Updates from Enporion
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North America
Clark, NJ
(Global Headquarters)
100 Walnut Avenue, Suite 304
Clark, NJ 07066
Phone: 732-382-6565
Email: info@gep.com
Can Contract Management Services Help Software Companies with VSOE Challenges?
One of the leading causes of financial restatements among software companies is due to revenue-recognition problems, namely with Vendor Specific Objective Evidence (VSOE). Ten years ago, the American Institute of Certified Public Accountants (AICPA) cracked down on when revenue is recognized not only for pure software products and services, but also any devices that rely on software, such as cars, phones, and other devices (SOP97-2).
With the revenue questions on financial statements of software or combined software product and services companies, it becomes a bigger challenge for them to deal with the investment community. Investors are less willing to consider a company if they have to delve into such issues as whether or not the revenue recognition is being accurately stated. In today’s economy, that makes it even harder to engage investors, lending institutions, and even gain the “thumbs up” from analysts and shareholders.
While it is primarily an accounting revenue recognition challenge, half the battle is contract conformity and accuracy. How a company manages contracts can alleviate errors at the front end of the sales process by using standard templates that are created in line with the necessary accounting procedures.
One company has gone so far as to tell its salespeople that they would not receive full credit for a sale unless the contract was written appropriately (Epicor Software, according to the CFO.com article "Why VSOE Spells Trouble", Jan. 2008). Payment to sales people happens when the company is able to book the deal from an accounting perspective, so commissions align properly.
Enporion’s Contract Lifecycle Management provides pre-approved clauses and pre-built templates that speed the creation process, force compliance and conformity, and basically improve contract monitoring. Contract Manager can help establish disciplines that will lead to accurate contracts aligned with revenue recognition requirements.
If you’re interested in how Enporion’s Contract Lifecycle Management solution works and how it can benefit your organization, contact us at (866) 4-Enporion or send an email to information@enporion.com
