How Can you Make Better Judgement Calls When it Comes to Revenue Recognition?

The effective date of the new revenue recognition guidance is, at long last, here. CFO Magazine’s recent article, How Risky Are New Revenue Recognition Rules?, says “at some point after that, we’ll begin to see whether the new standard’s principles-based methodology is working as intended.”

The article points out that there are some judgment calls that must be made when it comes to the new revenue recognition rules.

Elements of judgment reside in each step of the new standard’s five-step process, according to CFO, including:

Step 1: Identify the contract(s) with customers. The collectability of consideration in a transaction is a concept that requires judgment in both the current and new guidance. Under the new guidance, collectability will be addressed in the determination of whether a contract exists, rather than whether revenue can be recognized. While the concept of collectability is not new, the judgments used to assess it will now be necessary at the outset of the revenue recognition process.

Step 2: Identify the performance obligations within the contract(s). Identification of performance obligations will be less restrictive under the new guidance and, therefore, contracts may have fewer performance obligations to be accounted for separately. The determination of these performance obligations will also require increased application of judgment.

Step 3: Determine the transaction price. The transaction price under the contract(s) involves a number of judgments, including consideration of variable and non-cash factors. Under the new guidance, entities will determine variable consideration by estimating either the “expected” value or the most likely amount in a range of possible amounts. As variable consideration will be based on an estimate, the timing of revenue recognition may be accelerated upon implementation of the new standard as compared to the more formulaic recognition of multiple elements over time, as currently required.

Step 4: Allocate the transaction price to the performance obligations in the contract. To allocate an appropriate amount of consideration to each performance obligation, an entity will now determine the stand-alone price at the outset for the goods or services. As stand-alone selling prices can be calculated or estimated in numerous ways that may require significant judgment, revenue recognition may be accelerated under the new guidance, particularly when compared to the current allocation methods.

Step 5: Recognize revenue when (or as) a performance obligation is satisfied. Under the current guidance, the percentage-of-completion method is generally used when recognizing revenue for contracts. Under the new rules, revenue is recognized when, or as, control of the asset is transferred to the customer. The determination of when control is transferred is often a matter of judgment, and will require consideration of when obligations are satisfied.

How will you make judgment calls when it comes to these new rules?

U.S. filers are expected to adopt the new accounting standards their first reporting period after December 15, 2017. For most companies, financial statements released in 2018 will be the first in compliance with ASC 606. To ease the transition, the Boards allow filers to use practical expedients in their application of the new accounting standards and choose between two adoption methods (full- and modified-retrospective).

To learn more about the new standards, check out our ebook: Revenue Recognition Do’s and Don’ts.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions. From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions. Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

Is your Digital Transformation the Christmas present you thought you wanted and got, but it sucks?

Digital transformation is one of the hottest topics when it comes to IT lately. In a recent CIO article, 7 Digital Transformation Myths, several business and IT people were interviewed, including Dan Doggendorf, VP of business operations and CIO for the Dallas Stars NHL hockey team. He says to avoid a digital transformational fail, you should take the advice author Stephen Covey has about “beginning with the end in mind. Otherwise, you’re just spending money on new cool toys. It’s the Christmas present you thought you wanted and got, but it sucks.” 

Has this ever happened to you? You were dying for a Hatchimal but were disappointed after you opened it on Christmas morning? Ok, maybe not. Or the Xbox One X…ok, that sounds pretty awesome.

The article goes on to say that a successful digital transformation can deliver significant rewards. But these common misconceptions can undermine your company’s ability to achieve desired results. These are the most common myths:

Myth No. 1: Digital transformation is an IT function

I agree that this is a myth. We recommend that our clients involve more functional and operational business units than just IT in a digital transformation. To truly transform your business, you must have buy-in from all departments.

Myth No. 2: True transformation is a blue chip’s journey

We have solutions for businesses of all sizes and find that even the smallest company can successfully transform their business with Microsoft Dynamics.

Myth No. 3: Digital transformation is about reducing the workforce

People are nervous that they will be replaced by machines with all of the machine learning and IoT that’s out there now. But, as it says in the article, I think companies are seeing the opposite: The more automation and data analytics that organizations put in place, the more human beings are needed to drive the algorithms and understand what’s happening in complex buildings or manufacturing plants.

Myth No. 4. Digital transformation is all about the technology

The article says that a digital transformation is not just all about the technology, but invest[ing] in building the right culture, and also in the transformation of the IT function, including new skills and partnering opportunities.

This is where you must think about new and better ways to delight your customers. Microsoft Dynamics 365 for Sales and Customer Service empowers sales, marketing and customer service with insights to personalize relationships, predict customer needs, and increase sales.

Sales-630X472

Myth No. 5: Executive buy-in is a sure thing

You can’t always count on executive buy-in, and if executives are not fully on board with your project, it won’t be successful. Involve executives in digital transformation meetings from the get-go.

Myth No. 6: Digital transformation brings IT-business harmony

It’s not always harmonious when business people and IT people are in the same room. That’s what we are here to help with. SBS Group has a streamlined approach that ensures everyone is operating from the same blueprint, helping you realize business value faster.

