8 Revenue Recognition Automation Implementation Best Practices
This guide summarizes key learnings and best practices for revenue recognition automation and implementation from a panel of rev rec experts: Rupali Maheshwari, Senior Financial Systems Manager for SurveyMonkey; Carly Bothe, Finance Project Manager for CloudFlare; Nikki Wong, Director of Program Management at AppDynamics; Alvina Antar, CIO for Zuora; Paolo Battaglini, Chief Accounting Officer for Zuora; and Karthik Ramamoorthy, VP Services Zuora RevPro Product.
The new ASC 606 accounting standards around contract revenue are driving change and helping to push implementation of revenue recognition automation systems like Zuora RevPro. One of the biggest reasons, especially for public companies or those going public, is disclosure reporting.
Businesses can’t afford to spend time manually reporting, or on lengthy monthly closes. And everyone is laser focused on compliance — capturing, understanding, and reporting accurate data that meets standards, is timely, and efficient. Manual data won’t go away entirely, but revenue automation brings consistency and the ability to scale.
But the process of automating revenue recognition can be challenging. So here we provide some proven best practices from leading subscription finance and IT leaders.
#1 Don’t Think ERP Can Handle Revenue Automation
Businesses need a revenue automation solution beyond an ERP, as some of our panelists learned the hard way!
Case in point: CloudFlare initially tried using NetSuite for revenue accounting, but it was excessively manual. When they moved to ASC 606, they were literally doing the recast from 605 to 606 in Excel. That wasn’t going to work to get the books closed in time or for future external reporting. And in addition to being an efficiency time suck, manual processes also pose an accuracy problem because they are so error-prone.
As Paolo Battaglini, Chief Accounting Officer for Zuora observed,“With true revenue automation, you should be able to design your system to start with the quote, go through the order, billing, and full rev rec, without human touch.”
ERP systems not only require costly customization to manage revenue recognition — overall they just are not dynamic or comprehensive enough to handle end-to-end subscription management.
Carly Bothe, Finance Project Manager for CloudFlare, summed it up: “There’s a fundamental difference between an ERP and a purpose-built revenue automation system.”
There's a fundamental difference between an ERP and a purpose-built revenue automation system.”
Carly Bothe, Finance Project Manager for CloudFlare#2 Your Data Needs to Be Legit
Data is mission-critical. Good data is really the backbone that will drive your implementation and long-term business success. Revenue automation shines a light on your data gaps, and the integrity of your data.
As Alvina Antar, CIO for Zuora notes, “Revenue automation relies on legit data.” The data needs to be comprehensive AND accurate.”You’re not just cleaning house now; you’ve got to clean house for years prior. It becomes a heavy lift of data cleanliness to ensure compliance.”
Gathering and preparing the data doesn’t start when you decide on implementation. Before you begin the process, you need to look back at historical data, If you’re doing a full system conversion, you need to look back at historical data and get that in a form to be transferred over. This can be further complicated by the fact that the data that you’re capturing may be data that you’ve never captured before.
#3 Scope The Project
How can you scope the project and not take a big bang approach?
– Set priorities. That helps you decide how much and how fast to convert.
– Understand resources. Develop a clear idea of the resources in time, dollars, and people, you need for implementation.
– Identify business impacts and define success measures.
– Coordinate. Don’t think of revenue automation as a siloed process or you risk leaving key things out.
For Bothe, “what helped us was viewing it as a holistic revenue automation, and not just a system implementation.”
As Rupali Maheshwari, Senior Financial Systems Manager for SurveyMonkey noted, “Data movement has to happen in all the systems. There’s no ‘upstream.’ There’s no ‘downstream.’ Every system is important.”
This mindset helps keep you ahead of the game. For example, if your product strategy team is planning to introduce a new product line, decide how you’re going to bring the new product line into your tools and systems as you scope your project.
“For the 12-month revenue automation project, nine months of the project was just data cleansing.”
Nikki Wong, Director of Program Management at AppDynamics#4 Understand the Timeframe
Your implementation could take six to nine months, at a minimum. If you have to spend time cleaning up your data, that impacts the timeline.
As Nikki Wong, Director of Program Management at AppDynamics, described it, “For the 12-month revenue automation project, nine months of the project was just data cleansing.”
The fact you may be capturing data you’ve never captured before, adds another wrinkle (and more time to the project timeline).
#5 Engage Key Stakeholders
As Alvina Antar, CIO for Zuora notes, “Transformation takes the entire organization.”
A revenue automation implementation project touches so many departments and so many processes that it’s really “a revenue transformation.” And a revenue transformation requires educating the whole organization — sales, IT, new product development, and finance — early on.
Think of it as a campaign. Communicate how everyone will be impacted, what their role will be, and what you need from them.
Get C-suite executives on board, so they understand the impacts and resource implications — and will commit to the investment.
#6 It’s Not Just A Technology Implementation
With any revenue automation project, there’s the pure system implementation piece, and there’s the business side. Having a solid team is key with such a difficult project.
As Antar put it, what made Zuora’s own implementation of Zuora RevPro for revenue automation so successful was “There was no difference between who was on the technology side and who was on the business side.”
#7 Implementation Is A Springboard to Process Change
Revenue automation’s impacts go beyond revenue. The panelists spoke to it shining a light on their businesses, and triggering a rethink of existing processes.
Take termination for convenience. For Bothe, “I don’t think our sales team necessarily realized how variable those termination for convenience clauses were, and now we’ve started to standardize those.”
Rupali Maheshwari, Senior Financial Systems Manager for SurveyMonkey, gave as an example a new product line. With revenue automation, you can decide upfront, how you’ll integrate it into your tools and systems, and then onboard it into your revenue stream.
This mindset helps keep you ahead of the game. Antar found it becomes the ammunition you need to go to sales and drive changes ”because you can’t automate something that’s inconsistent or that’s not in the system.”
"You can’t automate something that’s inconsistent or that’s not in the system.”
Alvina Antar, CIO, Zuora#8 Implementation Partners
Partners, internal and external, play a pivotal role.
In CloudFlare’s case, PWC helped put together a resource loading chart and had key finance team members — like their head of revenue and controller — weigh in on who should do what based on skill sets, and what needed to happen to close in time…while still keeping the lights on.
A third party can also help with system selection, asking hard questions, sitting through demos, and making sure your business is maximizing the system.
“It’s also essential to have a strong internal technology partner,” as Maheshwari notes. They help you focus on business impacts, objectives, ‘and keep you honest.'”
“It’s essential to have a strong internal technology partner. They help you focus on business impacts, objectives, 'and keep you honest.'"
Rupali Maheshwari, Senior Financial Systems Manager for SurveyMonkeyFinal Thoughts on Revenue Recognition Automation Implementation
Revenue automation is highly impactful from an end-to-end perspective; it goes beyond a focus just on revenue. Your implementation will not go exactly as planned (it never does), but these best practices will help you be more clear-eyed going in, and primed to deal with the challenges that come up on your revenue automation journey.