3 ways ERP can help you prepare for new revenue recognition standards
Regardless of the fact that the Financial Accounting Standards Board (FASB) has recently called for public comments regarding a potential deferment of previously agreed upon 2017 alterations to its new revenue recognition standards, sooner or later the policy-makers will get the job done and the majority of its rule-sets will be enacted. Consequently, rather than waiting for the ball to drop, there are number of ways that ERP systems can help companies prepare for the coming storm.
1. Progressive is better
In the case of major rule changes associated with any enterprise-wide financial process, it should be generally accepted at the outset that changes to revenue processes will touch nearly every other operating process at one time or another. So, in the event of dealing with a collection of new financial rules, it will probably be best to chip away at the mountain rather than trying to drill through it in one lift.
The new revenue recognition standards will trigger deep and complex changes throughout many enterprise’s financial fabric.
In this event, there are three central areas that will have to be accommodated to implement successful change-management; alterations to the accounting system itself, it’s supporting IT infrastructure, and most complex of all, dealing with people who will have to learn about and respond to the new operating guidelines. Given the fact that ERP systems are typically developed and implemented in a similar fashion, the same level of discipline can be applied to the new rule-sets and subsequently measured in the same way.
2. Learn early and often
The new revenue recognition standards will trigger deep and complex changes throughout many enterprise’s financial fabric. Consequently, understanding the regulations sooner rather than later should become a best practice. Whether you are implementing new contract management processes, or redefining your products and services, the entire change-management tree will have to be particularly long and deep ranging from the C-level all the way down to the data entry level. Therefore, starting all-hands educational processes now will pay dividends later; as in two year’s worth down the road.
3. Know what you don’t know now
One of the most useful elements of any ERP system relates to financial parallelism, along with the ability to identify clusters of asset-based records for further investigation after the fact. In the case of FASB’s new rule sets, however, the density of the rule sets themselves, can potentially cloud these characteristics, and distort an enterprise’s viewpoint on one of ERP’s most useful functions. Consequently, prior to beginning to wade through the changes to revenue attribution or contract management, one would do well to identify and mark potential impacts throughout an enterprise’s financial system, in order to define what will and what will not remain after the changes are applied.
The proposed 2017 revenue recognition standards amount to seminal alterations in the way that revenue will be recognized. However, the successful integration of the new group of policies and systems will still fall on the shoulders of each individual enterprise.
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