As a CRO in the IT Services industry, you’re in charge of driving revenue growth for your company. The buck literally stops with you. No pressure, right? Chances are you’ve got one big challenge that’s about as fun as trying to get gum knots out of your kid’s hair. It’s revenue recognition. Incomplete revenue recognition. We’ll bet you shivered at the thought of it. We don’t blame you. Causes of Incomplete Revenue Recognition It’s only after you understand the root cause of a big knotty mess that you can find a solution. So what are the root causes of incomplete revenue recognition in IT Services? 1. Inconsistent billing practices It’s impossible to have accurate recognised revenue when billing practices are all over the place. Without standardized procedures, workers must rely on their own interpretations of guidelines. 2. Regulatory changes Regulations and standards are always in flux, and they vary from country to country. It’s extremely hard to keep up with every regulation all the time, and even harder to adapt to them. When they’re not managed properly, you get errors, changes in contracts, and incomplete revenue recognition. 3. Complex revenue streams In IT Services, revenue flows through multiple streams including project-based billing, recurring subscriptions, usage-based charges, add-ons, etc. They make complete recognised revenue across all streams really difficult. 4. Manual processes They steal your time, and leave the field wide open for errors. Even little mistakes can set off chain reactions that take ages to spot and sort out. 5. Silos Many IT services companies use different legacy systems for project management, billing, operations, and finance. Without integration, you’ll get inconsistency in data. Or missing data. Or data that was entered in too late. That’s more revenue leakage. These issues don’t exist in isolation either. When they intersect, they compound, and make things exponentially worse for your teams and your company. And that can lead to some real problems that will keep you tied up. Impacts of Incomplete Revenue Recognition There are far-reaching consequences to incomplete revenue recognition. And it doesn’t just impact your business, but your teams, your customers, and your reputation as a leader. Here are some of the results of incomplete recognised revenue: Unstable Revenue/Revenue Leakage Fluctuations in reported revenue make it hard if not impossible to accurately forecast and strategize for the future. Wasted Hours Time is the most valuable resource we have- after all, it can’t be replaced! When finance teams are stuck rectifying mistakes, they have less (if any) time left to work on strategic tasks that bring value to the company. Stress The last thing a revenue team needs is unnecessary stress. But they’ll have it in bucketloads. And this will impact morale, risking employee turnover and burnout. Damages Other Teams When you can’t rely on your numbers, it’s a struggle to stick to budget allocations for other departments. This hinders their planning and operations. Customer Relations Anytime billing is inaccurate, there will be problems with clients and customers. And disputes jeopardise customer lifetime value and growth. Revenue Decisions When you’re forced to juggle inaccurate data and numbers, you can’t make good decisions. You might have to rely on guesswork. And this can impact you and the company. So now we know about the causes and impacts of incomplete revenue recognition. So what can be done to untie this massive mess and streamline your recognized revenue? Fortunately, there are solutions. 6 Actionable Steps to Stop Incomplete Recognised Revenue The good news is that there are actionable steps you can take to free yourself, and get that revenue fully recognized. Here are some of the most effective, and depending on your situation, can be used together and in combinations. 1. Standardize Billing Policies that are clear and firm will ensure better consistency and accuracy. That’s less likelihood of mistakes and more likelihood of catching the ones that slip between the cracks. 2. Cutting-edge Training It’s important to invest in your teams so that they’re equipped with the knowledge they need to succeed. And the more they know about regulations and standards, the more they’ll know about how they impact revenue recognition. 3. Data Accuracy Having a regimented schedule to check and ensure data accuracy is a must. Reviews can help spot discrepancies early on, which can stop small mistakes from turning into revenue leaks (or gushes). 4. A Dedicated Revenue Recognition Team Having a specialised team just focused on revenue recognition frees up the finance team to work on the strategic tasks and projects you want to be enacted. It makes things more focused too. It reduces stress and the likelihood of burnout/turnover. 5. Smash Those Silos Your customer, revenue, sales, operations and development teams will need to communicate with each other, whether through software or at regularly scheduled meetings. When everyone’s informed, mistakes plummet. And all the teams are less frustrated. 6. Automate the Entire End-to-End You might balk at how realistic it is to have end-to-end automated, but it really is possible. And it does all the steps for you. Automation standardizes billing, keeps up with changes in regulations and adjusts to them, shares information between teams in real-time, ensures accuracy, and provides real-time visibility into recognized revenue. And it even automatically integrates changes in contracts (due to add-ons, new products, cross-selling, readjustment to align with usage, etc). In other words, whatever changes are thrown your way, automation takes them off your shoulders. When you automate these processes, you can say goodbye to human errors, wasted hours, and inefficiency. And say hello to accurate numbers that you can take to the bank at any time. Literally and figuratively. You Can Enjoy Complete Revenue Recognition As the CRO of IT Services, you have to deal with a lot of loose ends. That’s why it’s important not to have anything around that changes them into an untangle-able mass. Incomplete revenue recognition doesn’t have to be a daunting challenge that takes you and your teams down. It doesn’t have to be like your kids’ gummy hair. It’s all about taking those steps to prevent it. Or letting automation do all the work for you so you can finally get back to what you were hired to do. Drive revenue and lead the company. Ready to start? When you were brought on as CFO, no doubt you had a very clear idea of how you wanted to move the company forward. But you know that when you’re too busy chasing small payments, you won’t have the time to do the things you want and need to do. However, taking proactive steps to get to the root of this problem will empower both you and your finance team to improve efficiency and enhance the financial stability and growth of your company. Why not start that dedicated move to financial excellence now? Say goodbye to manual sales processes and boost your growth with Bluefort’s cutting-edge automation solutions. Learn how our end-to-end system streamlines the end-to-end process. Let's chat! More Bluefort insights... 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