Modern accounting leaders are always looking for new ways to strategically advise their business on scalability and growth. Historically, leaders would prioritize cost cutting measures and expense management. But as businesses adopt increasingly complex pricing models—incorporating a mix of subscriptions, one-time, and consumption-based offers—accounting leaders must shift their advisory focus to revenue recognition. 

As this shift continues, leaders are also becoming increasingly aware that their daily revenue recognition processes and financial close are becoming more time-critical, resource-intensive, growing in complexity, and prone to compliance risks. 

In fact, 76% of accounting leaders experience increasing pressure from the business to support new, more complex go-to-market models, products, and pricing, which may include consumption-based pricing and bundles. But at the same time, nearly 70% report that they do not have the right technology to address these growing demands from the business.

The obvious solution is to increase revenue automation, but what is the best approach? Many CAOs, controllers, and revenue accounting leaders may believe that their revenue process is already completely automated, but upon further investigation, they discover a web of spreadsheets combined with a customized revenue module within their enterprise resource planning (ERP) system. 

This error-prone, costly, time-consuming revenue process is anything but full automation. And simply put, if you have to wait until the books are closed to know what the monthly revenue is, then you aren’t automated.

True end-to-end revenue automation must include:

• 90-98% of revenue recognition is automated in the system
• Minimal manual interventions to process transactions
• Real-time access to data and reporting
• Out-of-the-box support for new products and pricing models

According to a recent MGI analysis of the industry, most companies who adopt an end-to-end revenue automation solution can see a positive return on investment (ROI) in just two quarters (6 months). But what does an end-to-end revenue module entail? 

While utilization of an ERP and spreadsheets does remove some level of manual effort, leaders may be surprised to discover that 60% of revenue accounting team members report that their current ERP revenue modules do not fully support business requirements, even with customization. 

In addition, 65% say ERP revenue modules were more expensive than anticipated, when factoring in customizations and ongoing maintenance leading to higher total cost of ownership (TCO) than planned. 

Clearly, an ERP revenue module on its own is not sufficient to support most businesses as they scale. However, a complete rip and replace of your current ERP system may not be the right option for your business either, so what is the alternative? 

More and more companies have shifted away from managing revenue recognition within their ERP and additional spreadsheets. Instead, they look for specialized tools, such as an enterprise-level revenue subledger—a purpose-built solution where data can be managed and accounted for in a controlled but flexible environment. Data can then be fed directly to the ERP general ledger for financial statement capture. 

In this article, we draw upon customer, partner, and analyst research, along with published vendor capabilities, to explore the pros and cons of popular ERP revenue modules. In addition, we propose options for using a revenue subledger in conjunction with your ERP to increase automation. 

When should you consider an ERP revenue module? 

While most ERP revenue modules from vendors like NetSuite, SAP, Microsoft Dynamics, or Workday are able to offer some revenue recognition automation, they are usually just one small piece in an ERP’s broad array of solutions. This means that developing and updating the revenue module to keep up with the ever-changing requirements of revenue recognition and—accounting teams at large—may not be a major area of focus or investment for the vendor.

According to MGI research, a small-business or mid-market level ERP revenue module can be a good fit for businesses with less complex revenue recognition policies, use cases, and lower transaction volumes. These solutions commonly offer many of the controls required for revenue accounting and allow for various revenue management scenarios. 

However, as businesses grow and their rev rec process becomes more complex, using an ERP revenue module in isolation can limit scalability and increase the need for manual workarounds. Additionally, since ERPs can be quite structured and controlled, implementing changes that allow your business to scale or work around outlier use cases can become time consuming and expensive. 

Businesses often find that they have to further customize the system and incur the never-ending management costs to update and maintain the customizations, or hire additional headcount to handle the required manual efforts.

Automated revenue management solution comparison

Many ERP vendors entice users to use their revenue module by providing low introductory licensing fees or a free trial, but you may be considering it and wondering about the pros and cons of these solutions. What are the indicators that a revenue module is a good fit for your company and how do you know when it’s time to look for a different solution?

As you evaluate your current rev rec processes, you should consider three key areas that can greatly impact your business, now and into the future: 

• Complexity and variability: How complex are the transactions and workflows? How much variability of pricing, bundles, etc. is present? 

• Volume and future growth: How many transactions are handled per month? How has the complexity of those transactions grown and how will they evolve moving forward? 

• Agility and automation: Is your current solution capable of incorporating new business and pricing models without requiring IT resources? How does the solution handle ongoing changes and modifications to customer contracts? How quickly can you get offers to market? Are manual interventions required?