Oops! Something went wrong while submitting the form.
Get a Demo
See your data in HubiFi < 2 days
Get practical steps for ASC 606 automation, from setup to ongoing compliance. Learn how automation simplifies revenue recognition and reduces manual work.
As your business grows, the manual processes that once worked start to break down. Nowhere is this more obvious than in revenue accounting. A spreadsheet that was manageable with a hundred contracts becomes an unworkable liability with a thousand. For high-volume businesses, trying to manage ASC 606 compliance manually isn't just inefficient—it's a significant risk to your financial integrity. You need a system that can scale with you. This is the core promise of ASC 606 automation: to provide a robust, scalable foundation for your financial operations, ensuring your reporting remains accurate and timely, no matter how fast you grow.
If you’ve ever felt like ASC 606 compliance is a puzzle with too many pieces, you’re not alone. This accounting standard isn’t just a new set of rules; it’s a fundamental shift in how businesses report revenue, moving from a rules-based approach to a principles-based one. The core idea is simple: recognize revenue when you deliver a good or service to a customer. But applying that principle to complex contracts, subscription models, and multi-element arrangements is where the real work begins.
Getting it right is non-negotiable. Accurate revenue recognition is essential for maintaining healthy financial statements, building investor confidence, and making sound business decisions. The standard was created to bring consistency to how companies report their earnings, but achieving that consistency requires a deep dive into your contracts and operations. It forces you to connect every dollar of revenue to a specific customer promise—a major change from older, more rigid guidelines. For businesses with recurring revenue or contracts that evolve over time, this creates a significant operational challenge. This is why so many high-volume businesses find that their old methods, especially manual spreadsheets, just don't cut it anymore.
At the heart of ASC 606 is a five-step model that acts as a framework for recognizing revenue. It’s designed to guide you from the moment a contract is signed to when you can officially count the money as revenue.
Here’s the breakdown:
This model standardizes revenue practices, making it easier to compare financial statements across different companies. It ensures revenue is a true reflection of the value delivered to the customer.
The theory of the five-step model is one thing; putting it into practice is another. Many companies hit a wall when they try to manage compliance using manual spreadsheets. These documents quickly become tangled and error-prone, especially as contract volumes increase or terms become more complex. The biggest hurdles often appear when interpreting contracts. Figuring out what qualifies as a distinct performance obligation or how to handle variable considerations can be a major challenge. This is where outdated processes break down, leaving finance teams struggling to keep up and maintain accuracy. It’s a common reason businesses start looking for a more robust, automated approach.
ASC 606 compliance isn't a one-time project—it’s an ongoing operational shift. It requires your team to perform a detailed review of every customer contract to map out all performance obligations. From there, they must determine the transaction price, allocate it correctly, and recognize revenue only as each promise is fulfilled. This means your accounting processes become much more dynamic. Instead of recognizing revenue at a single point in time, you might be recognizing it over weeks, months, or even years. This continuous tracking and adjustment cycle demands a high level of precision and can significantly increase the daily workload for your finance team without the right systems in place.
When it comes to ASC 606, you have two main paths: the manual route, typically involving a maze of spreadsheets, or the automated route, which uses specialized software. The choice you make doesn't just affect your accounting team; it has a ripple effect across your entire business, influencing everything from how quickly you can close your books to the strategic decisions you make.
Many companies start with spreadsheets because they seem simple and accessible. But as your business grows and your contracts become more complex, this manual approach can quickly turn into a significant bottleneck. You end up spending more time wrestling with formulas and tracking down data than you do analyzing what the numbers actually mean.
Automation, on the other hand, is designed to handle that complexity from the start. It transforms revenue recognition from a reactive, time-consuming task into a streamlined, proactive process. Instead of just keeping up, you can get ahead. It’s about trading manual effort for system-driven accuracy, giving your team the tools and the time to focus on growth. The right ASC 606 automation software doesn't just do the work for you—it provides a clear, reliable picture of your company's financial health.
