Build vs Buy: A Guide to Rev Rec Software Analysis

Want a Google Sheets version of the Build vs Buy calculator? Click here to access it.

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When evaluating the decision of building or buying a revenue recognition (rev rec) automation solution, there are numerous factors to weigh. With dozens of companies in the market providing out-of-the-box solutions and the alternative of having your CTO and engineering team build something in-house, the decision isn't always straightforward. This guide will help you conduct a clear and actionable build vs. buy analysis so that your organization can make the best choice.

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At the end, we’ll also provide a template to streamline this analysis for your particular case.

Key Areas to Consider

Hard Costs - Build

1. Initial Development Costs
   Building an internal system requires upfront investment in development. This primarily comes down to your internal engineering team designing and coding the software from scratch.
2. Server Hosting
   A custom-built solution will also necessitate server hosting costs, whether you're hosting on-premise or using a cloud service provider. This scales with your business.
3. Ongoing Maintenance
   As your business evolves, your custom-built rev rec system will need updates. You’ll likely need a dedicated team (or at least dedicated resources) to maintain the system and add new integrations over time.
4. Compliance Costs
   Custom-built systems generally have a higher cost to audit and maintain. Auditors will scrutinize the controls and processes more intensely, increasing your compliance efforts and costs.

Hard Costs - Buy

5. Software Costs
   The primary hard cost when buying a rev rec solution is the licensing fee. While this is typically recurring, buying a solution shifts the burden of updates, hosting, and compliance to the software provider and locks in your pricing over time.

Non-Qualitative Costs - Build

1. Opportunity Costs
   By diverting your internal team to build and maintain an accounting solution, you will be taking away resources from other critical, revenue-generating activities. You should ask - what could your engineers be working on instead?
2. Time Lost
   Building a system internally can take months (or longer), while buying a solution enables faster implementation. The lost time can result in delayed automation and scaling efforts.

Common Pitfalls of Internal Builds

If you do an internal build - here are a few common technical issues that will add unexpected complexity:

1. Change Data Capture
   Often, rev rec data is live and not always accountable. Your engineering team will need to develop a solution to handle this, which can be tricky without the right expertise.
2. Reporting
   Building a comprehensive reporting suite requires either creating a custom solution or integrating with a third-party reporting system. Either option takes time and resources.
3. Hiring a Systems Accountant
   Systems are often built by engineers, but they need to align with accounting principles. Without a systems accountant on your team, the build may miss key accounting functionalities.
4. Controls
   An internal build must have strong access controls, system change controls, and documentation to meet audit standards. Revenue recognition is always a key focus for auditors, so this area will face heavy scrutiny. Don’t underestimate the effort required to maintain an effective control environment.

Conclusion: Build vs. Buy - Which Path is Best?

The decision to build or buy a revenue recognition automation solution depends on your organization’s size, growth stage, and available resources. While building gives you flexibility, the hidden costs, including opportunity costs, compliance risks, and technical pitfalls, can quickly add up. Buying, on the other hand, offers quicker implementation, lower compliance risks, and ongoing support from vendors.

HubiFi: A Solution That Simplifies Rev Rec Automation

HubiFi was designed by a CFO and CTO who dealt with these common issues when doing their own internal build at past companies. As such it is built to provide a robust and cost-effective solution for revenue recognition automation. With:

1. Change Data Capture
2. Pivot Table-Based Reporting
3. Audited accounting rules
4. Lower Compliance Costs with SOC 1/2 Reports

HubiFi provides a fast to implement (<1 month) way to streamline your revenue recognition process, ensuring you meet compliance standards without breaking the bank.

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Feel free to use this guide and the included template to create a build vs. buy analysis and determine which solution is the best fit for your organization.

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