Revenue Automation Brings Real-Time Accounting to Complex Business Models

Business models are changing at a speed faster than ever before. As companies become more customer-centric, merge, acquire and diversify, their underlying financial models grow more complex and difficult to manage. These evolving business models put a strain on revenue operations (RevOps) professionals, who increasingly must manage recurring (a.k.a. subscription) along with non-recurring revenue. For some, it leads to death from thousands of spreadsheets.

It’s not just RevOps that are impacted by this new normal of increasingly complex business models. The business IT team has to manage a growing number of disparate technologies and somehow integrate them as seamlessly as possible. If that doesn’t happen, the Financial Planning & Analysis (FP&A) and Sales Operations (Sales Ops) teams can’t correctly forecast revenue. And the C-Suite won’t have the right data and analytics at their fingertips to make educated decisions about their company’s future.

During a recent webinar hosted by PricewaterhouseCoopers (PwC) and Zuora, experts from the professional services and subscription management firms explored revenue accounting trends, including the use of automation software that enables organizations to continuously recognize recurring and non-recurring revenue in parallel with order and billing processes. No matter how simple or complex a company generates revenue, these experts emphasized the importance of accurate, real-time accounting. This helps measure a company’s health and customer behaviors. A company that is not in tune with customers treads on slippery ground.

The Market Trends Impacting Revenue Accounting

Some key data points pulled from the most recent PwC CFO Pulse Survey that helped illuminate the direction market trends are headed for revenue automation.

“According to our survey, 63% of CFOs plan changes to products and services,” said Don Sobczak, Partner, Revenue Automation at PwC. “What we are noticing is that due to COVID and the changing environment, CFOs are looking to find ways to get products out to market faster. Whether it is subscription-based or users-based, they are looking to make changes to be more productive and grow revenue.”

Some CFOs are looking towards technology solutions to be the differentiator that will give them an advantage in the marketplace, according to Sobczak.

“As businesses try and reinvent themselves, nearly one-third of CFOs look to tech-driven products and services to drive growth,” he said. “Today, they may have a lot of manual processes and have trouble being agile and getting products to market fast. They are looking to do this through tech enablement.”

It is the ability to adapt and scale technologically, through being flexible and agile operationally, that CFOs see as the key to meeting the challenges of an unpredictable future.

“73% of CFOs believe that flexibility and agility are key to making their companies better in the long run,” Sobczak said. “To do this holistically, technology is going to be a very key driver,” he said.

He believes the growth of subscription business models is driving the need to automate revenue accounting more, as this recurring revenue is creating a need to track differently.

“If you are a ship-and-build-type company, you won’t have a lot of needs for variations and contract modifications,” he said. “But as you look for ways to move towards a subscription-based business model, you have to track it differently and account for it a little bit differently. Look to automation tools to track your revenue.”

Something that cannot be ignored during the process to automate revenue accounting is the need for clean data that can be automatically extracted and analyzed.

“Data is key to streamlining the revenue process,” Sobczak said. “As you pull data through the systems, you want to make the data as seamless and streamlined as possible, since you don’t want to manually extract data and load it.”

In the end, while the right technology solution can provide the foundation needed to automate revenue accounting, a cross-functional collaboration between leadership, revenue, IT and financial planning and analysis (FP&A) must be achieved for success.

“Finally, cross-functional collaboration is needed to put a revenue-centric solution in place so they don’t have to do the manipulation at the end.”

Impact on the organization

The move towards a subscription-model requires a different way of thinking from every group in the company, not just IT or RevOps, according to Vaibhav Mahajan, Revenue Automation Specialist for PwC.

“Changing of business models often results in significant operational and compliance risk across the entire organization,” Mahajan said.

Since a subscription model impacts and cuts across several key groups, from RevOps to the CFO, this enhances the greater need for collaboration across the organization.

“For a RevOps manager, the impact could result in a significant amount of time fixing data issues resulting in a long period close cycle,” said Mahajan. “This may include late nights, last-minute reviews, and difficulty recognizing recurring and non-recurring revenue.”

For an IT director, the impact could be the need to integrate disparate systems or the challenge of maintaining and customizing financial, operational, and customer systems. For a CFO, the impact could be the confidence of providing numbers to the board.

“Manual processes result in tedious controls to mitigate risk, so the CFO should be looking toward automation processes to help them,” Mahajan said.

Streamline with ZUORA Revenue

The need to have a system that automates the end-end revenue accounting process, from identifying a contract all the way through the revenue recognition and reporting, is on the top of the wish list for clients and prospects, according to Laz Pastrikos, Director, Revenue Advisory of Zuora.

Pastrikos explained how organizations can use the Zuora Revenue service to automate all aspects of the revenue accounting process in real-time. It is designed to automate the 5-step process, in order for revenue to be recognized in compliance with revenue recognition standards. It can group multiple sales orders into one revenue contract or determine the timing of revenue.

“This automation has allowed our customers to cut days, and sometimes weeks, off of their month-end close process, transforming them from a reactive to a proactive team,” he said.

Brian Carlson is a contributing writer. He is Founder of RoC Consulting and was Editor-in-Chief of CIO.com and EE Times. Follow him on Twitter @bcarlsonDM.

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