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Get clear on ASC 606 standalone selling price and see how using an ERP to manage SSP allocation across products can simplify compliance and reporting.
As your business grows, the spreadsheets that once managed your finances start to break. This is especially true for revenue recognition. With more contracts and complex product bundles, manual tracking becomes a huge risk. This is where a deep understanding of the ASC 606 standalone selling price becomes your secret weapon. But a manual ssp analysis asc 606 won't cut it for long. The real key is using an ERP to manage SSP allocation across products. We'll cover the essential practices for establishing a solid SSP framework that supports your growth, keeps you compliant, and gives you the clarity to make smart decisions.
If your business bundles products or services together in a single contract, understanding the Standalone Selling Price (SSP) is non-negotiable for ASC 606 compliance. Think of it as the foundation for recognizing revenue correctly. While the term might sound like accounting jargon, the concept is pretty straightforward: it’s all about figuring out the individual value of each item you sell. Getting this right is crucial for ensuring your financial reports accurately reflect how and when you earn your revenue. For companies with high transaction volumes, this process can become complex quickly, which is why many turn to automated revenue recognition to maintain accuracy and efficiency. Properly determining SSP helps you create a clear, defensible, and compliant revenue story that stands up to scrutiny from auditors and investors alike. It’s the difference between a clean audit and a series of painful questions about your methodology. Without a solid SSP framework, you risk misstating revenue, which can have serious consequences for financial reporting, investor confidence, and even your company's valuation. It’s not just about following the rules; it’s about building a financially sound business from the ground up.
At its heart, the Standalone Selling Price is simply the price you would charge a customer for a good or service if they bought it separately. Imagine you sell a software subscription that comes with a one-time implementation service. If you also offer that implementation service on its own for $500, then $500 is its SSP. It’s the observable, fair market price for that specific deliverable. This price is the anchor you’ll use to figure out how much revenue to recognize from a bundled deal. It’s not a guess, but rather a figure based on your actual pricing strategy or solid market data.
SSP is the key to correctly allocating a contract’s total price across multiple performance obligations—a term ASC 606 uses for each distinct promise you make to a customer. When you sell a bundle, you receive a single payment, but you deliver value at different times. For example, you might deliver software access over a year and a training session in the first month. You need to split the total payment between the software and the training to recognize revenue as each is delivered. SSP provides the method for this split, ensuring your revenue reporting aligns with your actual performance and meets ASC 606 compliance standards.
If your company operates on a global scale, you’ll also need to be familiar with IFRS 15, the international standard for revenue recognition. The good news is that IFRS 15 and ASC 606 are largely converged, meaning their core principles are almost identical. Just like with ASC 606, IFRS 15 requires you to allocate the transaction price to each distinct performance obligation based on its standalone selling price. This ensures that revenue is recognized consistently, whether you're reporting in the U.S. or Europe. The need for a clear, repeatable SSP methodology is just as critical for passing audits and maintaining compliance under these global accounting rules. For businesses managing transactions across different regions, this alignment simplifies reporting, but it also underscores the need for a robust system that can handle these complexities accurately and efficiently.
It’s easy to confuse SSP with the contract price, but they serve different purposes. The contract price (or transaction price) is the total amount a customer agrees to pay for a bundled package, which often includes a discount. The SSP, on the other hand, is the full price of an individual item if sold alone. For instance, if your software’s SSP is $1,200 and support’s SSP is $300, the combined standalone value is $1,500. If you sell them together for a discounted contract price of $1,300, you can’t just assign the full $1,200 to the software. Instead, you must allocate the $1,300 discount proportionally across both items based on their SSPs.
Determining the Standalone Selling Price (SSP) is the cornerstone of allocating revenue correctly under ASC 606. While it might sound complicated, the standard provides a few practical methods to get you there. The goal is always to estimate the price a customer would pay for a good or service if they bought it separately. Think of it as finding the "fair value" for each distinct promise you make to your customer. Choosing the right approach depends on the data you have available and the nature of your products or services. Let's walk through the accepted methods you can use.