If you’re using spreadsheets to manage ASC 606, you’re likely familiar with the headaches. Many companies rely on these clunky, outdated processes, which often lead to errors and inefficiencies in revenue recognition. A single broken formula or copy-paste mistake can throw off your entire financial statement, creating a fire drill to find and fix the issue.
Beyond the risk of human error, spreadsheets are incredibly time-intensive. Your team has to manually enter data, update revenue schedules, and reconcile numbers across different systems. This process isn't just slow; it's also difficult to scale. As you add more customers and more complex contracts, your spreadsheets become more fragile and harder to manage, making audits a stressful, document-heavy ordeal.
Automating revenue recognition helps your business do more work with less effort while giving you confidence that your numbers are correct. It fundamentally changes revenue accounting from a confusing, reactive job into a smooth, planned process. Instead of your team spending the end of each month chasing down data and manually calculating deferrals, the system handles it automatically.
This shift frees up your finance professionals to focus on higher-value activities like financial planning, analysis, and strategy. They can spend their time interpreting the data, not just compiling it. Automation provides a single source of truth, ensuring consistency and accuracy across all your revenue streams. It’s a move that empowers your team to be more strategic and forward-thinking.
While spreadsheets might seem like the "free" option, they come with significant hidden costs. The hours your team spends on manual data entry, reconciliations, and error correction add up quickly. These labor costs, combined with the risk of expensive compliance mistakes or audit adjustments, can make the manual approach far more costly in the long run.
Automation, on the other hand, is an investment in efficiency and accuracy. It reduces labor costs, speeds up the close process, and gives your finance team real-time visibility into performance obligations and revenue trends. When you look at the pricing for an automation solution, you're not just buying software; you're buying back your team's time, reducing compliance risk, and gaining the financial clarity needed to make smarter business decisions.
One of the most immediate benefits of automation is a faster financial close. Some reports show that automation can speed up the close process by up to 50% by handling the five steps of ASC 606 automatically. The system pulls data directly from your CRM, billing, and ERP systems, performs the necessary calculations, and generates journal entries without manual intervention.
This efficiency comes from seamless integrations with your existing tools, which eliminate the need to export and import data between disconnected spreadsheets. With everything centralized, reconciliations become simpler and faster. A quicker close means you get critical financial reports sooner, allowing your leadership team to act on timely insights instead of waiting weeks for the books to be finalized.
Choosing an ASC 606 automation tool is a big decision. It’s not just about finding software that can do the math; it’s about finding a partner for your financial operations. The right platform will fit into your existing workflow, handle the unique complexities of your business, and give you data you can actually trust. When you’re evaluating your options, it’s easy to get lost in feature lists and sales pitches.
Instead of focusing on bells and whistles, concentrate on the core functions that directly address the challenges of ASC 606. A great tool should feel like an extension of your team, taking on the heavy lifting of compliance so you can focus on strategy. It needs to be robust enough to handle your most complicated contracts but intuitive enough that your team can use it without a steep learning curve. Here are the essential capabilities you should look for.
Your customer contracts are the starting point for all revenue recognition. A solid automation tool needs to handle the full spectrum of your agreements, from simple one-time sales to complex, multi-year subscriptions with various add-ons. It should be able to automatically parse contract modifications, discounts, and bundled services without requiring you to build manual workarounds. The goal is to have a system that can accurately interpret your contracts and apply the right accounting rules from the start. This is especially important for businesses with high-volume transactions, where it’s impossible to manually review every single agreement and still understand the standard's requirements for each one.
At its core, ASC 606 is about recognizing revenue as you fulfill promises to your customers. These promises are called performance obligations. Your automation software must be able to accurately identify each distinct performance obligation within a contract, even when they are bundled together. For example, in a single software subscription deal, you might have obligations for the software license, implementation services, and ongoing support. The tool should track the status of each one, recognizing revenue only as each specific obligation is satisfied. This process of identifying and mapping out all performance obligations is a foundational step, and automating it removes a massive manual burden.