Myth No. 7. The digital journey ends at implementation

Often companies believe go-live is when their digital transformation ends, and this simply isn’t true. Without regular check-ups, training, and re-training, there is a danger of low user adoption and a wasted IT budget. SBS Group’s E3 system integrates strategic planning, ERP and CRM, Business Intelligence and Analytics together, enabling the entire organization to create, communicate, measure and manage plans, objectives, and initiatives at the organization, team, and individual level.

I hope that you don’t fall into the trap of these digital transformation myths this holiday season. Let us know if you have a concern about any of the seven above and we can help. Join us for one of our upcoming webcasts where we talk about how Dynamics 365 can help.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions. From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions. Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

 

SBS Group and Socius to form Velosio

Leading Microsoft partners combine to create a business platform that unites world class people, products and companies to deliver solutions in the cloud.

EDISON, N.J. (PRWEB) DECEMBER 15, 2017

Representatives from SBS Group and Socius announced this week that the two companies will form a new entity—Velosio. Velosio will be among the largest privately-owned Microsoft partners in North America having 4,000+ clients with more than 300 employees and 150 affiliates. As leaders in the manufacturing, agricultural, distribution, healthcare, and professional services industries, SBS Group and Socius have established a broad portfolio of technology and software solutions for sales, marketing, finance and operations.

Velosio will be led by the executive teams of both organizations and will focus on leveraging its vast experience across the Microsoft Dynamics portfolio including Dynamics 365, Dynamics GP, NAV, and SL. Combined, the entity supports the largest installed base of Dynamics clients in North America. Beyond its portfolio of solutions and clients, Velosio will be the largest Microsoft Master Value Added Reseller (VAR) for Dynamics. The companies will combine their Master VAR programs into a new single offering which brings together the entire Dynamics portfolio, the Office 365 family, and Azure services along with a rich suite of supporting services to assist Microsoft Partners in growing their businesses.

Jim Bowman, Chairman of Velosio said, “The company we are creating is one of a kind.  It’s a business platform where we are bringing together the best teams, products and methodologies to fundamentally improve the experience of our clients, employees and partners.  For our clients we are simplifying the cloud and delivering value quickly and predictably.  For our employees, we are providing a challenging and empowering environment.  For our partners, we are accelerating their growth and assisting in their own digital transformation.”

Jeff Geisler, CEO of Velosio added, “Our sole purpose is to help middle market businesses understand and take advantage of the significant shift we’re seeing around technology and business transformation. We now have a single team whose capabilities and experience with cloud technologies including Dynamics 365 are second to none. I’m very excited about what we’re creating at Velosio and the possibilities this provides our clients — and we are just getting started!”

About SBS Group: SBS Group is a Microsoft Master VAR and Indirect Cloud Solutions Provider specializing in Microsoft Dynamics solutions and services for companies of all sizes. With thousands of Dynamics customers and offices across North America, SBS Group is a recognized leader in Cloud, ERP, CRM, productivity and business intelligence solutions. SBS Group is headquartered in Edison, NJ and has been a technology innovator for over 30 years. http://www.sbsgroupusa.com

About Socius: As a Gold Certified Microsoft Partner, Microsoft Dynamics Master VAR, Sage Authorized Partner, and NetSuite Partner, Socius represents the most trusted accounting, enterprise resource planning (ERP), customer relationship management (CRM), and business intelligence and analytics technologies on the market. Backed by over 30 years experience, Socius serves clients throughout the U.S. from its headquarters in Columbus, Ohio, and its 28 additional locations. http://www.socius1.com

Socius and SBS Group have long been among the top 1% of Microsoft Dynamics Partners worldwide.

 

For more information, contact:

Cody R Aufricht

cody@ontrackcmo.com

817 821 6824

Are you at Risk of an Epic Digital Fail? 3 Ways to Avoid it.

You want to get the most out of your business technology investments. But are you at risk of an epic fail? A recent CFO Magazine article focused on just that. The biggest reason for a digital fail: companies neglect the very parts of their business that have the greatest impact on revenue generation — namely value creation and monetizing for that value. Instead, they focus on reducing costs, improving operations, or aggressive pricing to keep up with the competition.

Instead, CFO Magazine says, companies must focus on these three areas:

  1. Unlocking new value
  2. Building pricing power
  3. Improving customer segmentation and sales tactics

Let’s break it down and talk about how Microsoft Dynamics 365 for Sales can help in these three key areas:

1. Unlocking New Value to Reach More Consumers and Open New Markets

The CFO Magazine article says digitalization is not just an upgrade to maintain competitiveness or improve efficiency. Most companies overlook how digital technologies can be applied to reach more consumers and open new markets.

In a previous BLOG we talked about how LinkedIn Sales Navigator for Microsoft Dynamics 365 can be used to further relationship sales. Microsoft’s acquisition of LinkedIn has brought new and exciting integration and opportunities for the sales users within Dynamics 365 via Sales Navigator.  Finding the people/firms that you want to do business with and effectively managing those opportunities within Dynamics 365 is within reach. You can utilize common contacts within LinkedIn to build better relationships with your prospects, and reach more potential prospects. Not only will Dynamics 365 allow you to build relationships, but you can manage relationships at scale without dropping the ball.