This is the most straightforward and reliable way to determine SSP. The idea is simple: if you already sell a specific product or service on its own, that price is your observable SSP. You don't need to estimate anything because you have direct evidence of what the market is willing to pay. For example, if you sell a software license bundled with a support package, but you also sell that same support package separately for $500 a year to other customers, then $500 is your observable SSP for the support. This method is preferred by auditors because it’s based on concrete, verifiable transaction data.
What if you don't sell a particular item separately? The next best thing is to look at what your competitors are charging for a similar product or service. This approach requires you to do a bit of market research to figure out the price a customer would realistically pay. You might look at competitors' public price lists or industry reports. You’ll then need to adjust that market price to reflect your own company’s costs, expected margin, and market position. For instance, if a competitor’s product is slightly more advanced, you might adjust your estimated SSP downward to account for that difference.
When you can't find a direct observable price or a comparable market price, you can build the SSP from the ground up. This method involves forecasting the total costs required to fulfill the performance obligation and then adding a normal profit margin. The costs should include direct labor, materials, and any other allocated expenses. The key is to ensure the margin is reasonable for your industry and consistent with what you apply to similar products. This approach is often used for new or highly customized services where no direct market equivalent exists, making it a valuable tool for innovative business models.
This method is a bit different and should only be used in specific situations. You can use the residual approach when you have a bundle of goods or services where the SSP for some items is highly variable or uncertain, but you have a reliable SSP for the other items. You start with the total transaction price and subtract the known SSPs of the other items in the bundle. The leftover amount becomes the estimated SSP for the uncertain item. The Financial Accounting Standards Board (FASB) has specific criteria for using this method, so it’s important to document your reasoning carefully if you choose this path.
You aren't limited to using just one method for a single contract. In fact, for complex bundles, it’s common to use a combination of approaches. You might use the observable price for one performance obligation, a market assessment for another, and a cost-plus-margin approach for a third. This flexibility allows you to use the most reliable data available for each distinct part of the contract. The ultimate goal is to arrive at an SSP that faithfully represents the value of each item. Managing these different inputs can be complex, which is why many businesses rely on automated solutions to maintain consistency and ensure compliance.
Beyond the main estimation approaches, many businesses use more direct, rule-based methods to establish SSP, especially when they have standardized price lists and discount structures. These practical methods are often easier to implement and defend because they are tied directly to your company's established pricing policies. They help create a consistent and repeatable process, which is exactly what you need to manage revenue recognition effectively as your business scales. Having a clear set of rules removes guesswork and provides a solid foundation for your financial reporting, offering more insights into your financial operations and simplifying audit preparations.
This method is as straightforward as it sounds. Your SSP is simply the standard unit price for an item as listed on your official price sheet. Many companies maintain different price lists for various customer segments, such as retail, wholesale, or partners. In this case, the SSP is pulled directly from the relevant list for that specific type of customer. The beauty of this approach is its clarity and verifiability. There's no estimation involved; the price is what it is. This makes it incredibly easy to justify your SSP during an audit, as you can point directly to the price list used in the transaction.
Many businesses offer standard discounts from a master list price. This method formalizes that process for SSP determination. You start with the official list price for a product or service and then apply a predetermined discount based on established rules. These rules could be tied to customer type, order volume, or loyalty status. For example, you might have a policy that all enterprise customers receive a 15% discount on a particular service. This approach prevents inconsistent, one-off price reductions and creates a logical, defensible framework for how you arrive at the final selling price, making your SSP methodology much easier to explain.
This method is perfect for ancillary products or services whose value is directly tied to a primary item. Think of things like extended warranties, premium support packages, or installation services. The SSP for these add-ons is calculated as a set percentage of the main product's price. For instance, if you sell a piece of equipment for $10,000, you might set the SSP for its two-year extended warranty at 15% of that price, or $1,500. This creates a logical and consistent link between the core product and its related services, making the SSP easy to calculate and justify across numerous transactions.
