Revenue Recognition can be one of the most time-consuming and difficult processes that a finance team will undertake. Complex business models which can be ever-evolving due to customer demands can result in complex contracts which are not always consistent. Layer that onto a changing accounting landscape which periodically introduces new standards for recognising revenue and demands from the business to be more aggressive with revenue recognition. You can then begin to see why the process becomes so time-consuming and risky.

 

NetSuite’s solution to this problem is the Advanced Revenue Management (ARM) feature. ARM applies rules to defined dates and amounts to create a revenue recognition plan that can be posted each month. The plans also help with revenue forecasting and should help you getting the most out of NetSuite. The benefits of ARM include:

 

• Automation of Revenue Processes – ARM automates various aspects of revenue management, including forecasting, recognition, reclassification, and deferral. This automation reduces manual effort, minimizes errors, and ensures consistency in revenue recognition practices.
• Rules-based Event Handling – The module employs a rule-based event handling framework, allowing businesses to define rules for revenue recognition. This flexibility enables customization to align with specific business requirements and industry practices.
• Complies with accounting standards – Advanced Revenue Management in NetSuite helps businesses adhere to accounting standards such as ASC 606 and IFRS 15. This is crucial for ensuring that revenue is recognised appropriately, especially in complex scenarios like bundled services or multi-element arrangements.
• Revenue forecasting – The Revenue Forecast Detail Report shows when deferred revenue is forecast to be recognised. This integrates with revenue plans and can refreshed easily. This aids in financial planning, analysis, and compliance reporting.
• Integration with Other NetSuite Modules – Advanced Revenue Management seamlessly integrates with other NetSuite modules, including Order Management, Advanced Financials, and SuiteBilling. This integration ensures a cohesive flow of data across different business processes.

 

 

 

How does Advanced Revenue Management work?

Advanced Revenue Management uses revenue arrangements, revenue elements and revenue recognition rules to create revenue recognition plans. This graphic shows how each of these items fit together.

 

 

 

Revenue Allocation is an add-on feather to Advanced Revenue Management. This feature supports the use of fair value pricing which is useful if the price of an item contains multiple components which may be valued differently for example. The revenue allocation module contains a fair value price list which defines a fair value for items. This fair value is then allocated to revenue in revenue arrangements.

 

 

What are the limitations of NetSuite Advanced Revenue Management?

 

Complex Implementation – ARM can be complex, especially for organizations with intricate revenue recognition requirements. Customization may be necessary, and the implementation process may require careful consideration of the company’s unique business processes.

Customisation Limitations – While NetSuite offers a high level of customization, businesses with extremely unique or complex revenue recognition needs may find limitations. This could lead to the need for workarounds or additional custom development.

Integration Challenges – Integrating NetSuite ARM with other systems and modules may pose challenges. This is especially true for businesses using third-party applications or legacy systems that need to seamlessly exchange data with NetSuite.

Learning Curve – Users may face a learning curve when adapting to the advanced features of NetSuite ARM. Training and support may be required to ensure that staff can effectively use the module to its full potential.

 

 

NetSuite Advanced Revenue Management is a very useful tool for codifying your revenue recognition process. Your finance team will need to change the rev rec process to fit the NetSuite process, but it is a tried and tested process, and it does work. Even for businesses with complex client contracts or revenue types, ARM can be customised to work for your business. Get in touch if you would like to speak about how ARM would work with your revenue streams.