Once performance obligations are identified, the total contract price has to be allocated across them based on their standalone selling prices. This can get complicated, especially when discounts are involved or when some items don't have a clear list price. A capable ASC 606 tool will handle these allocations automatically, applying the correct logic even in nuanced scenarios. It should also be able to manage reallocations if a contract is modified down the line. By standardizing revenue recognition practices, the software ensures that revenue is recognized at the right time, giving you a more accurate picture of your company’s financial performance.
If you’ve ever tried to defend a spreadsheet during an audit, you know how stressful it can be. One of the biggest advantages of an automation tool is the clear, unchangeable audit trail it creates. Every calculation, journal entry, and data point should be traceable back to its source. This means that when an auditor asks how you arrived at a specific number, you can show them the exact step-by-step process within the system. This level of transparency not only makes audits smoother but also gives you confidence in your own numbers. Automated systems reduce errors and provide the documentation needed to prove compliance without a frantic scramble for evidence.
The days of waiting until the end of the month to understand your revenue picture are over. Modern automation tools should offer real-time or near-real-time data processing. This means as soon as a contract is signed or a performance obligation is met, the system updates your revenue schedules and financial reports. This continuous recognition gives you an always-on view of your company’s financial health, including key metrics like deferred revenue and recognized revenue. Having the ability to improve real-time reporting capabilities is invaluable for forecasting, strategic planning, and making agile business decisions based on the most current data available.
An ASC 606 automation tool can’t operate in a vacuum. It needs to connect seamlessly with the other systems you rely on, like your CRM, ERP, and billing platforms. Look for a solution with robust, bi-directional integrations that ensure data flows automatically between systems. This eliminates the need for manual data entry or clunky CSV uploads, which are common sources of errors. When your revenue recognition software is perfectly in sync with your other tools, you create a single source of truth for your financial data. This ensures consistency across your entire organization and gives you a reliable foundation for all your reporting and analysis.
Switching to an automated revenue recognition system is a major step forward for any business. But let's be honest—there's a lot of noise out there about what automation can and can't do. Believing the hype can lead to mismatched expectations and a rocky implementation. Let's clear the air and tackle some of the most common myths so you can approach automation with a realistic and strategic mindset.
It’s tempting to think of automation as a magic button you press once and never think about again, especially when you’re used to clunky spreadsheets. The reality is that ASC 606 automation is an ongoing process, not a one-time project. Your business is dynamic—contracts get updated, pricing models change, and new services are introduced. Your automation system needs to evolve with you. Think of it less like a finished product and more like a core part of your financial operations that requires regular check-ins and adjustments to stay aligned with your business goals and maintain ASC 606 compliance.
If your business has straightforward contracts, your implementation might be less complex, but that doesn't mean any off-the-shelf tool will do. Every business is unique. A subscription-based SaaS company has vastly different revenue streams than a firm that handles multi-year, project-based contracts. A generic solution can’t properly handle that kind of variation. You need a system that is flexible enough to adapt to your specific contract structures, performance obligations, and billing cycles. This is why it's so important to find a solution that truly understands the challenges of your business model.
Wouldn't it be great if you could just flip a switch and have a fully functioning automation system? Unfortunately, that's not how it works. A successful transition requires careful planning and execution. The process involves assessing your current revenue processes, cleaning and migrating historical data, configuring the new system to your specific needs, and training your team. A proper implementation plan is essential, whether you handle it internally or with the help of a consultant. Rushing this phase will only create more headaches down the road, so give it the time and attention it deserves.
Automation is incredibly powerful for managing complexity, but it doesn't make it disappear. If your contracts include variable consideration, multiple performance obligations, or significant financing components, those details still exist. What automation does is provide a structured, consistent, and transparent way to handle them. Instead of simplifying the contract itself, it simplifies the accounting process, reduces the risk of human error, and creates a clear audit trail. This accuracy is essential for properly representing your financial performance and maintaining investor confidence.
