As financial leaders of companies, driving growth is the goal behind almost every action CFOs make. It can also pose as one of the biggest challenges, especially when you’re having to cut costs. The new Revenue Recognition ASC 606 (IFRS 15) guidelines have zeroed in on commission expense amortization, which can potentially complicate the matter further.
The role of the CFO is becoming more growth oriented, which means CFOs are helping drive sales planning and incentive compensation, alongside sales operations and sales leaders. With new regulations and a push towards digital financial data, CFOs are facing new challenges to secure their company’s data and build accurate forecasts.
In our webinar with CFO Alliance, Xactly CFO Elizabeth Salomon discusses how modern CFOs are changing the way they view incentives and their growth strategies, all while remaining GAAP compliant. Below is a summary of what Elizabeth discusses in the webinar (register here).
Evolving Perspectives on Sales Incentives
In the past, most CFOs viewed commissions and sales incentives as an expense that should be driven down. This mindset is evolving–today, modern CFOs are beginning to view incentives as more of an investment and a way to strategically guide businesses towards profitable revenue and growth.
When you build incentive plans, the goal is to match incentives with overall business objectives, but upon examination, there are times where gaps can be found. It's important to dive into your incentive plan and ask if it is driving the right sales behaviors.
The Importance of Commission Expense Forecasting for CFOs
Commission expense forecasting (CEF) is vital for CFOs to achieve financial success, especially when it comes to accurate accruals. Without accurately forecasted commission expenses and anticipated costs, you are essentially running blindly into forecasts. Inaccurate forecasting can break the trust of the company CEO, board of directors, customers, and stakeholders.
Inaccurate forecasting makes it almost impossible to strategically plan for growth. With visibility into how commissions are going to look, companies can mitigate risk and refine accruals to help strategically drive the overall business.
Advice on Mastering and Gaining Compliance with ASC 606
Since its implementation for public companies in December 2017 (IFRS 15 went into effect January 1, 2018 for international companies), ASC 606 has challenged companies by changing the way they recognize revenue from customer contracts.
Companies must now gather more detailed data on each transaction that resulted in a commission payment. This can be extremely difficult for businesses offering services. However, many companies are now finding that the more detailed data can be used strategically to help analyze and improve incentive plans and drive growth in other ways.
Learn more about Xactly's acquisition of Obero and how ASC 606 data can help grow your business strategically here.