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For the most part, Revenue recognition is an accounting principle that ensures that revenue must be recognized as it is earned. Hence, many businesses often get scuffled with which revenue is considered ‘earned’ by a company.
NetSuite Revenue Recognition lets you recognize revenue, which is generally done after a critical event. For example, after delivering the product to the customer.
Revenue Recognition Management
- Revenue recognition standards can vary as per the company’s accounting method, geographical location, type of ownership (public or private), and other factors.
- The revenue recognition principle is a key accrual-basis accounting feature and it dictates that companies recognize revenue as it is earned, not when they receive payment.
- Accurate revenue recognition is necessary because it directly affects the integrity, reputation, and consistency of a company’s financial reporting.
- To standardize processes around revenue recognition, connect to an accredited and official NetSuite Channel Partner, who provides a framework for recognizing revenue efficiently.
Why Is Revenue Recognition Important?
- For the most part, proper revenue recognition relates directly to the integrity of a company’s financial reporting.
- The guidance around revenue recognition helps standardize the revenue policies used by companies.
- This standardization enables external entities — like analysts and investors — to compare the income statements of different companies in the same industry without much hassle.
- As revenue is one of the most important measures used by investors to analyze a company’s performance, financial statements must be consistent and credible.
Allocations
With the deployment of NetSuite Revenue Recognition, you can define Standalone Selling Prices using either a constant or dynamic formula. Also, it allows you to automatically allocate revenue across all contract elements by applying sophisticated, user-defined rules. Additionally, Revenue Recognition management helps businesses modify allocations prospectively or retrospectively to incorporate contract additions, changes, or cancelations.
Rules & Schedules
By leveraging the core capabilities of NetSuite Advanced Revenue Management, businesses can record revenue accurately by creating performance obligations, project milestones, and other revenue triggers into the revenue plan for each contract. Interestingly, NetSuite renders extensive support to multiple revenue recognition approaches, including subscription, fulfillment, project completion, and time- and materials-based pricing models.
Revenue Plan Management
Businesses can modify revenue plans individually or in bulk with Revenue Recognition Management. You can change update totals automatically, save time, and avoid manual errors. Also, it allows you to apply updates to just the remaining periods within a plan. For the most part, you can modify the entire plan with adjustments, such as catch-ups or clawbacks, included in the period changes are made.
Forecasting
With the deployment of revenue recognition capabilities offered by NetSuite, you can improve forecast accuracy with real-time data, and update projections as actual revenue is recognized. Additionally, you can witness the automated creation of forecast plans for each contract using the associated revenue recognition schedule.
Reporting
Businesses can make the most of powerful reporting features adjust deferred revenue and update contract asset balances automatically based on actual billings and revenue totals.
Conditions for Revenue Recognition
Revenue Recognition conditions differ based on a company’s geography, and business model. It can be varied with the ownership, whether it is a public or private entity, its bank, investors, and numerous other factors.
For the most part, public companies within the U.S. are required to follow GAAP standards, while private may find it necessary for financing and expansion opportunities.
At inoday, an official and #1 ORACLE NetSuite Channel Partner, an accredited offshore partner, you can avail of solutions, NetSuite Services, and support to recognize revenue via NetSuite Advanced Revenue Management. We deploy standard accounting practices that help meet legal requirements for financial institutions and public companies.
FAQs
How does NetSuite recognize revenue?
To recognize revenue for the sale of a product, you can associate a deferred revenue account with that item on its item record. Also, you can set up a revenue recognition template.
What is NetSuite revenue management?
NetSuite Revenue Management allows you to schedule revenue to be recognized at the proper time automatically, whether the amount is to be recognized at a fixed interval or a different amount at different intervals.
How does NetSuite increase revenue?
NetSuite’s CRM capabilities help scale up upsell and cross-sell opportunities for the sales team. You can avail of complementary products and services, accessories, add-ons, warranties, and other items to significantly increase the revenue from a customer.
For more information on NetSuite Revenue Recognition, write to us at info@inoday.com Or Schedule A Demo
