Published on March 4, 2014
Revenue Management for Microsoft Dynamics AX 1 © ArmaninoLLP | amllp.com
Example of Companies using Armanino’s Revenue Management Solution for Dynamics AX 2 © ArmaninoLLP | amllp.com
Q. What types of companies typically use Armanino’s Revenue Management for Microsoft Dynamics AX? A. Any company that sells multi-element arrangements or bundles. A few examples include: • Electronics OEMs • Telecommunications • Industrial Equipment Mfrs • Electro-Medical Device Mfrs • Software Companies • And many more 3 © ArmaninoLLP | amllp.com
Examples of Multi-Element Arrangements or Bundles Any packaged combination of items such as (but not limited to): Services Hardware Software • Multi-software offerings • Software and services • Software, hardware, and services Support Warranties • Hardware, post contract support and warranties The challenge is each of these accounting units needs to be recognized individually to ensure appropriate accounting. If companies do not determine value of (or break out) multi-elements, they have to treat the arrangement as a single unit of accounting. This results in the deferment of more revenue upfront. 4 © ArmaninoLLP | amllp.com
Business Challenge & Revenue Management Solution Armanino’s Revenue Management Module for Dynamics AX addresses many of these common business scenarios: • Selling packaged bundles such as software packages, software and services, hardware plus post contract support (PCS) and warranties, etc. • Accounting needs to identify & allocate appropriate revenue to each element • Manage the automatic deferral and recognition of revenue • Recognize revenue upon events or with an Item #3 amortization schedule Revenue And enables companies to: Item #2 Revenue by unit by unit Specify multiple elements or accounting units within bundles Defer recognition until customer acceptance Handle mid-month contracts, adjustments, and co-termination 5 © ArmaninoLLP | amllp.com Item #1 Revenue by unit Bundle
Fundamental “Take Aways” regarding the Principals of Revenue Recognition 1. 2. Revenue management is about determining the appropriate amounts & timing of revenue recognition. 3. 6 © ArmaninoLLP | amllp.com Companies that sell multi-element arrangements must follow specific accounting guidelines under GAAP (EITF 08-01, EITF 97-2, ASU, etc). With Armanino’s Revenue Management for Dynamics AX Module, companies can automate their entire revenue deferral, reallocation and carve out, and revenue recognition routines.
Core Concepts of Revenue Management Determining the Estimated Selling Price Identify Essential vs. Non-Essential Elements Revenue Amortization Schedules Allocations: Revenue Carve Outs & Reallocation Timing & Amount of Recognition Revenue Deferral 7 © ArmaninoLLP | amllp.com
Revenue Recognition According to GAAP • EITF 97-2 & 98-9 – Residual method of accounting GAAP Generally Accepted Accounting Principles • EITF 81-1 – Contract accounting • EITF 08-01 (ASU 2009-13): Multiple deliverable revenue arrangements • EITF 09-03 (ASU 2009-14): Deals with arrangements that include both hardware and software elements GAAP provides guidelines for acceptable revenue recognition practices for a given industry with specific considerations that need to be interpreted for each company. Armanino’s Revenue Management for Dynamics AX provides a flexible parameter driven setup to automate the appropriate revenue calculations, deferrals and recognition events – to comply with these GAAP requirements. 8 © ArmaninoLLP | amllp.com
Revenue Deferral & Recognition Revenue rules determine recognition timing • Immediately upon invoicing • Deferred until an event, partial fulfillment or % based recognition • According to an amortization schedule Recognition schedules can be static, dynamic, edited • Static - Fixed over 12 months • Dynamic –12 months, amortized over 13 periods, daily calculations, with future start dates • Catch up – Spread over defined start/end date for co-termination • Edits & Adjustments – Adjust recognition start dates, hold until customer signoff, returns and cancellations 9 © ArmaninoLLP | amllp.com
Establishing VSOE Based on Median Price • Automate the systematic calculation of VSOE from historical sales • Parameter driven, systematic calculation of median price: o At “item” or “item group” level o Minimum # of occurrences can be set o Configurable time period definitions o Thresholds / tolerances for including in calculation o Ability to auto-update the VSOE revenue price table o Full audit trail and justification reports 10 © ArmaninoLLP | amllp.com
Sales Order Entry & Invoice Format Presented on customer invoice - or - BESP & Revenue Reallocation 11 © ArmaninoLLP | amllp.com Revenue Basis for GL accounting
Revenue Recognition / Deferral • Recognized revenue and cost of goods (COGs) posted to GL at time of invoice • Deferred revenue and COGs posted to deferred accounts • Automated revenue schedules generated for recognition of deferred revenue • Workbench to review schedules - edits, rescheduling, holds, partials, etc. • Periodic routine or batch job auto-creates revenue recognition journals • Full drill down of all postings & audit trail of all changes 12 © ArmaninoLLP | amllp.com
Dynamics AX 2012: Where does the Revenue Management Module from Armanino fit in? User Layer (User Preferences) Customer Layer (Customer Development) Customer Development Module sits here VAR Layer (Partner Customizations) Partner Customizations --------------------------------------------------ISV Layer (Revenue Management) --------------------------------------------------Microsoft Dynamics AX 2012 13 © ArmaninoLLP | amllp.com
About Armanino • Microsoft Dynamics AX VAR since 2003 • 70+ certified AX consultants • 4 Customer Excellence Award Winners in the last 3 years • Dynamics AX ISV TAP Program • High Tech Industry Solutions: o Revenue Management o High Tech Manufacturing & Distribution o Distributor Sell-Through Management o Supply Chain Interface • Dedicated post go-live support desk 14 © ArmaninoLLP | amllp.com
Learn More about Armanino’s Revenue Recognition Management Module for Dynamics AX For questions or to schedule a demo, contact: John Van Metre Sales & Business Development 408.712.0743 firstname.lastname@example.org Visit us online: http://learn.amllp.com/revenue-recognitionmanagement-for-microsoft-dynamics-ax 15 © ArmaninoLLP | amllp.com
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