NetSuite Advanced Revenue Management (ARM) demo | ASC 606 overview for NetSuite users

so I will be walking you through a

demonstration of the advanced revenue

management functionality and one of the

core principles that we work with here

RSM specifically within our technology

and management consulting team is to

help companies like yours manage your

business using technology so RFM and

really partnered with NetSuite because

of their ability to fit within our

client base and what I'm going to do is

walk you through some of the key

components of arm that helps companies

like yours manage your business in

respect to 6:06 compliance so you should

be able to see NetSuite here and be able

to see a sales order so I'm going to

start off our process by walking through

this sales order so as you can see as

Stacey referred to you know when we will

start working with multi element

arrangements I'm going to be going

through this multi element arrangement

and in this example I'm going to be

walking through something that probably

the number of you guys are familiar with

and that'd be a software purchase and

specifically I'm going to be walking

through working through a purchasing of

a suite license ice as module as well as

some training classes and then

additionally some professional services

so as I as I go through this I want to

show you some of the aspects of these

multi of these elements that will be

affecting our revenue recognition so if

you look on the through this I'm going

to be working with our term or list

price I'm also going to be working with

our discount percent additionally I'll

be working through contract amounts and

then of course when we're working with

revenue recognition and specifically in

the SAS world I'm also going to be

looking at our the term start and the

term end components of this so the

we're going to walk through as we go

through the different components the

NetSuite revenue recognition

functionality is going to be the revenue

recognition rules so revenue recognition

rules are going to define how our

revenue will be recognized and within

NetSuite this will be our revenue

schedule which we're going to be

referring to within NetSuite as a net as

a revenue plan and I'm going to be

showing this shortly now when we run

these rules this is going to tie into

the configuration options that I'm going

to walk through and this is going to

automatically create our revenue

schedules or plans so to illustrate this

I'm going to walk through some of the

common rules that we've seen here at RSM

as we've been implementing advance

revenue management the first one that

you see highlighted there is percentage

complete so this is going to be a fairly

simple example we're going to go through

and it's common in the professional

services world where we're going to

recognize revenue as part of a project

that is being completed so that's a

sometime that you'll see pretty commonly

the next one that I'm going to move down

to it's going to be a rattle or you know

sort of anywhere I'm going to go through

and recognize and in a proration and

this is common for subscription license

is support services and some cases

professional services the next type of

rule that we see pretty commonly is

going to be a milestone rule so a

milestone would be for those of you out

there who are running projects on an

have true milestone going now NetSuite

has the ability to tie in the milestone

billing from their professional services

automation components as well and then

the last thing that I'm going to show

it's going to be just basically a

one-time event and this is going to be

most commonly used where we go through

and recognize something for one-time

Hardware or other miscellaneous items

sales so now I'm going to go to the next

component that we that we work with and

that it's going to be the items but

before I do that I'm actually

back up to my revenue recognition rule

because there's one aspect that I really

want to show you that is very very

significant and how revenue recognition

can be impacted at your organization and

this is going to be the end date change

impact now this is going to be used if

you've gone through and you started to

recognize revenue and you find out that

you need to extend your revenue

recognition terms so this has two

different options that we're going to

work through and the first one is going

to be updating all periods so this is

going to be when I need to go through

and do one cumulative ketchup and that

is going to say that the rep total

revenue is going to be divided by the

total number of months or periods and

then one adjustment is going to be made

in the current period the other option

that we have on this is going to be to

be go through and update the remaining

periods only and this is where NetSuite

will automatically update the periods on

a go-forward basis so the remaining

unrecognized revenue is going to be

divided by the total number of months or

periods remaining so then we'll go back

over to our items I can show you how

this will be affected on the items

within next week so those of you who are

currently working with NetSuite are

going to be familiar with this this is

the items that we're out here selling

and these are very much aligned with the

one with the items that I highlighted on

the sales order at the beginning of the

demonstration now when RFM engages in

our joint implementation approach which

I'll be talking about in a short bit one

of the key activities that we have found

is developing a plan support any

necessary reconfiguration of items to

support 606 compliance the best way that

I think can think of to illustrate this

as an actual example of an existing

client of ours who had previously gone

live with next week's advance revenue

management on that they implemented with

another solution partner now what we did

is we engaged with this client both with

Stacey's

technical accounting team as well as our

NetSuite team and we engage with this

client and basically did an analysis and

as a result of this the first part of

our project required a redesign of the

existing item structure to allow for

additional performance obligations that

had been identified by Stacy's team

under the ASC 606 compliance guidelines

now when we start to look at current

items I want to walk through some of the

key aspects of our item setup that could

be affected by 606 compliance so the

first part part we're going to see is

obviously our list price so as you can

see in my fourth column over I'm going

to have my list price now this is going

to obviously just be where we go through

and calculate our standard pricing the

next item that I want to show you here

is the next column over it and that's

going to be our revenue recognition rule

column now the revenue recognition

column is going to be our default rule

that will create our revenue recognition

plans or revenue recognition schedules

when we generate those schedules the

next column that we have as well is the

create revenue recognition plan phone

call now this is going to determine at

what point I create my revenue plans or

my schedule so for example if I was a

company a software company and I wanted

to recognize my software upon

fulfillment or when one of my customers

downloaded my software I would go

through and use the fulfillment option

here now another example of this is if I

was going to be working with a

subscription or my SAS modules that I

had I want to recognize these when I

create my revenue arrangement now when I

