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Case Study
WilliamsMarston Clears the Way for Automated Revenue Recognition Process
Learn how WM supported a mid-market, private equity-backed software company transform their manual revenue recognition process to an automated system, while navigating a potential IPO.
The Challenge
Mid-market, private equity-backed company required technical expertise for software revenue recognition efforts amid increased scrutiny and exploration of entering the public markets.
Despite previously adopting Accounting Standards Codification (ASC) 606, a mid-market, private equity-backed company’s historical revenue recognition policies were subject to increased scrutiny during the company’s Public Company Accounting Oversight Board’s (PCAOB) uplift audit, resulting in changes in revenue recognition and related policies. The company offered on-premise perpetual software and term software related maintenance—both subject to residual approach under ASC 606—as well as hardware, a Software-as-a-Service (“SaaS”) platform and professional services.
While the company was able to manually determine the standalone selling price for performance obligations, with the exception of its on-premise software solution, they historically incurred a high volume of transactions with meaningful discounting practices that required large amounts of time and effort to analyze. Due to the volume of transactions incurred, the company found themselves in need of a more efficient way to analyze and compile transactional data for purposes of it’s standalone selling price studies. Furthermore, the revenue recognition accounting process was a highly manual endeavor, requiring a large continuous level of effort by the Company to maintain.
The Solution
WM’s evaluation of existing revenue recognition processes and discovery of the company’s data capture process sparked the path to a fully automated system.
To start the engagement, WM collaborated closely with the company to gain an understanding of their operational quote-to-cash process and revenue recognition policy. From there, the team gained access to the company’s Salesforce Customer Relationship Management (“CRM”) platform to evaluate how front office data and bookings information were captured and to understand the level of granularity the data capture process encompassed.
WM utilized SQL to script an automated, repeatable solution that automated the company’s standalone selling price (SSP) studies, tailored to the company’s specific data capture process, the results of which were reviewed and signed-off by management and automatically included in the WM-built, SQL based, automated revenue recognition solution.
The Result
WM created a fully functioning, automated revenue recognition system, inclusive of an automated SSP study compilation function, to ensure seamless finance operations.
The solution WM created included key automated outputs such as revenue recognition transactional detail, automated deferred revenue waterwall reports and unbilled revenue reconciliations.
While the company never completed the IPO process, a clean audit opinion was issued over revenue in all periods presented in the company’s confidential filings. The automated revenue recognition was so effective that it is still employed by the company today.
THE TEAM RESPONSIBLE
Ready for clear guidance and powerful outcomes? Reach out to the team today.
Meet the Entire Team
Justin Sika
Partner – Advisory
Justin Sika
Partner – Advisory
Justin brings 13 years of accounting, reporting and executive management experience to WilliamsMarston. He provides leadership for diverse clients on numerous strategic financial issues. Justin has advised clients on technical reporting and accounting issues related to business combinations, divestitures, consolidation, bankruptcy and restructuring, debt offerings and related registration (including 144A and public debt syndication), as well as SEC reporting, segment analysis, debt vs. equity classification, exit/disposal activity, revenue recognition (including software revenue recognition under legacy ASC 985-605 and current ASC 606 revenue recognition guidance) and cash flow classification issues.
Prior to joining WilliamsMarston, Justin held senior positions at Aptean and in PricewaterhouseCoopers LLP’s Capital Market and Accounting Advisory Services (CMAAS) practice. Prior to serving in PwC’s CMAAS practice, Justin was in PwC’s Private Company Services (PCS) assurance practice.
Justin holds both a Bachelor of Science in Business Administration and a Masters in Accounting from Appalachian State University and is a Certified Public Accountant in both the states of North Carolina and Georgia.
Tim Benefield
Director – Advisory
Tim Benefield
Director – Advisory
Tim brings over 20 years of accounting and advisory experience to WilliamsMarston. Prior to WilliamsMarston, Tim was a Senior Consultant at Paradigm Advisory, LLC, a boutique advisory firm that provides complex accounting advisory solutions to middle market companies that are going through change, while also assisting with external audit support, carve-outs, technical accounting, IPO readiness, transaction due diligence and other challenges commonly encountered in the ripples of a transaction. While at Paradigm Advisory, Tim advised clients on a variety of complex matters in multiple business sectors and industries, including software, biotech, manufacturing and retail.
Prior to Paradigm Advisory, Tim worked for eight years as the Senior Director of Finance and Accounting at BlueCross BlueShield of SC, leading a team of accounting professionals in all areas of finance, accounting and financial reporting. Prior to BlueCross, Tim held various roles, including Controller, Financial Reporting Manager and Senior Manager of Accounting at both private and public companies. Tim’s areas of expertise include forensic accounting, financial reporting, and process improvements, including extensive ERP implementation experience and multiple implementations of Sarbanes Oxley compliance.
Tim holds a Bachelor of Science from Southern Wesleyan University and an Associates degree in Accounting from Midlands Technical College.
Darrell Johnson
Director – Advisory
Darrell Johnson
Director – Advisory
Darrell brings over 20 years of information technology, data, and management experience to WilliamsMarston. Since joining WilliamsMarston, Darrell has assisted with the carve financials for a $1.6B transaction requiring significant analytics of several years of financial data. Additionally, Darrell has assisted with the automation of complex revenue recognition models, created scripts to help resolve multinational intercompany balance discrepancies, and used analytics to ensure data integrity across disparate systems, identify KPIs, and assist with a multitude of FP&A, M&A and accounting matters.
Prior to joining WilliamsMarston, Darrell was a director in KPMG LLP’s Deal Advisory practice where he assisted with accounting change and regulatory compliance matters such as leasing or revenue recognition. Additionally, Darrell used technology and data tools in the M&A space to assist with integration and separation matters such as discontinued operations, held for sale accounting, intercompany matters, CTA/FX issues, fixed asset and legal entity bifurcation, and carve-out financial statements.
Darrell is a member of the North Carolina State Bar. He also holds a Bachelor of Arts degree in Mathematics from the University of North Carolina at Chapel Hill, a Master of Science in Information Technology and a Master of Business Administration from the University of Maryland, University College, and a Juris Doctor degree from the Mitchell Hamline School of Law.
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