2. Building Pricing Power

Digitalization is often accompanied by more intense pricing pressure due to increased competition, price transparency, and customers’ power to negotiate. Companies must have the discipline to refrain from engaging in price wars, which has a detrimental effect on margins.

Don’t get into a price war with your competitors. Microsoft Dynamics 365 for Sales helps you competitively price your products with advanced algorithms, artificial and predictive intelligence, and bots. You can also increase sales by adding related products as suggestions for up-sell, cross-sell, accessories, or substitutes. You can define related products within Microsoft Dynamics 365 for Sales to help your sales agents with their recommendations to customers.

The related products are displayed as suggestions to your sales agents during opportunity or order management. These suggestions help your sales agents recommend related products and bundles/kits to the customers, and increase product sales.

3. Improving Segmentation and Sales Tactics

To stay competitive, companies must become customer-centric organizations and develop a multi-dimensional and sophisticated understanding of their customers’ needs, behaviors, and most importantly, their willingness-to-pay. More effort is needed to harness digital technologies and behavioral science to support advanced customer segmentation, personalization, and customer experiences that resonate.

Microsoft Dynamics 365 for Sales helps you segment customers and prospects to ensure that they receive the right communication from you at the right time. You can better understand the customer journey by composing role-specific visualizations that bring together customer profiles, interactions, metrics, inferences, and predictions.

Microsoft Dynamics 365 customer segmentation

Segment customers and anticipate customer needs with Microsoft Dynamics 365 for Sales.

Digitalization can free up the sales force and help them engage better with the right customers.

Microsoft Dynamics 365 for Sales lets you manage all your customers and deals right in Outlook. You can prioritize your daily activities and take the right steps to close more sales. Your team can follow up on leads and opportunities from anywhere using mobile apps.

Don’t let your technology projects become a big digital fail at the end of the day. Do you have more ideas about how to avoid an epic fail? Drop me a line on LinkedIn and let me know.

Sincerely,

Joe Gulino
Director of Corporate Account Sales, SBS Group

About Joe
Joe Gulino has spent 30 years growing and running mid-sized ERP and CRM consulting organizations. Recently, he has focused his career on helping large and mid-sized services companies select, procure and implement ERP and CRM solutions. He has experience in several industries including manufacturing, distribution and professional services.
joegulino
Today, Joe serves SBS Group customers in his role as Director of Corporate Account Sales where he helps customers solve business problems using Microsoft Dynamics 365 technology. Joe holds a B.A. in Business Administration and Computer Science from Rosary College, and is based in Naperville, Illinois.
https://www.linkedin.com/in/joe-gulino-0a0ba72/

ASC 606 and IFRS 15: Are you Ready for New Revenue Recognition Rules?

We don’t want to add more to your to do list as things get busy around the holidays, but this is important! By now you’ve heard about the new rules governing revenue recognition for companies that will go into effect on January 1, 2018 for public companies, and January 1, 2019 for private firms. To recap, listen in to our podcast where I speak with Microsoft about the details.

ASC606 Overview

The Accounting Standard Codification 606, or ASC 606, made its debut in May 2014. It is an industry-neutral revenue recognition model designed to increase financial statement comparability among companies and industries. The objective is to decrease complexity involved with the current models for revenue recognition.

As a result, the new unit of account for revenue recognition is the obligation of a good or a service at the time it is delivered.

The Financial Accounting Standards Board (FASB), which administers Generally Accepted Accounting Principles in the U.S. (US-GAAP) has issued ASC 606, and the International Accounting Standards Board (IASB), which administers International Financial Reporting Standards (IFRS) used in most other countries, has issued IFRS 15. Both will enforce similar, fundamental changes to the revenue recognition process for any company that depends on complex contracts in their dealings with customers.

How do I know if my company will be impacted by ASC 606 and IFRS 15?

Businesses that have multiple components (e.g., product, services, warranties, etc.) in a single contract are the most impacted. If your firm permits changes to active contracts (e.g., adding a sports package to your cable TV contract), they are impacted. If the timing of when your firm pays commissions differs from when the products and services are delivered, then your firm is impacted. Cellular phone companies, software firms and many other kinds of companies will be impacted – some far more so than others.

 

 

Not Managed by Microsoft Dynamics out of the Box

Microsoft Dynamics does not manage these new standards out of the box. Companies running Dynamics GP, NAV, AX, or 365, must take all of their revenue outside ERP, process these complex calculations to figure out what they can recognize today versus what is deferred, and then bring those back in as manual journal entries. Before you start using Excel for this, consider using AXIO for Enterprise Firms, and Progressus for Small to Medium-sized Firms in addition to Microsoft Dynamics.

We wish you the best of luck with these new standards. Please let us know if you have any questions, and Happy Thanksgiving!

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

 

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