Software Arrangements Revenue Recognition Best Practice Business Process

Transcription

1 Software Arrangements Revenue Recognition Best Practice Business Process Na ama Drukman ERP Consulting Leader

2 Agenda The Industry Revenue Recognition Challenges The Customer & Project Goal Oracle Projects Suite Revenue Recognition Solution Slide 2

3 The Industry Software industry challenges: Delivery through projects of different length and complexity Multiple components arrangements including: - Licenses - Services - Maintenance Complex revenue recognition methods Slide 3

4 Revenue Recognition Challenges Revenue Recognition method is decided using many considerations, including: Different types of arrangements require different handling of revenue recognition VSOE (Warranty handling) Different types of deliverables: - Software License - Software Enhancement - Services - Maintenance Slide 4

5 The Customer Global Financial Software Solutions Company Leading provider of financial technology - banks and corporations Clients in the Americas, EMEA, and Asia-Pacific Software, license and Services Constant growth through mergers and acquisitions Slide 5

6 The Customer Implementation Goal Revenue Recognition eliminate manual accounting processes reduced billing time reduced Period End & Reporting Time accuracy of revenue processes Slide 6

7 Customer Requirements Slide 7

8 Oracle Projects Suite Oracle Projects suite enables separate billing and revenue schedules: Billing Event Draft Revenue Draft Invoice AR Invoice Revenue Journal Entries (GL) Invoice Journal Entries (GL) Slide 8

9 Revenue Recognition Solution The solution incorporates the following methods: Billing & Revenue Methods Percent of Completion Time and Materials Upon Delivery Prorated (Non-Software Arrangements) Carried Out Using Oracle Project Billing Extension Oracle Project Billing Standard Functionality Project Contracts Service Contract Taking VSOE Into Consideration Slide 9

10 Revenue Recognition Methods Percent of Completion Using Oracle project billing extension, revenue is recognized using the following calculation: RRRRRRRRRRRRRR TTTT RRRRRRRRRRRRRRRR = AAh TTTT TTh RRRR Ah - Actual Hours Invested Derived from employees time sheets Tr - Total Estimated Revenue Entered as Project Revenue Budget Th - Total Estimated Hours Entered as Project Cost Budget Rr - Revenue Already Recognized Previous events created Slide 10

11 Revenue Recognition Methods Percent of Completion PoC Solution abilities and requirements: Abilities: - Revenue Can be recognized for each component separately - If estimations are changed revenue amount will change accordingly - Project Revenue can be altered manually within projects module with no effect on the calculation Requirements: - Ability to set each component's revenue (VSOE) - Ability to estimate the progress towards completion Slide 11

12 Revenue Recognition Methods Time and Materials In Time and Materials agreements, standard Oracle project billing functionality is utilised Revenue is recognized based on hours performed and bill rates Billing Rate Schedules (Hour and Expenses) should be set; Override of rate schedule is possible: - Per Employee - Per Job - Per Day - Etc. Slide 12

13 Revenue Recognition Methods Upon Delivery Fixed Price arrangements in which revenue is recognized upon delivery: Using Standrd Oracle project contracts functionality, Oracle Projects revenue event is created from Project Contracts Module. Project Contract may contain multiple rows Each row can contain multiple deliverables Revenue event is created per deliverable (Deliverable based billing) Slide 13

14 Revenue Recognition Methods VSOE Considerations Using Oracle project billing extension, revenue derived form warranty component is reduced from the total revenue and recognized throughout the warranty period. Warranty amounts are reduced and recognized automatically based on: Warranty Ratio Warranty Period Total Estimated Revenue Slide 14

15 To Conclude Using Oracle Standard tools we were able to provide a comprehensive solution Flexible yet Methodical Rapid yet Systematic Comprehensive yet manageable Automated yet Controlled Slide 15

16 Thank You Na ama Drukman ERP Consulting Leader Rony Zucker Kesselman & Kesselman. All rights reserved. In this document, refers to Kesselman & Kesselman, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. Please see for further details. helps organisations and individuals create the value they re looking for. We re a member of the PwC network of in 158 countries with more than 180,000 people. We re committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.