With just over a year to go until new revenue recognition standards go into effect, public companies are committing significant resources to ensure they’re ready. Yet compliance with these comprehensive standards is no simple task. In fact, according to a recent PwC revenue recognition survey, 65 percent of respondents are still in the assessment phase and 22 percent haven’t even started.
Part of each company’s assessment process is determining if existing systems can support these new standards. If not, they could be in tremendous jeopardy, including not being able to accurately report financial results, missing the impending deadlines, and draining internal resources.
Changes to accounting regulation have been a consistent theme over the years. To adapt to these changes, companies have often relied on a hodgepodge of solutions and spreadsheets. But this approach won’t work for the new world of revenue recognition, and it is important companies have a technology foundation that supports them for years to come. Choosing to update legacy systems or select a bolt-on for the sake of meeting compliance deadlines is an ineffective use of time and money.
These rules are a catalyst for change and an opportunity for Workday to once again demonstrate how our flexible technology foundation helps customers stay ahead of regulation and remain focused on the future.
Why the Cloud is the Best Choice
We built Workday Financial Management knowing that today’s business environment is continuously changing and it’s critical for organizations to quickly adapt. Unlike legacy systems, Workday enables customers to better prepare for the new revenue recognition rules, helping them transition to meet the requirements without the frustration of challenging upgrades. Make no mistake—these rules are a catalyst for change and an opportunity for Workday to once again demonstrate how our flexible technology foundation helps customers stay ahead of regulation and remain focused on the future.
Here’s how we’re helping our customers prepare for new revenue recognition standards:
Assess and Review Contracts in One Place. With one system of record, customers can review contracts and compare how revenue was recognized in the original contract and under the new guidance, making it much easier to determine the impact. These comparisons can be difficult to do with legacy systems because contract details are often captured or stored outside of the finance system of record.
Test Scenarios Prior to Adopting a Strategy. According to the PwC Survey, 52 percent of respondents are still determining which method they’ll select. Workday enables customers to model different revenue scenarios and see the impact of the new standards prior to selecting a strategy—the full retrospective or modified strategy. For example, using the alternate contracts feature, customers can run “what if” scenarios, such as different performance obligations or revenue allocation methods in order to evaluate alternative views of historical contracts without impacting data integrity. With legacy finance systems, testing out different scenarios requires an exhaustive amount of time and manual effort, making it difficult for business leaders to review side-by-side comparisons.
Meet Dual Reporting and Disclosure Requirements. Without the right systems in place, organizations will have to rely on manual retrospective reporting, and consolidating and closing two different sets of books each month, quarter, and year leading up to the deadline. Workday’s revenue management capabilities allow customers to conduct retrospective and future reporting retroactively, saving significant time.
Ensure Compliance with an Always-On Audit Trail. We often talk about Workday’s always-on audit trail—it becomes especially critical when introducing change to your organization like transitioning to the new revenue recognition standards. Throughout the assessment phase, auditors will need to be able to audit the original and new transactions under the guidelines. With Workday Financial Management, dual reporting capabilities exist in one system, helping ensure that every transaction and change to it is tracked, simplifying the auditing process and resources required.
At Workday we pride ourselves on partnering with customers every step of the way, including understanding their evolving needs and how technology can help them adapt to change. While new revenue recognition standards can seem overwhelming, they don’t have to be if you have the right system in place.