Revenue recognition – and the finance team that applies it – often ends up being the bane of creative sales deals, seen as cramping the sales department’s ability to maximize the amount of money that they bring in the door. This is the natural result of the very different goals of finance and sales. Finance is responsible for adhering to the current guidance from the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), and for how new bookings move to the profit and loss statement. Sales, on the other hand, is focused on the sale – and any related incentives – and how much money is brought in based on the sale.
So, how can these two activities support each other? Or, at the very least, stay out of each other’s way? In the end, it’s finance that bears the responsibility, so it pays for finance to take the lead in developing processes that will help better align the two departments. There are things that can been done in the sales process – especially in the areas of agreements and negotiations – that will help ensure that revenue recognition won’t become an issue with that great new sales that the team just closed. However, it is equally important that these new processes don’t negatively affect a salesperson’s ability to sell.
If processes are in place that both support sales and ensure that revenue can be recognized, both departments can be more effective. This will require some upfront planning to get the correct agreements and processes in place so that revenue isn’t negatively impacted because of an “I” that wasn’t dotted or a “T” that wasn’t crossed.
If you’re interested in learning more about how to align your finance and sales departments around revenue recognition, be sure to check out our recorded webcast, “Structuring Software Sales Transactions for Optimal Revenue Recognition” with software revenue recognition expert Jeffrey Werner.
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