Aria Systems provides companies with software for managing subscription or recurring revenue business models. A recurring revenue business models includes three types of selling and billing structures: a one-time transaction plus a periodic service charge; subscription-based services involving periodic charges; or a contractual relationship that charges periodically for goods and services. Aria’s cloud-based software addresses key requirements of users in the marketing, sales, operations and accounting functions in this type of business.
Topics: SaaS, Sales, Sales Performance, Customer Engagement, ERP, Marketing, NetSuite, Recurring Revenue, Billing, customer life cycle, streaming, subscription, Customer Performance, Operational Performance, Business Analytics, Business Performance, Cloud Computing, Customer Service, Financial Performance, Accounting, Business Performance Management (BPM), Sales Performance Management (SPM), Aria Systems, billing software, invoicing
Revenue recognition standards for companies that use contracts are in the process of changing, as I covered in an earlier perspective. As part of managing their transition to these standards, CFOs and controllers should initiate a full-scale review of their order-to-cash cycle. This should include examination of their company’s sales contracts and their contracting process. They also should examine how well their contracting processes are integrated with invoicing and billing and any other elements of their order-to-cash cycle, especially as these relate to revenue recognition. They must recognize that how their company structures, writes and modifies these contracts and handles the full order-to-cash cycle will have a direct impact on workloads in the finance and accounting department as well as on external audit costs. Companies that will be affected by the new standards also should investigate whether they can benefit from using software to automate contract management or in some cases an application that supports their configure, price and quote (CPQ) function by facilitating standardization and automation of their contracting processes.
For most of the past decade businesses that decided not to pay attention to proposed changes in revenue recognition rules have saved themselves time and frustration as the proponents’ timetables have slipped and roadmaps have changed. The new rules are the result of a convergence of US-GAAP (Generally Accepted Accounting Principles – the accounting standard used by U.S.-based companies) and IFRS (International Financial Reporting Standards – the system used in much of the rest of the world). Now, however, it’s time for everyone to pay close attention. Last year the U.S.-based Financial Accounting Standards Board (FASB, which manages US-GAAP) and the Brussels-based International Accounting Standards Board (IASB, which manages IFRS) issued “Topic 606” and “IFRS 15,” respectively, which express their harmonized approach to governing revenue recognition. A major objective of the new standards is to provide investors and other stakeholders with more accurate and consistent depictions of companies’ revenue across multiple types of business as well as make the standard consistent between the major accounting regimes.
As I noted in a recent analyst perspective note the recurring revenue business model is gaining increasing use worldwide. Our recently completed recurring revenue benchmark research shows that companies are using this business approach because they find that it can convey a strategic advantage in creating additional sales opportunities, making future revenues more predictable, enhancing their customers’ experience and increasing customer loyalty. However, recurring revenue businesses have unique challenges, especially in finance and accounting departments because most ERP systems (the ones that handle the accounting function) are not designed to manage the specific requirements of a recurring revenue businesses.
Topics: SaaS, NetSuite, Recurring Revenue, Zuora, Billing, streaming, Customer Performance, Operational Performance, Business Performance, Cloud Computing, Customer Service, Financial Performance, Accounting, Aria Systems, billing software, Intacct, invoicing
Recurring revenue is a term applied to business models that involve three types of selling and billing structures: a one-time transaction plus a periodic service charge; subscription-based services involving periodic charges; or a contractual relationship that charges periodically for goods and services. Telecommunications was the first major industry to use it, but recently the model has gained popularity in others. It is a major trend in information technology as an increasing number of companies offer software and hardware technology accessed as a service through cloud computing. Recurring revenue also has been transforming the entertainment business, as customers subscribe to rent movies, music and other creative digital products instead of owning them; this is part of the so-called “sharing economy” whose social impacts are wide-ranging.
Topics: SaaS, NetSuite, Recurring Revenue, Zuora, Billing, streaming, Customer Performance, Business Performance, Cloud Computing, Customer Service, Financial Performance, Accounting, Aria Systems, billing software, Intacct, invoicing