One of the biggest things on most finance practitioners’ minds is upcoming revenue recognition changes. These are some of the most significant financial regulatory changes in the last 20 years, and the pressure is on to be prepared.
I’m responsible for managing the transition to these new standards—also known as ASC 606/IFRS 15—at Workday. While complex and daunting, it’s important that as practitioners we dive in and embrace these changes as they are here to stay. When talking with our customers and prospects about revenue recognition, I often share what I’ve learned so far in preparing, and the impact that our finance system—Workday—is having on the experience.
Like other companies, we’re currently in the process of digging into the guidelines and assessing the impact. Part of this includes reviewing contracts in order to determine which ones will be affected and the implications to revenue. As we go through this evaluation, we will determine the best strategy for transitioning to the new standards, and whether to use the full or modified retrospective method.
Also, while the new standards are specifically focused on revenue recognition, there will be broader implications across the business related to financial planning, expenses, sales operations, commissions, and more. So, part of our review also includes meeting with different stakeholders to discuss potential impacts.
All of this requires a lot of time and resources, but I’m excited about the ways in which our finance system is going to support our efforts. I have spent much of my career using legacy finance systems that required significant time and money to update for compliance during times of major regulatory change, including a lot of leg work during the assessment phase.
Now, as both a user and an employee of Workday, I’m realizing the power of a cloud-based system in adapting to regulatory changes. Workday Financial Management is one system of record with contract and transaction data in one place, making it easy to identify, assess, and report on contracts versus having to extract data from multiple or bolt-on systems for assessment.
Workday also enables side-by-side comparisons for how revenue is recognized now and under the new guidance. This isn’t easy to do in legacy systems —whether they are on-premise or cloud-based solutions—because the details of contracts are often captured outside of the finance system of record, such as non-standard terms that are unique to a particular contract, making comparisons difficult.