Accurate revenue recognition is critical for businesses navigating complex financial regulations and industry-specific challenges. In this scenario, NetSuite’s robust capabilities in revenue management offer companies a structured approach to compliance with IFRS and ASC 606 standards. Now, as more organizations look to streamline their revenue recognition process within NetSuite, experienced advisors like CloudPaths have emerged as trusted Oracle partners that help NetSuite users in this pursuit.
According to Vijay Tripathi, Vice President of CloudPaths’ SuitePaths practice and a veteran in this space, the company’s mission is to deliver simple, scalable, and integrated NetSuite solutions tailored to client needs.
Revenue recognition challenges
Tripathi, who joined CloudPaths in 2022 to build its NetSuite practice from the ground up, heads CloudPaths’ NetSuite leadership. However, he points out that the company’s expertise extends to platforms like Salesforce, Concur, NSPB and Coupa and middleware solutions like those from Celigo and Dell Boomi, which enable seamless end-to-end solutions for CloudPaths’ customers.
Tripathi notes that companies, especially those with subscription-based and service-based business models, face ongoing and unique revenue recognition challenges, including:
- Allocating transaction price across multiple performance obligations: When selling bundled offerings with discounts or freebies, companies need to properly allocate the transaction price to different components like maintenance and support to comply with ASC 606 revenue recognition guidelines.
- Handling changes to multi-year contracts: This includes dealing with add-ons, upsells, or other changes to the original multi-year subscription contract.
- Recognizing revenue for mixed revenue streams: For companies with a combination of subscription and service revenue, it is important to properly recognize revenue based on milestones, time and materials, or subscription models.
- Accounting for foreign currency fluctuations: When dealing with global customers and multi-currency contracts, managing the impact of exchange rate changes on revenue recognition.
- Managing contract cancellations and credits: Handling scenarios where customers cancel contracts or dispute charges and the impact on previously recognized revenue.
- Providing visibility and audit trail with effective reporting: NetSuite reporting for both recognized and forecasted revenue with audit trail tying to the contract and product helps organizations in financial planning and accounting.
Tripathi emphasizes that while the Advanced Revenue Management (ARM) module in NetSuite helps address these complexities, it still requires a deep understanding of the client’s business and accounting principles, to implement effectively. This is where Tripathi and his growing team of around 20 consultants at CloudPaths have successfully assisted organizations across various industries.
Making a case for revenue recognition solutions
Tripathi shares some examples of how CloudPaths has helped various organizations overcome their NetSuite revenue recognition challenges.
“We ensured correct allocation of transaction prices across different performance obligations, especially when discounts or free items are involved for a subscription-based company with multi-year contracts,” he says. CloudPaths has also helped these companies align revenue recognition with ASC 606 guidelines, particularly for contract modifications, add-ons, or upselling, and manage contract cancellations efficiently by stopping revenue recognition and billing as needed.
Giving an example of how CloudPaths has helped a software and services company, Tripathi highlights that their solutions assisted the company in managing revenue recognition for contracts that combine subscription and service components. “We also helped them with implementing rules for recognizing revenue based on milestones, time and materials, or straight-line models for subscription services,” he says. Tripathi adds, “Since the company had a large geographical footprint, our solutions addressed foreign currency fluctuations impacting revenue recognition for global businesses.”
CloudPaths’ approach to resolving revenue recognition challenges for a media customer was slightly different because of the unique nature of the business. “We leveraged NetSuite’s Advanced Revenue Management module to handle intricate revenue allocation and recognition. Additionally, we configured the system to process revenue based on unique contractual terms like termination for cause, performance obligations, and billing models,” Tripathi explains.
Tripathi notes that what sets CloudPaths apart is its customer-centric approach. “Our team focuses on understanding each client’s business model, industry-specific challenges, and regulatory requirements,” he says. “By aligning these factors with NetSuite’s capabilities, we deliver tailored solutions that improve accuracy, compliance, and operational efficiency.”
What This Means for ERP Insiders
Leverage expertise for compliance. Utilizing NetSuite specialists ensures that businesses remain compliant with revenue recognition standards such as IFRS and ASC 606 while optimizing financial processes. With CloudPaths as an expert partner, businesses can simplify revenue recognition, reduce compliance risks, and enhance financial reporting within NetSuite.
Tailored solutions drive business success. Understanding industry-specific challenges and customizing ERP implementations results in scalable and effective financial management. For example, SAPinsider research shows organizations are beginning to leverage advanced capabilities like AI and automation in their financial processes. If used correctly, these tools can help accomplish essential tasks, maximize efficiency, minimize errors, and allow finance and accounting teams to spend their time on other important work.
Utilize solutions that integrate across systems. A holistic approach that incorporates NetSuite with platforms like Salesforce, Concur, and middleware solutions improves operational efficiency and data accuracy. Thus, companies like CloudPaths ensure clients receive a comprehensive, scalable solution for their revenue management needs.