While similar to the adjusted market assessment approach, market-based benchmarking is often more direct. It involves setting your SSP by looking at what your competitors are charging for nearly identical products or services. This method is most effective when you operate in a market with high price transparency and comparable offerings. By aligning your SSP with prevailing market rates, you ensure that your valuation is grounded in economic reality. It serves as a powerful external validation of your pricing, demonstrating to auditors and stakeholders that your SSP reflects the true fair value of what you're selling in the competitive landscape.
Determining the standalone selling price for your products and services sounds simple enough on paper. But when you start applying the principle to real-world scenarios, things can get complicated quickly. Several common hurdles can make estimating SSP a genuine challenge for finance teams, requiring careful judgment and a solid strategy to overcome.
What do you do when a product or service has never been sold on its own? This is a common problem for businesses that offer integrated solutions or add-ons that are always part of a package. Without a history of standalone sales, you have no direct observable price to use. In this case, you have to estimate its standalone selling price based on the best available information. This often means relying on estimation techniques and exercising significant judgment, which can feel uncertain and open up your process to scrutiny during an audit.
Many companies sell products and services in bundles—think of a software license that comes with implementation services and a year of customer support. When you sell a package like this, ASC 606 requires you to allocate the total transaction price across each distinct item. The challenge lies in figuring out the standalone selling price for each component to ensure the revenue is recognized correctly as each obligation is fulfilled. This process can be complex, especially when the bundle includes a mix of goods, services, and licenses with different delivery timelines.
Your business doesn't operate in a vacuum. Market conditions, competitor pricing, and customer expectations are constantly changing, and these factors can directly influence a product's standalone value. An SSP you determined last quarter might not be appropriate today. To stay compliant, you need to use as much real-world information as you can gather, considering everything from broad market trends to specific customer segments. This requires ongoing analysis and a willingness to adjust your estimates as the market shifts, making SSP a dynamic target rather than a fixed number.
Determining SSP isn't just a job for the accounting department. It requires input and collaboration from multiple teams, including sales, marketing, finance, and product development. Your sales team has insights into pricing strategies and what customers are willing to pay, while your finance and accounting teams understand the compliance requirements. Getting everyone on the same page is crucial for accuracy. Without clear communication and a collaborative process, you risk using inconsistent data, leading to inaccurate revenue allocation and compliance issues down the road.
Under ASC 606, it’s not enough to simply estimate your SSP; you have to document how you arrived at that figure. You must establish the SSP at the beginning of a contract and maintain thorough records of the methods, data, and judgments you used. This documentation is your proof of compliance and will be essential if you’re ever audited. For many businesses, creating and managing this audit trail can be a significant administrative burden, especially when dealing with a high volume of contracts or complex offerings. Failing to meet these documentation demands can put your company at risk.
When you're managing revenue recognition in spreadsheets, the risk of human error is always lurking. A simple copy-paste mistake or a broken formula can have a domino effect, leading to misstated financials. This is especially true for businesses that sell bundled products. To a customer, a package of software, setup, and support seems straightforward, but for your finance team, it's a complex puzzle. Under ASC 606, each of those components is a separate performance obligation that needs its own price and revenue schedule. Manually tracking and allocating revenue for every single bundle is not only tedious but also incredibly risky, creating compliance vulnerabilities that can be difficult to spot until an audit.
The complexity of manual revenue recognition multiplies the moment a customer changes their contract. When a client decides to add a service, remove a feature, or change their subscription tier, it’s not a simple update. You have to go back to the original contract, recalculate the entire transaction price allocation, and adjust the revenue schedules for all related performance obligations. Doing this by hand is a time-consuming process that introduces new opportunities for error with every change. Each modification requires a complete re-evaluation to ensure compliance, turning what should be a straightforward customer update into a significant administrative headache and a major risk to your financial accuracy.
