By Zoey Czech, Consultant II
These days there really is no excuse for any manufacturer (small, mid-size or enterprise) to still be using an unscalable legacy system requiring manual input and outdated spreadsheets for financial workflows. The limitations are simply too restrictive.
Using manual spreadsheets or Excel to track transactions, especially large volumes, can be frustrating and risky. There’s high potential for human error — you may forget to bill a transaction during the month. And there’s a lot of manual labor involved in reviewing an Excel spreadsheet, creating an invoice and sending it to the customer.
You may already know the good news: a modern enterprise resource planning (ERP) system can automatically do all that, saving you time, reducing errors and providing real-time insights into how your business is really doing.
I’ve previously addressed the benefits of real-time ERP reporting in manufacturing. In today’s fast-paced manufacturing world, if you don’t have a good ERP for financial processes, you’re probably struggling to keep up, and you may not be too confident when it comes to following the different regulations.
Meeting Compliance Requirements for Revenue Recognition
Although new regulations went into effect well over a year ago, many manufacturers still wrestle with ASC 605, ASC 606 and IFRS 15 compliance. Without a sizable accounting team to rely on, many small- to midsize companies find the compliance adoption process to be complicated, tedious and stressful.
New regulations naturally bring with them questions and anxiety. “What is it? How do I figure it out? Who’s going to handle it? How much extra work is required?” And perhaps the most important questions concern reporting: “How will I report on it to meet the requirements? Can I gather all the data needed to show we’re in compliance?”
Grow Financial Workflow Confidence With NetSuite Revenue Recognition
NetSuite Revenue Recognition has reliable, real-time reporting to show you’re complying with today’s accounting standards. It helps you accurately schedule, calculate and present your revenue on financial statements.
Revenue Recognition allows you to recognize revenue separately from billing customers and receiving payments so you can defer revenue and recognize it across multiple periods. Revenue Recognition uses a rule-based event handling framework. You set up rules that automate the processes and ensure the correct revenue allocation, recognition and auditing.
Here’s a simple example. A service company that manages trucking fleets arranges a contract with a trucking company; the agreement is to bill a set amount each month for services rendered over the next 12 months. The amount could differ by month; for instance, if the trucking company experiences higher shipping volumes in the fall, yet each month is already agreed to, that’s recognized revenue across multiple time periods.
You can also use NetSuite to forecast. For example, in a deferred revenue situation (a contract stipulates the whole amount paid upfront), you know you’re going to receive specific revenue each month. Revenue Recognition helps you understand how much monthly revenue is coming in and how to properly budget for the future. In addition to accounting/finance departments recognizing and recording revenue and staying in compliance, your sales force can determine how to set up billing for all sales orders when entered into the system.
You have options. Billing can also be tiered so you simply choose when invoices are triggered: a project milestone is hit, a task is completed, a project reaches a specified completion percentage, an item is fulfilled in NetSuite or when plans are tied to your sales orders.
Automating the Process
Once the different rules for your company are set up in the background and everything is ready, it’s simple. When entering a sales order, choose which revenue plan and rule to use, tag it on the sales order, and the system will automatically create a revenue recognition plan. You can review the sales order once for accuracy, and then NetSuite Revenue Recognition will automatically create and deploy invoices.
Remember how much work this is in Excel? You have to manually monitor the spreadsheet every day and create invoices based on the schedule, among other things. NetSuite is not only a huge time-saver but also eliminates the risk of forgetting to bill someone for a month.
This system isn’t just for revenue! NetSuite has amortization schedules on the expense side. You can enter a bill, mark it as a deferred expense and automate each payment, recognizing that expense over multiple time periods. One example is prepaid insurance. You may pay an annual premium yet need to recognize it each month as you incur that expense.
Wipfli Magnifies the Benefits
Depending on your version of NetSuite, Revenue Recognition is either included and can simply be turned on, or it can be added as a separate module. Either way, expect some initial excitement about the new system. After all, automation makes life easier (which this will). At the same time, some people may become frustrated when not everything runs as smooth as silk on Day One. Troubleshooting, from minor glitches to unexpected billing details, is where Wipfli really shines.
Wipfli consultation includes the key to a system’s success: behind-the-scenes set up and upfront planning. When these are taken on without proper guidance, it often throws the entire system into chaos. If you’re at that point, don’t worry. We’ve been called on to rescue companies in this exact situation.
One final and vital note: Wipfli is an accounting firm with on-staff CPAs who possess in-depth knowledge of compliance rules and financial acumen. That unique insight and guidance are the perfect complement to NetSuite Revenue Recognition.
Learn more about replacing a legacy system with a highly functional ERP such as NetSuite Revenue Recognition. Connect with the technology and revenue recognition specialists at Wipfli