Import revenue schedules from source system for planning

Description

A "Revenue Schedule" is a financial tool used to plan, track, and manage when revenue from sales or services is recognized over a period of time according to accounting principles and standards. It outlines the specific dates and amounts of revenue expected to be recognized from various sources, including sales contracts, subscription agreements, service deliveries, and other revenue-generating activities. The purpose of a revenue schedule is to provide a detailed and structured view of incoming revenue, aiding in financial planning, analysis, and reporting.

The ability to import revenue schedules directly from source systems is an important requirement in Corporate Performance Management (CPM) software. This functionality is often required by SaaS businesses or anyone with unique timing of revenue recognition for a specific customer or a specific purchase.

Example Use Case

Scenario: A technology company uses CPM software for its financial planning processes. It has various revenue schedules for specific customers, each of which has sub-schedules based on when they purchased specific products. Most customers purchase for a year, however some purchase for longer terms. These schedules are stored in a combination of a CRM and Excel.

Solution: The revenue schedule for their SaaS license sales from their CRM software and actual subscription income from their billing system are automatically incorporated into the CPM software. This automates and streamlines the planning process, reducing errors and inconsistencies. It also allows modeling new revenue recognition models in the forecast.

Considerations

There are various products on the market that are used to take a customer's contract and convert into a revenue schedule + recognition. The most common is Excel. The system should allow the upload of your Excel file, but ideally should eliminate it altogether.

Consider the following when working with revenue schedules in a planning and financial reporting environment:

1. Timing of Revenue Recognition: Specifies when revenue from different contracts or sales is expected to be recognized based on the criteria for revenue recognition under applicable accounting standards (e.g., ASC 606 or IFRS 15).
2. Amount of Revenue: Details the amount of revenue to be recognized at each scheduled interval, which helps in forecasting cash flows and managing liquidity.
3. Revenue Sources: Identifies various sources of revenue, such as product sales, services, subscriptions, or licensing fees, providing insights into the diversification and stability of revenue streams.
4. Compliance: Ensures that revenue recognition complies with relevant accounting standards and principles, aiding in accurate financial reporting and reducing the risk of financial misstatements.
5. Performance Obligations: In many cases, especially under ASC 606 and IFRS 15, revenue schedules are aligned with the satisfaction of performance obligations in contracts, where revenue is recognized as or when these obligations are fulfilled.
6. Forecasting and Planning: Assists in budgeting and financial planning by providing a forward-looking view of expected revenue, which is critical for making informed business decisions and strategic planning.
7. Periodic Adjustments: Revenue schedules may be updated periodically to reflect changes in contracts, customer agreements, or the completion of performance obligations, ensuring that the schedule remains accurate and up-to-date.

For example, consider a SaaS company that sells annual subscriptions. When a customer subscribes on January 1st for $12,000, the revenue schedule would allocate this amount evenly across 12 months, recognizing $1,000 in revenue each month. This systematic approach ensures that the company's financial statements accurately reflect earned revenue over the subscription period, aiding in the management of financial performance metrics and compliance with accounting standards.

In summary, the CPM tool should have the ability to handle the above, but also model out new schedules that are forecasted to come into the model.

Questions to Ask a Vendor

• Compliance: Can we model out different timelines for our company to satisfy performance obligations, such as milestones?
• Importing Manually: How can we bring in these schedules manually?
• Modeling: Is there a function to model new schedules, such as when we're negotiating with a large potential client?