully integrated ERP solution
- You have other requirements that require a powerful solution like NetSuite
- You are looking to replace your accounting system
Reasons NetSuite might not be right for you:
- It is expensive
- It is time consuming and complex to implement
11. SAP Revenue Accounting and Reporting (RAR)
SAP RAR is a module within the SAP ERP framework which caters to companeis with complex revenue recognition needs.
Reasons to choose SAP RAR:
- You have the time and budget to invest in a fully integrated ERP solution
- You have other requirements that require a powerful solution like SAP and have chosen it over other ERP solutions
- You are looking to replace your accounting system and other tech stack elements
Reasons SAP RAR might not be right for you:
- It is expensive
- It is time consuming and complex to implement
12. Workday Financial Management, Revenue
Workday Financial Management is a cloud-based solution that forms part of a wider ERP solution and supports core accounting and financial reporting requirements.
Reasons to choose Workday Financial Management, Revenue:
- You have the time and budget to invest in a fully integrated ERP solution
- You have other requirements that require a powerful solution like SAP and have chosen it over other ERP solutions
- You are looking to replace your accounting system and other tech stack elements
Reasons Workday Financial Management might not be right for you:
- It is expensive
- It is time consuming and complex to implement
- You need billing and collection management
13. Zuora
Zuora is a subscription management platform focused on billing, collections and customer experience; it includes a revenue recognition module tailored specifically to subscription businesses.
Reasons to choose Zuora:
- You have B2C subscription needs
- You are looking for an end to end subscription management tool
Reasons Zuora might not be right for you:
- Zuora doesn’t provide full accounting integration and journals
- You are looking for more comprehensive integrated reporting and analytics
- You are looking for other accounting automations such as prepaid expenses
14. TrueRev
TrueRev is a SaaS revenue mangaement tool for QuickBooks Online. It provides automated billing and metric calculations for subscripton businesses.
Reasons to choose TrueRev:
- You use QuickBooks
- You have simple revenue recognition requirements mainly focused on billing
Reasons TrueRev might not be right for you:
- You wish to integrate with other platforms besides QuickBooks
- You are looking for more advanced automations such as text recognition or prepaid expenses
- You have complex contracts and revenue recognition requirements
Benefits of using ScaleXP revenue recognition software
Text recognition for revenue recognition: ScaleXP can save you significantly more time than other revenue recognition software products by using its text recognition capabilities to automatically spread revenue to the appropriate dates. Automatically captures dates and spreads revenue over the appropriate period.
Custom revenue recognition rules : Selection of revenue recognition automation tools enables you to customise the automated process to meet your needs: use the text recognition or set rules by account or invoice. Use for percent completion or other rule based contracts.
Contract management and invoicing linked directly to your accounting system: ScaleXP not only automates revenue recognition from your contracts with journals provided right to your accounting system, it also integrates with your CRM data to produce booked versus billed and renewals schedules.
MRR and customer revenue analytics: View earned revenue in your choice of views: monthly recurring revenue (MRR) or as compliant with financial standards, along with upsells, downgrades, lost customers, new customers, and reactivated customers.
Customer analytics and smart KPIs: See important contract metrics such as customer churn, revenue retention, lifetime customer value, ARR (annual recurring revenue), CAC (customer acquisition cost) payback. All included in your package and available in real time, linking accounting figures directly to your management reporting in real time.
Dashboards and management presentations: Visualise revenue alongside other business metrics in real time and export directly to your PowerPoint management pack.
Revenue forecasting: Combines CRM integration and automated revenue recognition to forecast sales direct from your CRM pipeline
Ready to transform your financial operations and save hours or even days from your month end processes and reporting?
