Revenue recognition presents various challenges and complexities for growing companies, especially those dealing with various sales agreements and recurring revenue streams. NetSuite Revenue Recognition – sometimes called NetSuite Rev Rec - offers a comprehensive solution that automates and simplifies these processes, ensuring compliance with accounting standards while introducing efficiency and accuracy to the entire process.

What is the NetSuite Advanced Revenue Recognition module?

NetSuite Advanced Revenue Recognition is a NetSuite module that automates revenue scheduling, allocation, and reporting. Businesses can utilise NetSuite Revenue Recognition to create specific recognition rules for each product or service and link them to individual contract line items. This both ensures compliance with various standards and makes it easier for finance teams to manage complex contracts and generate accurate financial statements.

Let’s take a look at the high-level capabilities and benefits before moving on to the specific features and some specific scenarios where NetSuite Revenue Recognition becomes particularly critical.

The key capabilities and benefits of NetSuite Revenue Recognition

Revenue policy automation

What it does: Easily manage exceptions by holding revenue, updating schedules, or making other changes. This gives finance teams the flexibility to adapt to changing circumstances without disrupting their revenue recognition processes.

Automate planning

What it does: Saves time and reduces errors by automating the planning process. Finance teams can automatically schedule revenue recognition based on predefined rules. Re-usable Revenue Rules govern the triggers and duration of revenue plans.

Automate unbilled revenue recording

What it does: This capabilityautomatically identifies and records unbilled revenue elements automatically to streamline the closing process and ensure all revenue is accounted for.

Support multi-currency transactions

What it does: The module accounts for exchange rate fluctuations in each period. This is particularly beneficial for financial accuracy and compliance in global operations, protecting businesses from currency risks.

Manage balance sheet accounts

What it does: The module automatically adjusts contract liability and asset balances based on real-time data. By reflecting the true financial position of the business, the accuracy of financial statements is greatly enhanced.

View financials in real-time

What it does: NetSuite Revenue Recognition can be set up to post to the general ledger from Revenue Plans as frequently as needed. With the most up-to-date financial information, financial teams are better positioned to make informed decisions, particularly when it comes to financial planning.

Flexible forecasting

What it does: Users can update revenue projections based on real-time events, such as project plan updates. This improves forecast accuracy, helping businesses plan more effectively and adjust to market changes.

Specific features of NetSuite Revenue Recognition

Allocations | Define standalone selling prices and allocate revenue across contract elements using user-defined rules. This ensures accurate and consistent revenue allocation, reducing the risk of audit issues and financial discrepancies.

Rules & Schedules | Build performance obligations, project milestones, and other triggers into revenue plans. This ensures revenue is recorded accurately and finance is supported for various recognition approaches and compliance with standards.

Revenue Plan Management | Modify revenue plans individually or in bulk, with automatic updates, making revenue management more efficient and reliable.

Forecasting | Create forecast plans automatically and update projections based on actual revenue. Finance teams gain can improve forecast accuracy, and access more reliable data for strategic planning.

Reporting | Adjust deferred revenue and update contract balances automatically to streamline reporting processes, and ensure financial statements reflect the true state of the business.

Challenges solved by NetSuite Revenue Recognition

  • Process complexity: Automates revenue management to save time and minimise errors.
  • Inconsistent allocations: Standardises revenue allocation with predefined rules.
  • Reporting errors: Ensures accurate revenue recording through automated performance obligations.
  • Exception management: Modifies revenue plans to account for project holds and other issues.
  • Difficulty forecasting: Improves accuracy with real-time data and automated projections.

NetSuite Revenue Recognition in action 

Example scenarios: A security solutions company

Let’s look at a hypothetical security solutions company offering both products and services including security systems, installation services, and ongoing monitoring. With the business experiencing rapid growth, the complexity of managing revenue recognition had significantly increased. They implemented NetSuite including the NetSuite Advanced Revenue Recognition module to streamline these processes, at scale.

Example 1: Product and service bundles

The company sells a package that includes a physical security system, installation, and a year of monitoring services. With NetSuite Revenue Recognition, they can:

  • Automatically recognise revenue for the hardware at the point of sale, while scheduling revenue for installation and monitoring services over the contract period.
  • Set up rules to recognise installation revenue upon completion and monitoring revenue monthly.
  • Automatically track and record revenue for monitoring services even if invoices haven't been issued yet.

Example 2: Recurring revenue

The company also offers a monthly subscription for advanced monitoring services. Using NetSuite Revenue Recognition, they can:

  • Manage subscriptions for international clients, ensuring exchange rate fluctuations are accurately accounted for each month.
  • Adjust contract liabilities for deferred revenue, ensuring accurate balance sheets.
  • Post revenue from subscriptions to the general ledger automatically, providing real-time financial insights.

NetSuite Revenue Recognition offers one of the many ways financial teams can transforms how the businesses manages their finances with NetSuite. By leveraging these capabilities, financial teams have at their fingertips, tools to completely streamline the revenue recognition process, ensuring compliance with accounting standards and reducing manual workloads. Bringing together all the NetSuite revenue elements in a single module, gives finance the many advantages of accurate and timely financial reporting, enhanced financial visibility, and improved decision-making. And with the automation of complex revenue recognition tasks, their time is further freed up to focus on strategic initiatives that drive business growth and profitability.