A manual revenue recognition process that works for ten contracts will break under the weight of a thousand. As your business grows, the sheer volume of transactions makes spreadsheets and other manual systems unsustainable. The risk of errors increases exponentially, and your finance team will spend more time fixing mistakes than performing strategic analysis. This inevitably leads to slow and inaccurate financial reporting, which can delay your month-end close and hinder your ability to make timely business decisions. If you're feeling this pain, it's a clear sign that you need an automated system designed to handle high-volume transactions and complex contracts without the manual overhead. Automating this process is essential for maintaining accuracy and efficiency as you scale.
Determining your Standalone Selling Price is a critical step, but implementing it consistently and accurately is where the real work begins. Getting it right means you can confidently recognize revenue, pass audits, and make smarter business decisions. The key is to build a process that is clear, repeatable, and grounded in solid data. These best practices will help you create a framework that not only ensures compliance but also supports your finance team instead of creating more headaches for them. Think of it as building a strong foundation—once it’s in place, everything else becomes much easier to manage.
Your SSP doesn't need to be a single, rigid number. In fact, it’s often more practical to use a range. The trick is to make sure this range is meaningful. According to ASC 606 guidance, your SSP range should be narrow enough to be precise and concentrated enough that the majority of your standalone sales for that item fall within it. For example, setting a range of $100-$500 is probably too wide, but $100-$120 could be perfectly acceptable if most of your transactions land there. This approach gives you flexibility while maintaining the integrity of your revenue allocation.
Markets shift, pricing strategies evolve, and customer behaviors change. Because of this, your SSP is not a "set it and forget it" figure. You should plan to review and update your SSPs on a regular basis—at least annually, or more often if you’re in a fast-moving industry. If you use a specific estimation method, like the residual approach, you need to periodically confirm it’s still the most appropriate choice. A regular review process ensures your SSPs continue to reflect market realities and keeps your revenue recognition accurate and defensible. It’s a simple habit that can save you from major compliance issues down the road.
The quality of your SSP estimate depends entirely on the quality of your data. That’s why a strong data management strategy is non-negotiable. Always start by looking for the most direct, observable evidence available. Before you turn to more complex estimation methods, you should be pulling data from your CRM, ERP, and billing systems to find actual standalone sales. Having a system that can integrate disparate data is a huge advantage here. It gives you a single source of truth, making it easier to find the observable prices you need and build a reliable foundation for any estimates you have to make.
When it comes to an audit, you’ll need to show your work. The best evidence for your SSP is the price at which you sell a good or service separately to similar customers in similar circumstances. If you have that, your job is much simpler. If you don’t, you’ll need to document how you arrived at your estimate using one of the approved methods. This means keeping detailed records of the market data you analyzed, the cost-plus calculations you performed, or the logic behind your residual approach. The goal is to create a clear audit trail that justifies your conclusions and demonstrates a consistent methodology.
Consistency is key for ASC 606 compliance. Once you’ve chosen a method for determining the SSP of a particular item, you should apply it consistently across all similar contracts. The best way to ensure this happens is by creating clear, written policy guidelines. This document should act as a rulebook for your team, outlining which methods to use in which scenarios and how to document the process. It removes guesswork, reduces the risk of human error, and makes training new team members much more straightforward. An automated solution can also help enforce these policies, ensuring every transaction is handled correctly.
Determining SSP is straightforward when you sell one product at a fixed price. But business is rarely that simple. Contracts evolve, product bundles get complicated, and pricing strategies shift. These situations can turn revenue allocation into a serious puzzle. When you’re dealing with moving parts like contract changes or bundled services, you need a clear strategy to stay compliant and ensure your financial reporting is accurate. Let’s walk through some of the most common complex scenarios and how to handle them.
