A Fresh Look at Revenue Management for the Construction Industry

The survey, “The New World of Revenue Management,” by the Institute of Management Accountants and cloud ERP provider FinancialForce, is making waves. After surveying 6,000 accountants and financial professionals, CFOs, and senior managers, IMA and FF are re-evaluating how they assess their revenue management practices in response to new market conditions.

The survey found that as the business landscape changes with a service-centric mindset, the construction industry, along with other industries, is exploring sophisticated technology to advance accounting from using spreadsheets to using purpose-built applications.

New categories of business models are garnering attention because they can positively influence a business’s valuation. The new business models include software subscriptions, recurring billing, professional services and product/service bundling that encourages revenue growth. However, the models require new billing and revenue recognition procedures to track what can be recognized and when tasks are better served by technology beyond spreadsheets.

Notable findings from the survey include:

• • Due to a lack of awareness, companies risk noncompliance with new revenue recognition standards.
  • Half of respondents said their firms fall under generally accepted accounting principles guidelines for revenue recognition. Of those not affected, two-thirds haven’t evaluated new standards.
  • Because of an inability to address complex scenarios and ensure data’s integrity, spreadsheets are no longer the way to dominate accounting tasks.
  • Yet 60 percent of respondents said that spreadsheets are still the most commonly used method to track revenue recognition. And the use of purpose-built ERP apps is a close second at 46 percent but on the rise, with 21 percent implementing or planning to implement one.
  • Companies using ERP apps to track revenue rate the highest overall satisfaction with integrity of data, with 40 percent “very satisfied” and 51 percent “somewhat satisfied.”
  • Market requirements are spurring adoption of new billing models supported by advanced software. The most popular trigger of change in revenue recognition methods is billing models, followed by top management decisions, better software and changes to revenue recognition standards.
  • The majority of respondents who said they were “very satisfied” with their revenue management systems are using ERP systems to track revenue recognition.

Raphael Bres, general manager for financial management applications at FinancialForce, said that we’re in the “midst of the as-a-service economy boom, which is making recurring revenue the central model of new and traditional businesses.”

Bres concluded that “CFOs and senior management teams are at a crossroads and must address these major shifts or risk being noncompliant, inefficient and, worse yet, losing market share for failing to give customers new billing models.” The survey stressed the importance of adopting a strong revenue management application that helps companies gain a predictable revenue stream and superior customer and revenue forecasting analytics, as well as automates complex accounting requirements, Bres said.