Subscription businesses face unique accounting challenges, particularly around revenue reporting. Traditional methods of tracking and accounting for revenue are inefficient and error-prone. And ASC 606, first introduced in 2017, only further complicates the process.
If you’re a finance and accounting pro at a subscription business, you’re already familiar with these challenges and pains. But you may not know how new finance technology solutions are helping teams meet – and beat – these challenges.
This blog post summarizes the key takeaways from our recent webinar, 3 Things Subscription Businesses Gain with Accounting Automation – and 3 Big Things They Lose. Prefer to learn through video? Watch the webinar on-demand now.
Three pains of revenue reporting
- Tracking revenue data: Businesses often use multiple payment providers, leading to scattered and inconsistent data. From provider to provider, data and report naming conventions are different, as are column labels and field formats. All of these differences and nuances mean accountants have to spend time manually manipulating the data in order to consolidate and verify it.
- Agonizing manual processes: And how do accountants manually manipulate their data? They rely on massive, unwieldy Excel spreadsheets (or Google Sheets). Painstakingly, they go row by row, transaction by transaction, to standardize formats, remove unnecessary and irrelevant information, combine, standardize, look for errors, inconsistencies, gaps, etc. Even with the help of VLOOKUP and other macros or scripts, this work is mind-numbing, tedious, and repetitive. It leaves the door wide open for errors and increases audit complexity.
- Increasing workloads: The demands of revenue reporting and month-end close are already high. New regulations, economic volatility, new business models and evolving revenue strategies are adding to the workload of accountants, making manual processes even more unsustainable than they already were. And adding urgency and pressure to an already stressful situation. It’s time to hit the pressure release valve!
The importance of automation
Automation is a proven, reliable solution for the challenges of managing data tasks at scale. And accounting automation is purpose-built to address the nuanced revenue reporting needs of subscription businesses. The best part is that accountants now have access to proven, reliable, and affordable accounting automation tools.
Three things accountants gain with accounting automation
- Manageable data in a single place: Automation consolidates data from multiple sources and standardizes it for easier comparison and reporting. A dozen spreadsheets every month isn’t a badge of honor. You deserve a source of truth system that’s purpose-built for finance and accounting’s monthly revenue projects. That stands in stark contrast to general-purpose data lakes or warehouses that don’t distinguish between revenue transaction data and literally any other type of business or customer data.
- Connected dots of critical data: Automation systems link related transactions, providing end-to-end visibility, and simplifying processes like refunds and disputes. Every month shouldn’t be a treasure hunt to track down relationships between transactions. Your revenue picture should be clearer. And your team (and your auditors too) demand and deserve an easier experience tracing the details of your revenue.
- Uncomplicated complexity: Automated systems break down complex processes into manageable steps. For example, with deferrals, a tool like Leapfin enables you to accurately record revenue at the moment it’s earned, rather than based on the monthly-close. Particularly with regulations like ASC 606, ensuring accuracy and timeliness is critical.
Three things accountants lose with accounting automation
Spoiler alert: these are things you definitely won’t miss.
- Tedious manual tasks: Automation eliminates repetitive tasks like downloading reports from PSPs, manually aggregating data in Excel or Google Sheets, and standardizing dozens of fields and columns and then spot-checking hundreds or thousands of rows. This is work that takes some accountants 60 hours a month (or more) every single month.
- Damaging and embarrassing errors: Accounting automation reduces the likelihood of errors commonly found in manual processes. And if errors are found, it flags them so you can investigate and quickly correct them. Automation = speed and accuracy.
- Stress: Automation takes the burden of high-pressure tasks and monthly milestones off of accounting’s shoulders. It frees up time for accountants to focus on value-add, strategic projects rather than mundane, error-prone activities that are, frankly, beneath your knowledge and abilities.
How to assess if you’re ready for accounting automation
“How do I know if I need accounting automation?”
This is a question we get all the time. Finance and accounting operators and leaders want to know if automation is a fit for their business and team. And they want to know when the right time is to adopt accounting automation.
Our 11-point automation readiness questionnaire helps you answer these questions. At a minimum, it helps you see if you’re ready to have a conversation and learn more. The questionnaire asks questions like:
- Are you hitting growth mode or planning to go public?
- Do you feel increased pressure to close books and provide revenue insights faster?
- Are you spending too much time wrangling revenue transaction data from Stripe, Shopify, Adyen, Apple Pay, Google Pay, Braintree, etc. – and even more time trying to get it all into NetSuite?
See all 11 illuminating questions here.
How to build a business case for accounting automation
If it’s already painfully clear to you that your team needs accounting automation, your next challenge may be convincing stakeholders to support the investment. To do this, you’ll need to build an effective business case.
Keys to a successful business case for accounting automation include:
- Clearly articulating your challenges and the opportunities accounting automation can unlock
- Anticipating stakeholders’ questions and priorities and preparing the right info and data
- Framing up the trade-offs and opportunity costs of maintaining the status quo and/or the build vs buy conversation
- Considering the overall impact to the business including other departments (e.g. fewer demands on data/engineering teams or colleagues)
Use these helpful resources to start building your business case: Blog Post | Webinar Recording
Leapfin’s role in automation
Leapfin transforms your messy transaction data into beautiful, balanced journal entries and summaries for your general ledger and ERP like NetSuite or others.
Here’s how Leapfin works:
- It connects to all of your revenue data sources (PSPs, order management tools, billing systems, and home-grown systems) and automatically downloads the data needed
- It applies logic to normalize and standardize the data
- It enriches transactions with things like product tags and automatic currency conversion
- It links related transactions together like invoices, returns, payments, disputes, and more.
- It applies curated and customizable accounting rules to ensure compliance with GAAP, SOX, ASC 606 and any other internal policies or industry regulations.
- It gives you the ability to properly lock periods for immutability and a fully traceable audit trail.
- It turns all of your revenue data into clean journal entries and summaries
Conclusion
If you are at a high-volume business, the business case for automation is strong. In fact, you may learn that your leadership is already supportive – they just need to hear that you and your team have challenges that can be solved, and that you’re ready to solve them now.
Ready to learn how Leapfin can help you? Get a personalized demo and see how Leapfin works using your own data.
