Finance heads are now expected to elevate their tools and processes as they navigate their way around new models for revenue recognition.
According to automated revenue recognition software developer RightRev, modern solutions allow businesses to support evolving models, adapt fast, and stay competitive, but these models bring complexity which end up making finance teams to rethink their strategies.
Efficient processes, automation, and real-time insights are essential for agility. Compliance with standards like ASC 606 and IFRS 15 is still crucial, but the focus has shifted to optimising operations for growth.
For many organisations, revenue recognition is a strategic function that impacts forecasting, investor relations, and the company’s financial health report. RightRev says financial leaders regularly struggle with non-standard contracts, audit risks, process inefficiencies, and a lack of automation, all of which create friction in properly recognising revenue.
There are five big challenges that finance leaders must handle in terms of revenue recognition in 2025:
- Meeting compliance and audit standards. Inconsistent application of IFRS 15 and ASC 606 can lead to significant risks, including audit adjustments, compliance penalties, and investor mistrust. Manual revenue recognition processes are especially vulnerable to errors due to the complexity of identifying and allocating performance obligations, determining total transaction prices, and recognising revenue over time or at a point in time.
- Managing non-standard deals and complex contracts. Non-standard deal structures can result in revenue leakage, where potential revenue is lost due to inefficiencies or errors in contract management. Particularly with subscription-based businesses, mid-cycle amendments or contract modifications—such as service upgrades or downgrades—create a significant challenge.
- Systems and process delays. Finance teams feel a direct impact from these inefficiencies, as they are directly responsible for ensuring the accuracy of revenue recognition, closing the books on time, and delivering reliable financial forecasts. Their jobs become more time-consuming due to the manual reconciliation and workarounds necessary to address data discrepancies.
- Spreadsheets cause manual work and time delays. Companies may lose 20% to 30% of their annual revenue due to significant discrepancies, missed deadlines, and other inefficiencies associated with manual processes. For a company generating $1 million in revenue, this translates to a potential loss of up to $300,000.
- Inaccurate forecasting and reporting. Forecasting inaccuracies have far-reaching consequences for finance teams, as these affect their ability to make informed decisions, allocate resources effectively, and collaborate across departments. One of the most immediate consequences of inaccurate forecasting is poor decision-making. When revenue projections are based on overly optimistic assumptions, whether due to aggressive sales targets, customer churn, or misaligned renewal expectations, finance teams have no choice but to adjust their strategies on the fly.
