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Audit risks and the need to control errors and build for compliance

In this series on the decision making around supporting ASC 606 with revenue recognition automation software, the project manager assesses the fourth and fifth identified issues. The team continued focus on being risk adverse and taking the opportunity of change under ASC 605 regulations to address risks, as well as addressing the Board of Directors (BOD) concerns about compliance. In particular, the company BOD had taken note of the new compliance regulation and were keen to address this area quickly and completely rather than to take a patch approach.

BOD and stakeholders push for automation to manage compliance

Q: Did your Board of Directors have any comments on ASC 606? 

Members on our board want to reduce the risk (of manual systems) to the business, just as any accountant would, and we believe introducing a tool that is formulated specifically for revenue recognition would reduce some of the risk areas around revenue recognition. Even when we explain to the market (investors) that our costs may be up due to implementing a new tool, they understand, they kind of expect it, and they understand it. The same as our board.

Q: Do you think that your Board of Directors’ interest in compliance helped the push for automation?

I think it helped. Yeah, I do. They brought it up in our board meetings, they wanted to understand what we were doing, how we were doing it, and also they were more than interested to hear if we were going to automate it in someway. That RevStream is actually going to give our management visibility to our revenue numbers quicker than our existing tool does is key. Our existing tool is more of a batch processing system that happens once a period, at period end. With RevStream, it is more of a day by day where we will be posting transactions and we will have a fairly good view of where our revenue management is at a single point in time.

And the fifth issue faced:

Board of Directors (BOD) and stakeholder concerns around compliance

Leveraging audit risk concerns to implement a solution

“Introducing a tool that is formulated specifically for revenue recognition would reduce some of the risk areas around revenue recognition.”

Q: Did you use projected growth potential as the reason to automate revenue now, or was there another factor, perhaps ASC 606?

One of the areas was exactly that, so that we can handle some of the new guidelines while also handling projected growth. With the new guidance coming out we figured right now would be the time to look at our tool and see if it’s better to maintain our home grown solution or see if there was a better solution off the shelf. If you look into it right now with 606, many companies are going towards more of an automated tool. But 606 may not be the real driver, for us, it is something that has been needed for a while.

Continue the story:

Inefficient financial planning and reporting

Download the full series of Issues Revenue Management Teams Face – ASC 606


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