Picking the right automation software is a major decision that will affect your entire finance team. It’s about more than just ticking off feature boxes; it’s about finding a partner that fits into your current workflow, supports your team, and grows with you. The goal is to find a tool that simplifies compliance without adding unnecessary complexity to your tech stack. A great solution should feel like a natural extension of your team, handling the heavy lifting of revenue recognition so you can focus on strategy and growth.
As you evaluate your options, think about your day-to-day operations and your long-term goals. What are your biggest revenue recognition headaches right now? Where do you see your business in five years? The right tool will solve today’s problems and be ready for tomorrow’s challenges. Keep these key criteria in mind to find a solution that truly works for your business.
Your revenue data probably lives in multiple places—your CRM, your payment processor, your ERP. A standalone ASC 606 tool that doesn’t talk to your other systems just creates more manual work. You need a solution that can automatically pull data from all your sources. The best platforms will link with other financial software to gather all sales information in one place, eliminating the need for manual data entry and reducing the risk of errors. Before you commit, make sure the tool offers robust integrations with the systems you already use every day. This is the foundation for true automation.
No two businesses recognize revenue in exactly the same way. Your contracts, pricing models, and performance obligations are unique. A rigid, one-size-fits-all solution will force you into awkward workarounds. Instead, look for a platform that gives you the flexibility to set up your own rules for how revenue is recognized. Whether you deal with multi-element arrangements, contract modifications, or usage-based billing, the software should adapt to your specific needs. This level of customization ensures that the system supports your business model, not the other way around, giving you accurate and compliant financials you can trust.
The solution that works for you today must also work for you tomorrow. As your company grows, your transaction volume will increase, and your revenue streams may become more complex. The last thing you want is to outgrow your software and face a painful migration process in a few years. Ask potential vendors how their systems perform under pressure. A scalable solution should be able to handle more transactions as a business gets bigger without slowing down or compromising accuracy. Choosing a tool built for high-volume businesses ensures you have a reliable partner for the long haul.
The ultimate goal of ASC 606 automation is to produce accurate, compliant financial statements with less effort. That’s why reporting capabilities are so important. A strong solution will automatically create accounting reports that follow ASC 606 and IFRS 15 rules, saving your team countless hours during the financial close. Look for features like detailed disclosure reports, revenue waterfalls, and clear audit trails. These not only make audits smoother but also provide valuable insights into your business performance, helping you make better strategic decisions based on real-time data.
You’re trusting your automation software with your most sensitive financial data, so security is non-negotiable. A reputable provider will prioritize protecting your information through robust security measures. Look for certifications like SOC 2 compliance, data encryption both in transit and at rest, and granular user permissions to control access. Top firms use advanced technology to improve audit quality and ensure compliance, and your software partner should meet a similar standard. Verifying a vendor’s security protocols gives you peace of mind and helps you confidently demonstrate compliance to auditors and stakeholders.
Switching to an automated system is a big step, but with the right plan, you can make the transition smooth and successful. It’s not just about installing software; it’s about preparing your data, your team, and your processes for a new way of working. A thoughtful setup ensures you get the most out of your investment and achieve accurate, compliant revenue recognition from day one. Think of it as building a strong foundation—the effort you put in now will pay off with faster financial closes, cleaner audits, and more reliable data for years to come. Here’s how to approach your setup process step by step.
Before you jump into a new system, take an honest look at where your company stands. Many businesses are still working with clunky spreadsheets and manual processes that are prone to errors. Are your current methods holding you back? Assessing your readiness means understanding the gaps in your existing workflow and identifying exactly what you need an automated solution to solve. This initial step helps you set clear goals for the implementation. It also ensures you choose a tool that truly fits your needs instead of a generic solution. You can find more helpful articles on this topic in the HubiFi blog to guide your internal review.
