The ever so fondly-named ASC 606, otherwise known as the new standard in revenue recognition, is no policy to bat an eye at.
Issued by both the Financial Accounting Standards Board (FASB) and International Accounting Standards Board, the new standard intends to, as Deloitte puts it, “replace the existing guidance with a single industry-neutral revenue recognition model that will reduce complexity and increase financial statement comparability across companies and industries.” Cited as “the most historic accounting changes to hit US capital markets in decades” by Bloomberg, ASC 606 is going to flip everything in the realm of accounting on its head. And you need to be ready.
Meredith Schmidt, EVP of Global Revenue Operations for Salesforce, says the goal of ASC 606 is to create a unified system of recognizing revenue.
“This is regardless of what industry you’re in, what country you’re in, no matter how big or small your company,” Schmidt said. “Every business will be following the same guidelines for recognizing revenue.”
The rules used to be black and white, but revenue recognition is principle-based and should be left to interpretation. This is profoundly true in our converging technological business ecosystems. With the change less than three months away, you deserve to know about the best solution to complying with the new rules with minimal impact to your current practices and operations.
Technology as a role in revenue recognition
If you aren’t thinking about the role of technology in solving your accounting issues, you’re running a greater chance of risk and complexity in your business on the heels of the new accounting standard. Revenue recognition is all about compliance, and there are solutions out there that will enable the mandatory accounting change, give you peace of mind, and help you simplify the process.
However, the first step to realizing this goal of seamless ASC 606 compliance requires a slight change of mentality. Most businesses know the risks of relying too much on siloed systems, and if your business is still operating in this structure, you’re going to find it harder to adhere to the new revenue recognition rules. This is particularly true for your IT and accounting departments—there is an opportunity now to bridge the gap between your IT and accounting departments, who aren’t always communicating with each other. This is going to be an imperative component to successful compliance.
“I think the number one solution that is going to help with this problem is the investment in and implementation of a CPQ tool,” Schmidt said.
How CPQ can help with ASC 606 adoption
A CPQ solution is the easiest way to address and enforce those standardized accounting rules upfront, and control the way you sell, recognize revenue, and pay commissions. All of this freedom and flexibility starts with the data that you can access via the Salesforce platform and Salesforce CPQ. The two services combined can drive an end-to-end process from configuring price and quote all the way to revenue recognition compliance—all within one platform.
“Salesforce CPQ is a technology that can really enable your success,” “It’s where the data starts and where the revenue starts, and it’s also where you can minimize risk and where you ensure that you are compliant with all regulations.”
With the new standard looming just on the horizon, hopefully, you have already begun to consider the implications of ASC 606 and how your business is going to handle the changes. Even more so, it is in your best interests to understand the ease and simplification that a Salesforce CPQ solution can bring to the overall process.