NetSuite ARM Module: Benefits For Better Revenue Recognition
By Tanuja Srivastava,Technical Consultant
Advanced Revenue Management (ARM) launch of NetSuite
Business volatility causes owners to worry about income control. If you're doing an almost steady production business, then revenue management can be set aside. But none of the businesses are running this way. In addition to managing your finances, a revenue management strategy helps to build potential plans that will produce more business.
The problem now is how will revenue management strategy be applied? ASC 606 requirements were tailored for the execution of revenue policy. The new standard updates guidelines on how and when to consider revenue.
NetSuite has a new revenue recognition module for handling new rules. This is called Advanced Revenue Management (ARM). Before you understand a new model of ARM. Let's see how the Rev Rec module works with NetSuite.
One benefit of implementing advanced NetSuite ARM module is that it costs nothing extra. You are entitled to ARM if you already use Rev Rec. On your personal request, NetSuite will enable it for your personal account. NetSuite ARM is not an update to the old Rev. Rec. program. The ARM is applied from the initial phase. A conversion process turns the old system into new.
The current Rev Rec engine will not be discontinued, at least till ARM starts functioning well. The idea of launching NetSuite ARM is not to bring another version for Rev. Rec. software implementing ASC 606. A NetSuite research was conducted to explore the new possibilities that can be incorporated to create a new solution that can completely handle management revenue and provide solutions for future business expansion.
The ARM module functions on two fundamental concepts. The first is the Revenue Recognition portion, and the second is the Fair Value pricing engine, also known as VSOE handling.
ARM module includes some changes in the revenue recognition portion to smooth the handling of Revenue Recognition.
Revenue adjustments are supported
Assume the estimated value of plan changes due to physical parameters in the mid-way of revenue recognition,ARM can make changes without impacting any other result.
The majority of the listed ARM records are exposed to Suite Script
If the NetSuite solution is to be applied with custom business rules, the ARM will provide this facility so that changes can be made but not too many.
Revenue arrangements can be merged
Merging agreements allow proper control of the fair value of returns to be generated. It cannot be done by the current software. More simply, you can tie all the changes together in a single system if you have set a revenue recognition value and during the evaluation process you adjust and then reset the fixed values. It is not necessary to edit the dependent value. For example, instead of storing all one-quarter sales reports, we use a net recurrent value to reflect the final sales that have been made. We don't need to open an individual file until and unless we need a sales report for each sale.
Project revenue forecasting is perfectly done
Revenue Forecast reporting can be performed to deliver more accurate results that are actually linked to your general ledger. This can help the system to prepare for future changes and a plan for the future is before a marketing team.
As far as VSOE handling is concerned, the ARM module is somewhat innovative.
The module is a complete overhaul of fair pricing in NetSuite and provides more features than the current engine can accommodate. ARM can manage Multi-Element Arrangements (MEAs), which is ASC 606's primary interest. MEA's classic example is the sale of a mix of hardware, software, and services. Here you try to offer a product package deal and you set prices to please a customer.
Old VSOE was unable to deal with new issues such as handling contracts or treating exceptions such as returns. That's where the ARM of NetSuite was so much needed.
To summarize, NetSuite ARM includes a lot of new features that have become favorites of early adopters for now. These include revenue arrangement processes, versatility to manage revenue streams, detailed reporting, fair value pricing models, and a structure to comply with changing requirements.
We hope that you found the information on ARM module useful and easily digestible.
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