As seen in the Boston Business Journal
The accounting and finance industries have been abuzz with the recent changes to the Revenue Recognition standard.
This new standard has been in the works for almost 15 years and represents one of the largest changes in the history of accounting. As a result, many business owners are wondering, “What does this new standard mean to my business going forward?”
Revenue Recognition is a generally accepted accounting principle (GAAP) that regulates the conditions in which revenue is “recognized,” or accounted for. Revenue is typically recognized when a critical event takes place, and the amount of revenue is measurable. There are certain situations where exceptions may apply, as outlined by the guidelines.
Businesses across all industries will be impacted by the new standard, both in day-to-day transactions, and financial reporting perspectives. The new standard does the following:
The implementation of this standard will require the expertise of more individuals than just the finance and accounting departments. Almost every department in your organization will be affected by the new standard in one way or another, including the following:
Sales and marketing departments will need to learn new ways to evaluate and negotiate contracts. The sales force should recognize that there may be new opportunities for bundling products and creating new sales models, which could create prospects for structuring incentivized customer deals.
Business owners should establish an implementation strategy as soon as possible, involving all departments in the organization. Without input and involvement from all departments, implementation may take longer, be more cumbersome, and potentially lack attention to certain details.
This collaborative strategy should continue past the initial implementation stage to ensure that the best business decisions possible are made. Consult with your trusted financial and business advisors to get started, and keep them in the loop to ensure all of the necessary aspects of the new standards are taken into consideration.