3 Ways to Turn ASC 606 from a Burden into an Opportunity

4 min read

In our blog post, ASC 606 & IFRS 15: Revenue from Contracts with Customers, sales compensation expert Erik Charles broke down the major considerations companies should make when dealing with revenue recognition changes, including:
  • What is ASC 606 (IFRS 15)
  • What is Revenue Recognition and why sales and finance should care
  • How to manage amortization
  • How ASC 606 will affect your accounting and commissions practices

And that's just a few of the talking points in the blog. Reading through this detailed breakdown could give the impression that Revenue Recognition is more a burden to contend with rather than an opportunity to leverage. Sure, the ASC 606 will demand changes for compliance that will disrupt your processes. But mandatory disruption can be a good thing, allowing your organization to reexamine and optimize inefficient accounting processes.

With that said, below are 3 ways to leverage ASC 606 as an opportunity for long-term growth.

1. Capture the Data, Make Better Decisions 

Accurate, high-quality data is critical to ensuring compliance. With the right systems in place, companies will be privy to an unprecedented amount of data. Since a waterwall amortization schedule will be required for every line item, for each employee on variable pay, and on every contract companies will be creating an incredible amount of information. This is a blessing in disguise as it will provide sales and finance leaders with more data to make better decisions. That is if you're not managing commissions manually.

2. ASC 606 is a Great Reason to Automate Commissions 

If you're still managing commissions manually, the compliance needs of ASC 606 are a perfect reason to automate. Not only will your compensation admins and sales ops managers thank you for it, but finance can rest easy knowing that the chance of costly errors is significantly reduced. Successful finance teams realize that by automating processes based on real and predictive analytics leads to more profitable decisions for the entire organization.

3. Build Trust with Transparency

Business changes from M&As or legislation like ASC 606 denote risk for customers, prospects, and even employees. Change of any perceptible kind can alter the risk profiles of companies involved. Even poor quarters don't go unnoticed. So you can imagine the negative impact of improperly accounting for commissions under Rev Rec.
Under the new standards, companies are no longer only reporting on the state of the accounts receivable, but also the state of the companies themselves. The automation suggestion above ensures that finance teams are able to ensure consistent monitoring and communication. More transparency builds trust, which keeps costly turnover and churn low.

Key Takeaway

Introducing tools that streamline and automate commission accounting can turn ASC 606 from a burden into an opportunity to implement processes that reduce costs and spark growth.
Discover what else your organization can do to prepare for and maximize the return from ASC 606 in our Revenue Recognition executive guide.