Contracts aren't always set in stone. When a customer adds a service, removes a product, or changes the terms of your agreement, it’s considered a contract modification. This requires you to re-evaluate the transaction price and how it’s allocated across the performance obligations. The key is to determine standalone selling prices for each distinct good or service at the contract's inception. When a modification occurs, you treat it as a new, separate contract or as a change to the existing one, depending on the specifics. This decision impacts how you recognize revenue moving forward, making it critical to get right.
Similar to contract modifications, your performance obligations—the promises you’ve made to your customer—can change over time. You might add a new feature, extend a service period, or remove a deliverable. If you don’t have a directly observable price for a new or altered obligation, you’ll have to estimate its SSP. To do this, you should use all the observable information you can, considering market conditions and customer-specific factors. This ensures your revenue recognition roadmap remains accurate even when the scope of your deliverables shifts.
Many businesses sell goods and services together in a single package or bundle. These are known as multi-element arrangements, and they are a primary reason SSP is so important. Under ASC 606, you must allocate the total contract price to each separate item in the bundle based on its relative SSP. This process ensures that you recognize revenue as each distinct promise is fulfilled. The main challenge is accurately identifying the standalone selling prices for each component, especially when some items in the bundle aren't typically sold on their own.
Variable consideration includes things like discounts, rebates, refunds, or performance bonuses that can change the total transaction price. This uncertainty adds another layer of complexity to SSP. If the price of a good or service is highly variable, you might use the residual approach to estimate its SSP. This involves taking the total transaction price and subtracting the known SSPs of the other items in the contract. The remaining amount is then allocated to the item with the uncertain price. However, this method should be used carefully, as it’s only appropriate in specific situations where an item’s value is not easily determined on a stand-alone basis.
Determining your Standalone Selling Price isn't a one-time task you can check off your list. Think of it as a living component of your financial reporting that requires ongoing attention to stay accurate and compliant with ASC 606. Market conditions shift, pricing strategies evolve, and new products are launched. Your SSP methodology needs to keep pace with these changes.
Maintaining your SSP is about more than just following the rules; it’s a strategic practice that ensures your revenue recognition is always based on a solid foundation. When you have a reliable process for reviewing and updating your SSP, you’re not just preparing for a smooth audit—you’re also gaining a clearer, more accurate view of your company’s performance. This clarity helps you make better decisions about pricing, product bundling, and overall business strategy. By establishing a routine for SSP maintenance, you can confidently stand behind your financial statements and focus on growing your business.
Your prices don’t exist in a vacuum, and neither should your SSP. To keep your estimates accurate, you need to regularly look outside your own company and assess the broader market. This involves considering all the information you can reasonably get your hands on to understand what customers are willing to pay. Keep an eye on your competitors’ pricing for similar goods or services, and pay attention to industry trends and customer demand. If you operate in a market with dynamic pricing, this step is even more critical. A consistent market assessment ensures your SSP reflects current economic realities, not just historical data.
Once you’ve gathered market intelligence, you need a formal process to act on it. While an SSP is determined at the start of a contract, the assumptions behind it can become outdated. That’s why it’s essential to regularly check that your methodology is still appropriate. Establish a cadence for these reviews—whether quarterly, semi-annually, or annually—and stick to it. You should also define triggers for an ad-hoc review, such as a significant change in your pricing strategy or a major market shift. This creates a systematic approach that keeps your SSP analysis relevant and defensible.
SSP determination shouldn't fall on the shoulders of a single department. True accuracy comes from collaboration between your pricing, sales, accounting, and finance teams. Building strong internal controls means creating a clear, documented workflow for how SSP is established, reviewed, and approved. Each team brings a valuable perspective: sales can provide on-the-ground pricing insights, while finance and accounting ensure the methodology aligns with ASC 606 guidelines. Using systems with seamless integrations can make this cross-functional collaboration much easier by ensuring everyone is working from the same set of data.
