Revenue recognition can be a complicated process for accounting departments, as they must determine when to recognize revenue earned from the sales of both products and services. To aid in this process, many accounting departments utilize revenue recognition software; however, such software is often too expensive and unable to adapt to the company's reporting policies. As a result, accounting departments are often left with no choice but to manually update spreadsheets to reflect the differences.
Thus, Cascade affords accounting departments an easier and more efficient way to recognize revenue. The workflow outlined in this article is designed to accommodate disparate data sources, unique revenue schedules, and non-standard fiscal periods.
Nuances of Revenue Recognition
The process of calculating recognized revenue is filled with nuances and complex calculations. To ease this challenge, Cascade workflows offer a visual representation of the processes and logic involved. With a Cascade workflow, calculations are not merely memorized or copied from different spreadsheets - rather, they are recorded collaboratively within Cascade's environment.
Revising Existing Contracts
Service contracts, purchase orders, and policies are ever-evolving, leaving accounting teams with the arduous task of meeting quarter-end, year-end, and sudden audits and book closings. To make this task simpler, Cascade workflows can be executed 'on demand' and with 'event-based triggers' (see Webhooks). This makes it easier for accounting departments to stay ahead of the changing landscape.
The Audit Trail
Cascade’s self-documenting capabilities enable users to effortlessly capture executions and alterations with version control. Easily share the revenue recognition process with your manager and audit team to confirm and validate your workflow logic.
The process begins with two Import File tools to input both a table of work orders and a custom table of revenue schedules. The table of work orders details identified working contracts with customers which have been verified as performance obligations. It contains a unique contract identifier, the service being provided, the date the contract was acquired, the date services were started or executed, and the cost and fees associated with the contract.
Due to the nature of some of the services, specific revenue recognition schedules are necessary to record the pertinent revenue transactions in the current period.
The second Import File tool is utilized to input a custom table which encompasses the associated revenue recognition schedule.
Join tools provide a simple way to merge two datasets into a single table, based on a shared column. Through Join tools, data can be quickly and efficiently combined, allowing for the production of comprehensive and organized reports.
In this case, a Join tool is employed to append the corresponding revenue schedule to the matching contract.
Additionally, another Join tool is used to filter through transactions and services that were performed during a certain fiscal period.
Calculate Recognized Revenue
Edit Columns tools are utilized to incorporate new columns with expressions.
To accurately calculate recognized revenue, accrued revenue, and deferred revenue, distinct Edit Columns tools are incorporated into the workflow.
Although consolidating these steps into a single Edit Columns tool is an option, the designer preferred to utilize separate tools as individual components which can be supplanted with revised logic with the release of new regulations and for modeling purposes outside of the present period assessment.
The workflow yields the total recognized revenue, accrued revenue, and deferred revenue for the period. To further break down the data, Pivot tools are used to cluster the recognized revenue by districts and services.
To provide a visual representation of the information, a Chart tool was added into the workflow. These tables are conveniently located in the Data App of the workflow. To facilitate deeper analysis, users can download and share the results.