The Importance of Revenue Recognition Software

The Importance of Revenue Recognition Software

The ASC 606 revenue recognition software has brought the topic of recognition of revenue back to the fore and is considered a revolutionary accounting change of the century. The Financial Accounting Standards Board of the US released it in 2014.

Before moving on to its importance in the present time, let us look at what it is all about.

What is recognition of revenue?

The principle calls for recognizing earned income, not the one received after product delivery. Organizations lay down the rules in accordance with this accounting principle. ASC 606 revenue recognition software provides a comprehensive 5-step framework to recognize revenue earned.

For e-commerce companies, recognition of revenue is a cakewalk as the product is delivered and income is received instantly. However, for companies offering over-the-top services, the difficulty increases due to the need for incremental updates. Recognizing revenue is the most challenging for B2B SaaS companies. This is the reason for FASB’s coming up with ASC 606 revenue recognition software and offering standardized guidelines to bring the most complex products under a single umbrella.


The benefits of revenue recognition software can be summarized into five main points as follows:

  • Saves time and improves accuracy

Automated and digitized administration reduces the scope for human errors and saves time. Revenue data needs to be accurate as it determines consumer and platform interaction. Inaccuracies arising from manual input into computers are efficiently reduced by software.

  • Legal requirements and targeted analysis

All businesses have to comply with guidelines as it is a mandatory requirement. The ASC 606 revenue recognition softwareenables companies to select their area for analysis, making it highly customizable and user-friendly.

  • Financial Planning

Crunching numbers is not just for record-keeping but also for deciding on a future course of action. Accurate revenue data helps businesses analyze their data and understand the products that fetch them high prices. Competitor analysis is an essential tool that, when used wisely, can help maintain a stronghold in the market. This type of financial planning is also beneficial for looking at competitor records and making necessary tweaks to their own company.

  • It improves business visibility.

An organized data set ensures easy access for investors, banks, and other shareholders. It eases investment opportunities and loan disbursements, improving the overall business ranking. Improved visibility also enhances consumer confidence, thus boosting the sales of a company.

  • Reduced revenue leakage and real-time data records

There is a reduction in revenue leakages due to human error, and there is effective management of refunds, cash backs, and other reward options. Real-time data monitoring is essential, especially for businesses offering subscription options due to periodic changes in subscription options by users, which makes revenue tracking difficult. Software that recognizes revenue eases this through regular data updates and better communication between users and businesses.


Data management is one of those areas that can make or break the valuation of a company and its social standing. It is essential to have efficiency and accuracy in records that will enable businesses to take long-term planning into account, and the recognition of revenue software helps navigate through the entire process.