How ASC 606 Compliance Helps Your Company Prepare for IPO

April 1, 2021

Published by: chandrika

Taking a company public is hard.

The process of an initial public offering (IPO) is long and filled with painstakingly detailed requirements for teams of internal stakeholders.

The relatively recent establishment of ASC 606, the new revenue recognition standard to which all public companies must adhere, could make the challenge that much more daunting. 

However, if viewed with your big-picture lens, ASC 606 can actually help a company achieve that ultimate goal of IPO.

It’s not as if ASC 606, which requires alterations not only to the obvious candidates of accounting and finance but also IT, Sales, HR and beyond, snuck up on firms prepping to go public. Companies have had years to prepare for the seismic changes - new systems, processes and controls - required once the new standards came into effect.

The goal in implementing the new standard, the first to be adopted globally, was to simplify and harmonize revenue recognition practices. As a result, corporate organizations have had to completely re-evaluate when and how to account for their firms’ revenue. That has meant a serious deep dive by accounting teams into each and every contract to determine whether orders are booked correctly.

The overriding principle of ASC 606 is the following: a company must recognize revenue when goods and services are transferred to the customer, in an amount proportional to what has been delivered at that point. In today’s era of digital transformation, such requirements can pose significant problems when relationships with a customer can go through so many changes in rapid succession.

So, much like the IPO process, bringing a company current in order to adhere to ASC 606 is itself a long and painstakingly detailed process.

The benefit is by accomplishing one - ASC 606 compliance - the ability to achieve the other - IPO - is greatly simplified.

The best method to achieve compliance with ASC 606 is to rely on technology and automated processes rather than manual entries. Modern financial management solutions offer the ability to recognize revenue for both old and new rule sets, ensuring swift compliance and much less confusion.

The added beauty and benefit, along the way, is how this flattens a company’s formerly rocky road to IPO. Accounting teams now have fingertip access - faster and easier - to all of an organization’s critical data sets. The ability to supply audits and reports is simplified. And by choosing to automate, an organization can perform such tasks with absolute trust in the accuracy of said reports, regardless of the level of complexity.

Adopting a platform like RecVue can be just such a game-changer in terms of leveraging technology and automation to deliver upon the twin goals of ASC 606 compliance and a public offering. RecVue’s unified platform integrates with ERP, CRM and front-end order processing systems, enabling customers to improve efficiencies across order-to-cash, revenue and general accounting while gaining real-time access to data. Finance groups are able to increase the accuracy and timeliness of billing and invoicing and aggregate billing information in a single system to improve analysis and forecasting. 

RecVue’s monetization platform includes a 360-degree view into the entire contract lifecycle, rules-based attribute pricing, complete order-to-invoice capabilities, pay-side management for third-party obligations and robust analytics and reporting. When the new revenue models associated with digital transformation take shape, they bring an exponentially greater level of complexity.

Envision a long line of dominos spaced out, side by side, in a beautiful pattern across the floor and your company’s selection of a platform is the first one to be flicked, the ignition switch to the whole show. Dominos down the path fall, one by one, leading your company to compliance with ASC 606, which is another domino - albeit a big one - to fall in the path toward your company’s IPO achievement. Everything leads to something.

Contact us today to learn how RecVue’s order-to-cash solutions can help your organization knock down those achievable goals of ASC 606 compliance and going public in support of future growth.

Revenue and Compliance Should Not be Complicated.

Contact us for a demo to see how RecVue gives you complete control of your recurring revenue contracts.