Moving your data isn't as simple as copying and pasting. A successful migration requires a detailed plan. You'll need to review all your existing contracts to identify every performance obligation, determine the transaction price for each, and map out how that price is allocated. This process is your chance to clean up and organize your data, ensuring the information going into your new system is accurate and complete. A well-planned migration prevents headaches down the road and sets your automation tool up to work correctly from the start. It’s also a good time to see how a new tool handles your data by exploring its available integrations.
Your new automation software is only as good as the people using it. Proper training is essential for a smooth transition and long-term success. It’s a good idea to assign a dedicated person from your team to lead the implementation project. This person can act as the main point of contact and work closely with your software provider to develop training materials and policies. Getting your team involved early helps build their confidence and ensures everyone understands their role in the new workflow. This collaborative approach makes your team feel like part of the solution, leading to better adoption of the new system.
Once the system is set up, you need to test it thoroughly before going live. Run parallel processes, comparing the results from your new automated system with your old manual methods. This helps you catch any discrepancies and fine-tune the configurations. Validating the data ensures that your revenue is being recognized accurately and that your financial statements are reliable. This step is critical for maintaining investor confidence and passing audits without a hitch. You can get a head start on this process when you schedule a demo to see exactly how the software will handle your specific use cases.
ASC 606 compliance isn't a one-time project; it's an ongoing commitment. Your contracts will change, your business will evolve, and accounting standards may be updated. Your team needs to be prepared for continuous maintenance and monitoring. This includes regularly reviewing your processes, updating system configurations as needed, and staying informed about any changes in compliance requirements. Establishing a routine for ongoing maintenance ensures your financial reporting remains consistent and transparent. This proactive approach helps you adapt to new challenges and maintain the integrity of your revenue recognition practices over time.
Switching to an automated ASC 606 solution is a huge step, but it’s not the finish line. The real value comes from what you do next. How do you know if the tool is actually working for you? And how can you make sure your compliance strategy stays solid as your business grows and regulations evolve? It starts with being intentional about measuring your success and planning for the future.
Think of it like this: you’ve just upgraded your car, but you still need to check the oil, monitor your gas mileage, and take it in for regular tune-ups. The same principle applies here. By setting clear metrics and creating a plan for ongoing improvement, you ensure your investment pays off for years to come. This means defining what success looks like for your team, keeping a close eye on your financial close process, and actively working to reduce errors. It also involves staying ahead of regulatory changes and fostering a culture of continuous improvement. This proactive approach not only keeps you compliant but also turns your revenue data into a powerful tool for making smarter, data-driven decisions. You can find more helpful tips and strategies in the HubiFi Blog.
Before you can measure success, you need to define what it looks like for your business. While ASC 606 compliance is the main goal, the benefits of automation go much further. Think about the specific pain points you wanted to solve. Was it the long hours spent closing the books? The constant worry about errors in your spreadsheets? Or the inability to get clear, real-time revenue insights?
Your key performance metrics (KPIs) should reflect these goals. Consider tracking metrics like the time it takes to complete your monthly close, the number of manual journal entries required, or the reduction in audit-related queries. Choosing the right software helps ensure not just accurate reporting but also gives your management team the ability to make forward-looking, data-driven decisions.
One of the most immediate and satisfying benefits of automation is a faster financial close. Manual processes are slow and tedious, but automation can speed things up significantly—in some cases, by up to 50%. Start by benchmarking your current close time, from the end of the period to when your financial statements are ready.
After implementing your new system, track this metric every month. You should see a noticeable decrease in the time it takes. This isn't just about saving time; it's about freeing up your finance team from repetitive tasks so they can focus on more strategic analysis. A faster close also means you get critical financial information into the hands of decision-makers sooner, giving your business a competitive edge.