create these plans I'm going to have

both a forecast and an actual revenue

plan so this is going to give me

visibility into my reporting and my

revenue recognition forecast and then

the last example that we have here is on

the services side down at the bottom and

which is one where we would recognize

revenue as the project is delivered

the next column over but I want to

highlight for you is the revenue

category and this is going to be coming

into play as well as this mean discount

when I start to talk about our fair

value calculations and our fair value

calculations is going to be the next

area that I want to walk into for you

and this is going to be recognized by

our fair value price lift now some of

you may recognize this as your

standalone selling price possibly your

best

edie estimated selling price or your VSA

we now in summary this is a very

powerful aspect of the advanced revenue

management platform so as you saw on the

item we're able to use the revenue

category and mean discount and set those

on the item now additionally we can

bring those in and/or then bring that in

to my fair value formula as you can see

here for example on the first couple

we're going to be working with a SAS

with a SAS example and sorry let me just

restore that for you really quick and so

we're going to be working with our fair

value formula for us for a SAS example

and now when we work with these revenue

categories we can you go through and

classify items that have some similar

characteristics and revenue allocation

requirements and we can also be used to

default this to a fair value formula or

range checking policy so when we get

into our fair value calculation we're

going to be doing some calculations and

additionally we can combine this with

NetSuite dimensions and multi books and

this is going to allow us to have

multiple fair value calculations based

off of one item so what this is going to

do is allow you to automate as much as

possible and then lift the burden from

your accounting and revenue teams and

allow them to focus on just having a

minimal amount of items and then be able

to get as many fair value calculations

as reasonably possible out of there

so some of the common uses that we've

seen here at RSM with the dimensions is

that when you generate our revenue

Arrangements you can use the dimensions

an example of this is very useful when

you're either sewing through a channel

as well as directly to an end user you

can use those default dimensions from

within NetSuite which is going to allow

you to simplify your item catalog using

the one-to-many relationships between

the items and the fair value now the

calculations are also significant for

multi-currency because you have the

ability to maintain the base currency

for fair value and you're going to be

able to translate the transaction

currency based on the transactions

exchange rate now obviously those are

some fairly complex concepts so this is

an area where our team has some pretty

good best practices that we can apply as

well based on the standard accounting

preferences within NetSuite and of

obviously dependent upon the 606

requirements that you're going to have

the next I want to go to and show you an

example of our revenue arrangement and

what I'm going to do is go to another

sales order that I've got set up for

this and what I'm going to do is just

walk through examples of the five-step

revenue recognition process that Stacey

outlined for us and I'm going to do this

as close soon as I can

just with my revenue arrangement so from

within that suite I can go to my related

records and then from my related records

I can see that I have a revenue

arrangement that has been created from

my sales work if I drill into this

revenue arrangement which you'll see pop

up here I'm going to start with step 1

identify the contract with the customer

so this revenue arrangement is the

vehicle which is going to be represent

our contract and has been automatically

current been created upon the approval

of our sales order step 2 I want to go

through and identify my performance

obligations so here you can see if I

have

down here this revenue elements this is

a revenue element that has been

automatically generated from the atom

configuration that I just walked through

and that we do as part of our set up and

this is going to align with our

performance obligations on step three we

want to determine the transaction price

so within NetSuite if you look up on the

top right that I'll highlight for you

here we're going to have our transaction

price as well as on that far right

column other factors that are going to

affect it such as the carbon or the

recognized revenue on that and then step

four we want to go through and allocate

the transaction price to the performance

obligations so as you can see down in

the detail here I also have my

allocation amount and then if I was Kazu

switch tabs and go over into my

allocation detail it's going to give me

all of the information that I need to

know about allocating my transaction

price up and finally step number five I

want to recognize revenue as each of the

performance obligations are satisfied so

for this I'm going to go over to my

revenue recognition plan and I'm going

to open this up and as you can see here

these are revenue recognition plans that

are automatically created now another

aspect that's very dynamic

about our revenue recognition plans is

that revenue managers and revenue

accountants have control over when to

recognize revenue so as you can see here

as I go in and and act and edit my and

edit my revenue recognition plan I can

go through and we see a couple examples

of both the actual so this has my actual

as well as my forecast on and so the

actual is going to be generated from the

create revenue plans option on the item

setup and then my forecast is going to

be generated but at the time of the

revenue arrangement and plan job to run

I can also go through and change my

start and end date as you can see here

and I have to

that control over all of these aspects

and one other thing that I'd like to

point out about being able to edit

revenue planes is that while I just went

through and modify and excuse me and

edited that in a on this one specific

order those can also be modified in bulk

using an a page within this week so here

you can see you know a list of the

functionality highlights some of which I

went through but let's just go through

and compare this to some of the previous

record of any recognition functionality

that you might have seen within NetSuite

so previously the you know the what we

refer to a lot of times here at RSM is

revenue recognition classic it's going

to it would have required you to have

additional bundle installation and

configuration to do your allocations by

fare values additionally you had complex

formulas if you had any of those it

required customization and scripting to

be able to get that accomplished whereas

you can see in the new revenue

recognition engine I should say with an

advanced revenue management I'm able to

use my complex sir value formulas to go

through and calculate that using

NetSuite easier interface and finally

one of the biggest highlights that I

like to find that I like to focus on

here is multi-book support so for those

of you who have multiple books that

you're running either because of

statutory requirements or different

books that you have some internal

reasons you're going to be able to use

the multi book functionality within

NetSuite across your revenue recognition