Revenue Recognition

Why is revenue recognition so difficult? There must be a better way to keep track of different revenue streams and spreads.

In a perfect world, revenue would arrive in predictable patterns at pre-ordained times. In the real world, revenue from customer sales, maintenance and support contracts, product or service plan renewals, royalties, etc., comes in on completely different schedules, not always when due.

Accounting for multiple revenue streams in “simple spreadsheets” is anything but simple. You know the routine:  Create multiple worksheets linked by formulas. Frustration sets in when you need to change an assumption in one worksheet, because you also need to change it in the others. The risk if you miss one is a broken link that destroys the entire model. The spreadsheet becomes so complex you settle for forecasting deferred revenue based on averages or “guestimates.”

All of which has serious implications for the integrity of your data and reports.

Or you can use Budget Maestro or Planning, which performs Revenue Recognition calculations for you, in essence giving you another staff accountant.

Using a friendly wizard, you select your receivables schedule to forecast “cash in hand”, then define when you want to recognize that revenue. (You can customize as many schedules as you want). Budget Maestro automatically records revenue-related activities in the appropriate period for all Income Statement and Balance Sheet line items, throughout your accounts, so you can generate a synchronized P&L, Balance Sheet and Statement of Cash Flows based on precise data -- not averages or guestimates.

The Software Company Difference

Revenue recognition is fundamentally critical to software companies, which are subject to more specific and stringent revenue recognition rules than many other companies. Mitigate your risk of mis-allocation of revenue by using Budget Maestro’s revenue recognition capabilities. Define the different classes of revenue such as software licenses, services, support and maintenance. Spread the revenue for each revenue stream as you like. End up with an accurate revenue forecast and accurate financial reports and forecasts.