Manual data entry is prone to human error, which can lead to inaccurate financial statements and stressful audit seasons. Automated systems minimize this risk by syncing data directly from your CRM, ERP, and billing platforms. This continuous flow of information ensures your revenue recognition is both timely and precise.
To measure this, start tracking your error rate. You can monitor the number of post-close adjustments or restatements you have to make. A well-implemented automation tool should bring this number down dramatically. Fewer errors mean more reliable financials, which builds confidence with investors, lenders, and your leadership team. It also means a smoother, less complicated audit process for everyone involved.
The world of accounting standards is never static. ASC 606 was a major shift, and future updates or new regulations are always a possibility. Your compliance strategy needs to be agile enough to adapt. This is where having the right technology partner makes a huge difference. A good automation solution will be updated to reflect the latest regulatory requirements, taking the burden off your team.
Beyond relying on your software, create an internal process for staying informed. Assign someone on your team to monitor updates from the Financial Accounting Standards Board (FASB). Compliance with ASC 606 is essential for accurately representing your company’s financial health, so it’s worth the effort to stay ahead of any changes.
ASC 606 automation is not a "set it and forget it" solution. To get the most out of your system, you need a strategy for continuous improvement. This should be a collaborative effort involving your finance team and your automation provider. Schedule regular check-ins—quarterly or semi-annually—to review your KPIs and discuss what’s working and what could be better.
Gather feedback from your team. Are there any processes that are still clunky? Are there reports they need that aren't available? Use this feedback to refine your workflows and configurations. By treating compliance as an ongoing project rather than a one-time task, you ensure your processes remain efficient and effective as your business scales. If you need a partner to help build this strategy, you can always schedule a demo to discuss your needs.
My business is still small and our contracts are pretty straightforward. Can't I just stick with spreadsheets for now? You certainly can, and many businesses start that way. The real question is about scalability and risk. While spreadsheets might manage a handful of simple contracts, they don't provide a solid foundation for growth. As your business expands, manual tracking becomes a significant time drain and a source of errors that can be costly to fix, especially during an audit. Adopting an automated system early establishes good habits and ensures your financial processes are ready to handle complexity long before it becomes a problem.
What's the biggest mistake companies make when they switch to an automated system? A common pitfall is treating automation like a magic wand that requires no preparation. A successful transition depends on thoughtful planning. This means taking the time to clean up your existing contract data, clearly defining your revenue recognition rules, and properly training your team on the new workflow. Rushing the setup or migrating messy data will only lead to inaccurate results and frustration. The tool is powerful, but it needs a clean slate and a clear strategy to work effectively.
How does an automation tool handle contract changes, like upgrades or cancellations, that happen mid-month? This is where automation truly shines. A good system is designed to manage these modifications automatically. When a customer upgrades, downgrades, or cancels, the software can recalculate the transaction price, reallocate revenue across the performance obligations, and adjust the recognition schedule from that point forward. It creates a clear audit trail for the change, so you can easily see how and why the numbers were adjusted without having to manually rebuild a spreadsheet.
Will this kind of software work with the CRM and billing tools we already use? It absolutely should. A quality automation tool is not meant to be a standalone island. It should act as a central hub that connects seamlessly with your existing systems, like your CRM, ERP, and payment platforms. This integration is key because it allows data to flow automatically, eliminating manual entry and ensuring everyone is working from a single source of truth. Before choosing a solution, always confirm it can connect with the specific tools your business relies on.
Is automation just about compliance, or are there other business benefits? While achieving ASC 606 compliance is the primary driver, the benefits go much further. Automation frees your finance team from tedious, manual tasks, allowing them to focus on strategic analysis and planning. It provides real-time visibility into your revenue streams, which helps leadership make faster, more informed decisions. Ultimately, it transforms revenue recognition from a reactive accounting chore into a proactive tool for understanding your company's financial health and driving growth.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.
Copyright © 2025 HubiFi | All rights reserved.