If an auditor ever questions your SSP, your documentation will be your best defense. A well-managed audit trail tells the story of how you arrived at your SSP estimates. It should include the data you used, the valuation method you chose, the rationale for that choice, and the approvals you received. This is especially important if you use a method like the residual approach, which requires strong justification. Keeping meticulous records demonstrates a good-faith effort to comply with ASC 606 and provides concrete evidence to support your financial reporting. For more tips on financial operations, you can find helpful articles on the HubiFi blog.
Determining and managing Standalone Selling Prices is a detailed process, and doing it manually can feel like a full-time job. As your business grows, tracking every performance obligation, market shift, and contract modification in spreadsheets becomes a huge source of risk. You’re not just dealing with complex calculations; you’re also trying to keep up with a mountain of data from different systems. This is where manual processes often fall short, leading to errors, compliance issues, and a lot of time spent on tedious work.
An automated revenue recognition solution takes this burden off your plate. Instead of manually pulling data and running calculations, you can let a dedicated system handle the heavy lifting. These platforms are designed to manage the complexities of ASC 606 by connecting your financial data, applying consistent logic, and maintaining a clear audit trail. It’s not about replacing your team’s expertise but giving them the right tools to work more efficiently and accurately. By automating SSP management, you can free up your finance team to focus on strategic analysis rather than getting stuck in the weeds of compliance.
Think of an Enterprise Resource Planning (ERP) system as the central hub for all your company’s critical information. It’s a software platform that integrates core business functions—like finance, sales, and operations—into a single, unified system. Instead of having your contract data in a CRM, billing information in another platform, and financial records in a separate accounting tool, an ERP brings it all together. For revenue recognition, its role is to break down data silos. By connecting disparate systems, an ERP provides the comprehensive dataset you need to analyze sales, identify observable prices, and apply your SSP methodology consistently across the entire business, creating a stable foundation for compliance.
As your business scales, relying on spreadsheets to track SSP becomes a significant liability. Manually pulling data from different systems is not only time-consuming but also introduces a high risk of error. An ERP system, especially when paired with a specialized revenue automation tool, solves this by creating a single source of truth. It connects directly to your other platforms to consolidate all relevant financial data in one place. This means your finance team can stop chasing down information and start working with a complete, reliable dataset. With all your contracts and pricing data unified, you can confidently establish and apply SSPs, knowing your calculations are based on accurate, real-time information from across the business.
Once your data is centralized, the real power of an integrated system comes from automation. A dedicated revenue recognition solution can handle the heavy lifting of ASC 606 compliance for you. Instead of manually calculating allocations for every contract, the system applies your established SSP logic automatically and consistently. It maintains a clear and defensible audit trail for every transaction without any extra effort from your team. This automation frees your financial professionals from the tedious work of compliance, allowing them to focus on strategic analysis and business growth. Seeing how these integrations work can make it clear how much time you can save.
One of the biggest headaches in SSP calculation is getting all your data in one place. Your customer information might be in a CRM, your billing details in another platform, and your financial records in your accounting software. Manually consolidating this information is not only time-consuming but also prone to human error. An automated solution acts as a central hub, connecting directly to your existing systems. This creates a single source of truth for all your revenue data. With seamless integrations, you can ensure that your SSP calculations are always based on complete, consistent, and up-to-date information without the manual data entry.
Markets change, pricing strategies evolve, and your product catalog grows. Your SSPs need to reflect these dynamics, but manually reviewing them quarterly or annually might not be enough. An automated system can monitor your sales data and market inputs in real-time. This means you can spot trends and adjust your SSPs as needed, ensuring they remain accurate and defensible. For businesses with complex product bundles or dynamic pricing, this continuous oversight is essential for staying compliant. It allows you to be proactive, making sure your revenue recognition practices keep pace with your business. You can find more helpful articles on financial operations in our HubiFi blog.
