netsuite advanced revenue management

netsuite advanced revenue management

Exploring the Benefits and Best Practices of NetSuite Advanced Revenue Management

1. Introduction to Revenue Management in Business

NetSuite has enhanced RPM’s capabilities to automate revenue recognition allocations of transaction price predictions to satisfy accounting standards of different customers who access transaction streams across multiple dimensions and provide Ultimate Company shareholders insights to fulfill real-time financial reporting evaluations.

Besides the modules ship management, allocate revenue, and manage revenue, RPM extends NetSuite’s standard revenue management capabilities to distinguished facets of revenue transaction lifecycles. With sabotage resistance, auditability, and consistency, processes cost efficiently scale to thousands of transactions per period, satisfy automated accountancy standards, and expedite cohesive internal and external business processes to meet complex business transactions cost effectively, seamlessly in an end-to-end dashboard view.

To bridge the gap, Oracle NetSuite optimized the Advanced Revenue Management suite for a truly end-to-end solution, not just for recognizing revenue associated with tangible products, virtual goods, or services, but also to streamline back-office fulfillment given different delivery timelines. From driving sales performance, auditing revenue impact, and improving customer satisfaction, RPM can seamlessly manage revenue transactions across the order-to-cash and record-to-report cycles.

In the past, revenue process was performed by accounting department but today’s revenue management is the entire order-to-cash cycle. As part of customer experience, revenue recognition is equally important in revenue management process as days sales outstanding (DSO), customer satisfaction index, and attrition rate are to overall OTC.

Proper revenue management is essential in any business, especially in mid-sized to large enterprises and global organizations. This is because these entities experience complex revenue processes, high volumes of transactions, multitude of revenue entities, or compliance requirements, which if overlooked can possibly spoil their reputation.

2. Understanding NetSuite Advanced Revenue Management Features

In all these stages, we consider amortization and fair values for that period to maintain coherence between operating revenues in profit and loss statements. As an example, let’s consider a scenario where we perform a service, splitting the service into two sections. The first part is delivered in the first month, and the rest is delivered in the second month. Our accounting department needs to account for half of the fee that we agreed on to perform this service in the first month. However, the common practice in the industry would be to recognize the service fee as profit in the harvest time but not in July. For this reason, we need a flexible and sophisticated revenue recognition package like ARM in our enterprise resource planning (ERP) system.

The main concern of NetSuite ARM is creating ARM items. Without properly created ARM items, the ARM module wouldn’t give the expected outputs. Next, we move on to creating fair value for the delivered services through fair value pricing schemes. There are three main stages in recognizing revenues using the ARM module. They are fair value, delivered value, and then accounting for the fair value.

Transaction-Based Revenue Recognition: NetSuite brings the highest level of flexibility on transactions that the ARM module works with. Out of all available transactions, the ARM module can work with sales orders, cash sales, and item fulfillments.

Next, we will get an understanding of the main features available in NetSuite ARM.

First of all, NetSuite ARM application is the most suitable revenue management tool available for the following types of industries: A) Service-based companies or organizations that sell services. B) Product-based companies where the service and maintenance portion of the product life cycle is important.

Before embarking on the journey of setting up and using ARM in your NetSuite, let us take a closer look at what the application has to offer.

3. Implementing NetSuite Advanced Revenue Management: Best Practices

During the implementation, it is recommended that engagement of the subject-matter-expert seller team for insights that test and validate the set; develop, test, and refine implementation processes and controls to be sure they align from an operational and compliance standpoint with both old and new logic. Then there’s the need to test scenarios of changes in set logic to ensure that the entire process, from initial call to appropriate entries, runs without creating problems and that the differences in results from before the change are correct. After the implementation, reports and dashboards should be held up against both old and new post-recognition decisions and controls to make sure they align with the business aspects of reallocation for the length of the policy’s performance obligation. Finally, supervisors will need to maintain close supervision of the new set rules and the associated data and controls, identifying, testing, and adding to them, as necessary.

In implementing NetSuite Advanced Revenue Management, there are recommended best practices to follow for maximum effectiveness of the new tool. First, careful preparation is extremely important in getting the most from NetSuite Advanced Revenue Management. Early on, there should be a review of every single rule, policy, and checklist to be sure the company’s financials continue to be compliant. Assigned tasks should chart the team on a timeline to ensure there’s ample time for setup and testing and, prior to activating the feature, a percentage of transactions must fall under each item type and category to ensure that the set logic will be successful. For allocated sellers (sales reps) to properly manage item types and allocation categories, they should be educated on their role in the process.

4. Case Studies and Real-world Applications of NetSuite Advanced Revenue Management

– The case of a company going public and realizing that its order entry system would not support its IPO starts as follows. Sybase was using Oracle Financials as its GL application but had some areas of data-capture-to-record-keeping which it could not trust to satisfy internal, sort-out-whether-the-deal-works, external, sort-out-whether-it-made-the-books, and auditor compliancy/SCR 280 documentation requirements. Particularly sensitive areas were revenue management and complex revenue allocation issues with company software being architected to accommodate changes/differentiation in these areas but the sales staff writing deals would accommodate these requirements post order entry which didn’t make the books. Post order entry, we discovered that we actually received 12 percent less than the sale because we didn’t have a product of that cost in the sales system.

– Key points derived from a case study involving a company experiencing the high growth issues of scaling a finance department are as follows: an integrated solution is needed for internal and external compliance, there must be segmentation of finance functions around the key partnering areas of business finance, and all disciplines within the finance function must be kept informed of the various areas of interest in deals. Zions needed to have the capability of identifying the agreements when they were manipulated at the deal and quote stage (not order fulfillment) so that they could make informed operational and financial decisions. RTAL was tasked with the revenue management and complex revenue allocation issues and solving these at the order entry stage.

5. Future Trends and Innovations in Revenue Management Technology

In no specific order, some of the future areas and trends of development might include: (1) SaaS licensing with usage-based or consumption-based outcomes; (2) Truing multi-element services arrangements; (3) Gaming or Content streaming and delivery revenue data patterns; (4) Intensive usage and utilization exposure language and terms financially executed; (5) Pre-contracted, canceled, or modified customer dynamics; (6) IoT, which may result in net new solutions to track and expose sales triggers, customer or financial results factors. Each of the shifts makes revenue arrangements increasingly complex, and the guidelines will probably never be fully able to capture such nuance. However, with continual improvements in people, processes, and ARM technology, there’s tremendous potential to minimize financial errors, help guide organizations with better commercial execution, all the while adhering to the various rules and regulations that help maintain compliance and control.

Due to the rapid innovations and technology advances, NetSuite continues to introduce and upgrade, as well as the multitude of complex industry-specific challenges it helps to manage, one might think that NetSuite Advanced Revenue Management (ARM) has reached the pinnacle of functionality. Certainly, the capabilities and benefits of NetSuite Advanced Revenue Management are remarkable and vast, and their overwhelming and continually growing adoption proves just that. Nevertheless, there will always be future trends and endeavors towards improved ARM solutions that fill gaps, cater to specific industry or company offerings beyond the generality of current tools. This is simply a sign of the continued convergence and sophistication of operations in various revenue-driven industries and, of course, a need for product offering alignment as varied as the categories across the software business itself.