In today’s business landscape, companies looking to boost their revenue can turn to digital transformation for an answer. Our article Unlocking the Benefits of Business Process Automation to Increase Revenue discusses that leveraging business process automation (BPA) software can streamline tasks like customer service, inventory management, and order processing. That means they can enhance customer satisfaction and loyalty to improve sales conversions, reduce costs, and free up time and resources for employees to accomplish more activities that can bolster your bottom line.

Because it can also aid in assessing accounts receivable, BPA software is especially handy for revenue recognition, which helps ensure long-term profitability. Since this task deals with finances, however, you have to be especially wary about the particular tools you use. That’s because you have to worry about compliance. C-suite executives interviewed by theCUBE emphasize that in today’s digital age, it’s a major business differentiator that fuels business growth and security. Conversely, non-compliance with financial and industry regulations harms your revenue. The resulting fines and penalties cost businesses $14.82 million a year, compared to the mere $5.47 million it costs for companies to comply in the first place.

But what exactly does compliance look like when it comes to revenue recognition, and how can it benefit your business?

Defining compliance in revenue recognition

Let’s start with revenue recognition. This accounting principle involves assessing the income generated from your financial statements, recording it, and reporting it to the likes of stakeholders and analysts for transparency. It aids the decision-making process, allowing companies to see what they can afford to invest in to improve their operations moving forward.

Compliance, in this case, refers to conducting revenue recognition in line with standardized accounting frameworks and regulations. For domestic American businesses, that can include Generally Accepted Accounting Principles. Meanwhile, those with cross-border operations will want to follow the International Financial Reporting Standards (IFRS). If you’re looking for BPA software that can help simplify the revenue recognition process, you thus need to ensure the tools you choose help you comply with these accounting rules. In doing so, your business can reap a number of benefits.

How compliant revenue recognition benefits businesses

More accurate budgets and forecasts

Accuracy is crucial for revenue recognition because it provides the consistency, transparency, and credibility needed to illustrate a business’ true financial health. That can help companies better budget their existing resources, forecast future revenue, and make more precise business decisions. Because compliance involves following widely recognized accounting rules, it automatically ensures that accuracy.

As such, it’s ideal to use BPA tools with integrated compliance features when looking to automate revenue recognition without compromising veracity. That’s why SOFTRAX’s revenue recognition software is used by 3M and other market leaders. It can handle even complex billing models, like subscriptions, and automatically updates to account for changes to major compliance frameworks like ASC 606 and IFRS 15. Aside from helping you avoid non-compliance, the accuracy such platforms provide can aid revenue recognition in all kinds of businesses and can be crucial for freeing up the time needed to decide how to further increase your revenue.

Improved stakeholder relationships

Because compliant revenue recognition results in accurate reporting, it can help further strengthen relationships with company stakeholders, making it crucial if you’re looking to use revenue recognition to boost business profitability. After all, 93% of the executives surveyed by the Pew Research Center agree that stakeholder trust is vital for accelerating their bottom lines. When conducting revenue recognition, complying with specific accounting standards they’re familiar with will lend you the credibility you need to boost their trust in your business.

That’s especially true since accounting fraud does occur and may come about as a result of misinterpreted revenue recognition reports—which is why even firms like Firth Investment Management use Transparently.ai’s anti-fraud software to automatically detect such instances during the accounting process. Such tools are designed to integrate seamlessly into existing systems for convenience, helping them enhance the accuracy and compliance benefits provided by dedicated revenue recognition software.

Further loss minimization

Revenue recognition done in line with widely accepted accounting principles automatically ensures compliance, which helps you avoid all the fines, penalties, and even legal disputes caused by non-compliance. Given that a single non-compliance event can cost your business as much as $4 million, compliant revenue recognition can ultimately safeguard your profits in the long term for uninterrupted growth. Beyond that, though, the improved reporting and decision-making accuracy that comes from compliant revenue recognition can help you spot potential financial risks and mitigate their effects.

Since that proactivity can further protect your bottom line, leading compliance and risk solution providers like Abrigo have invested significant sums in the likes of TPG’s risk management software. It automates accounting and reporting processes for risk management in compliance with standards from major regulatory bodies, like the National Credit Union Administration and the Office of Foreign Assets Control. This kind of accounting software is especially useful for companies in the finance sector that are more vulnerable to monetary risk, which is where it can further help minimize losses via revenue recognition.

By Giselle Simmons for sketchtogrowth.com