How do you know you’re using the best information to estimate your SSP? ASC 606 guidance suggests using the most observable evidence available. An automated solution can help by running validation checks on your data automatically. You can set rules to compare your SSPs against historical transaction prices, competitor data, or other market indicators. The system can flag any outliers or inconsistencies that need a closer look. This automated validation adds a crucial layer of assurance, helping you build a stronger, more defensible SSP analysis that will stand up to scrutiny during an audit.
Creating and maintaining the documentation required for ASC 606 compliance is a significant undertaking. You need a clear audit trail that shows how each SSP was determined, what data was used, and why a specific method was chosen. An automated platform handles this for you. It logs every calculation and change, creating a detailed, time-stamped record of your SSP policies and their application. When it’s time for an audit, you won’t have to scramble to pull together spreadsheets and notes. All the supporting evidence is organized and easily accessible, making the entire process much smoother. You can schedule a demo to see how HubiFi can streamline your documentation.
SSP determination isn’t just a finance task; it requires input from your sales, legal, and product teams. When everyone is working out of different spreadsheets, it’s easy for wires to get crossed. An automated solution provides a centralized platform where all stakeholders can collaborate effectively. Everyone works from the same data set, ensuring alignment across departments. This transparency breaks down silos and fosters a more cohesive approach to revenue recognition. It ensures that your pricing strategies and SSPs are developed with a complete picture of the business, leading to more accurate and strategic decisions.
Automating your SSP and revenue recognition processes does more than just keep you compliant with ASC 606. It transforms your finance function from a reactive, rule-following department into a strategic partner for the entire business. When you remove the manual grind of spreadsheet management, you unlock a wealth of benefits that can improve forecasting, strengthen customer relationships, and reduce operational risk. It’s about shifting your team’s focus from tedious data entry to high-value analysis that drives growth. By leveraging technology to handle the complexities of revenue allocation, you gain the clarity and confidence needed to make smarter, faster decisions that move your company forward.
One of the most powerful advantages of automation is the ability to generate sophisticated financial reports that are nearly impossible to create with spreadsheets. Specialized reports, like waterfall and roll-forward analyses, give you a clear view of your revenue streams over time. Instead of just seeing what you earned last month, you can accurately predict future earnings and cash flow based on your existing contracts. This level of foresight is a game-changer for strategic planning, budgeting, and resource allocation. It allows you to move beyond historical reporting and start using your financial data to proactively guide the business, answering critical questions about performance and growth with confidence. For more on financial strategy, check out the HubiFi blog.
Your revenue recognition process might seem like a back-office function, but it has a direct impact on your customers. Automation ensures that billing is clear, accurate, and consistent, which is fundamental to building trust. When customers receive invoices that correctly reflect their contract terms—especially in complex, multi-element arrangements—it eliminates confusion and reduces the need for support inquiries. This seamless financial experience reinforces their decision to do business with you. Inaccurate billing, on the other hand, can quickly erode trust and create friction. By automating your revenue processes, you ensure the financial side of your customer relationship is as smooth as your product or service itself.
Manually creating journal entries for every contract is not only tedious but also a huge source of risk. A single misplaced decimal or incorrect formula can throw off your entire financial statement. Automated revenue recognition software uses intelligent rules to create these entries for you, even in tricky situations involving discounts, cancellations, or contract modifications. This systematic approach drastically reduces the risk of human error and ensures your books are always accurate and audit-ready. It also frees up your finance team from hours of manual work, allowing them to focus on strategic analysis rather than data entry. With seamless integrations into your ERP and accounting software, these entries are posted automatically, creating a streamlined and reliable financial workflow.
Choosing an automation solution is a big step, and it’s about more than just finding a tool that can run calculations. You’re looking for a system that can grow with you, adapt to your unique business model, and make life easier for your finance team. The right platform should feel like a partner, simplifying the complexities of ASC 606 so you can focus on strategy instead of spreadsheets. When you’re evaluating your options, focus on the core capabilities that will have the biggest impact: how it handles complex deals, its flexibility in applying pricing rules, its ease of use for your team, and its ability to create an ironclad audit trail.
The primary job of any SSP automation tool is to untangle your bundled deals without manual intervention. If you’re selling multi-element arrangements, you need a system that can automatically identify each performance obligation within a contract and allocate the transaction price based on your established SSP rules. An automated revenue recognition solution takes this burden off your plate. Instead of spending hours exporting data and running calculations in spreadsheets, the platform connects your financial data, applies consistent logic, and ensures every component is accounted for correctly. This not only saves a massive amount of time but also dramatically reduces the risk of human error that can lead to compliance headaches.
Your business isn't cookie-cutter, and your SSP methodology shouldn't be either. A rigid, one-size-fits-all system won't work when you’re using different methods to determine SSP across your product catalog. The best solutions offer the flexibility to build and apply custom rules that reflect your specific pricing strategies. For example, you might use the observable price for one product, a market assessment for another, and a cost-plus-margin approach for a new service. A powerful platform allows you to configure this logic directly in the system, ensuring that the right method is applied consistently to the right transactions. This adaptability is crucial for building a defensible SSP framework that truly aligns with how you do business.
The most powerful software in the world is useless if your team can't actually use it. Look for a solution with a no-code, intuitive interface that empowers your finance team to manage the entire revenue recognition process without needing to write a single line of code. This is about putting control back in the hands of the experts—your accountants. When your team can easily set up, adjust, and monitor SSP rules on their own, they become more efficient and self-sufficient. A user-friendly setup also improves collaboration across teams. An automated solution provides a centralized platform where everyone works from the same data, ensuring alignment and breaking down the silos that often exist between finance, sales, and operations.
When it comes to ASC 606, your documentation is just as important as your calculations. A top-tier automation solution should create a clear, defensible audit trail for you. The system should automatically log every action, from the initial data import to the final revenue allocation. This means creating a detailed, time-stamped record of every calculation, any changes made to SSP rules, and the user who made them. Instead of scrambling to piece together evidence from spreadsheets and emails, you can instantly pull a comprehensive report that justifies your methodology. This level of transparency not only makes audits smoother but also gives you confidence that your financial reporting is built on a solid, verifiable foundation. You can explore more insights on compliance on the HubiFi blog.
What's the simplest way to think about Standalone Selling Price? Think of it as an item's "sticker price." It's the price you would charge a customer if they bought that single product or service on its own, without any bundling or special discounts. This price is the foundation you use to fairly divide the total revenue from a bundled contract across each individual promise you've made to your customer.
What if we never sell a particular product on its own? How do we find its SSP? This is a very common situation, and you have a few options. You can look at what your competitors charge for a similar offering and adjust that price to fit your business. Another way is to calculate your direct costs to deliver the product or service and then add a reasonable profit margin. The most important thing is to choose a logical method, apply it consistently, and document why you chose it.
Why is it so important to document our SSP methodology? Your documentation is your proof of compliance. When an auditor reviews your financials, they will want to see how you arrived at your revenue figures. A clear audit trail that explains the data, methods, and judgments you used to determine your SSPs shows that you have a thoughtful and consistent process. It’s your best defense against compliance issues and demonstrates the integrity of your financial reporting.
How often should we be reviewing our SSPs? Your SSPs are not set in stone because markets and pricing strategies change. A good rule of thumb is to review them at least once a year. However, if you're in a dynamic industry or you frequently adjust your pricing, you may need to conduct reviews more often, such as quarterly. The goal is to ensure your SSPs always reflect the current value of your offerings.
Can we use different methods to determine SSP for different items in the same contract? Yes, you absolutely can, and for complex contracts, it's often necessary. You might have a clear, observable price for one part of the bundle and use that. For another, more customized service, you might need to use a cost-plus-margin approach. The standard allows for this flexibility so you can use the most reliable and appropriate method for each distinct performance obligation in the contract.
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.
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