Even in the realm of virtual fish tanks and shopping malls, sometimes real money gets involved. And where there's real money, real finance leaders concerned about financial compliance aren't far behind.
CrowdStar, a Burlingame, Calif.-based developer of mobile and Facebook games, such as Happy Aquarium, Mermaid World and Top Girl, was struggling with revenue recognition due to the nature of its transactions. While the games are free to play, users can make purchases within them, which can be hard to track. "There's a multitude of transactions [and] it's very high volume. We have a lot of transactions in each of our many games, so it's fairly complicated revenue recognition to manage," said Victoria Bourne, vice president of finance and administration.
While the revenue was "recognized at time of sale before," Bourne knew things had to change as she looked ahead to a multi-year audit. Additionally, she needed to recognize revenue on a daily basis instead of monthly, which would add to the complexity.
CrowdStar's accounting processes were also less than optimal due to the fact that the company operated on two financial systems -- one for the U.S. location and another for a branch in Ireland. This led to problems with financial consolidation, Bourne said.
With revenue recognition management as the company's top requirement, CrowdStar signed on with Intacct, a Software as a Service (SaaS) financial management software vendor, in October 2011. Bourne said that although the company evaluated a few other vendors, Intacct's revenue recognition capabilities separated it from the pack.
"We looked at the big guys out there for medium-sized companies, but Intacct came out as the leader," she said. "Pretty much all of those companies do things [like] global consolidation, and those were just sort of basic requirements, but we needed specific revenue recognition [capabilities], and Intacct seemed to be the best and most well-developed" in that respect.
Financial management software simplifies consolidation, shortens close
Experts note that enterprise resource planning systems are ill-equipped to handle complex revenue recognition needs, and for that reason, finance managers often attempt to tackle the process manually in Microsoft Excel. Bourne said she wanted to avoid relying on Excel at CrowdStar. "We did not want to do this in spreadsheets, because once you go down the spreadsheet path it gets very complicated," she said. "You'll no doubt have errors that creep in."
Bourne and Jennifer Kajisa, CrowdStar's director of accounting, acted as the deciding team that chose Intacct. Besides sophisticated revenue recognition management, Bourne said Intacct's SaaS model was a benefit. "We didn't want to manage something in house," she said. "All of our games are run on cloud-based systems, so we have no issues with cloud-based software."
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Although Kajisa said the implementation took slightly longer than expected, she attributed the additional time to getting the necessary configurations in order, such as custom reports and specialized data imports. The financials component was deployed first and the revenue recognition module followed several months later, she said.
Bourne added that readying the company's financial data was no easy feat. "[Kajisa] inherited a very messy set of financials, so there was a lot of cleanup before we migrated systems," she said. "End to end it was a pretty big project."
But now that the dust has settled, the benefits are clear. "We came from a pretty low bar because we were working on two basic systems," Bourne said. "But accounting is now a lot easier across the board." Kajisa added that financial consolidation is now automatic, whereas before the company had to match up two different charts of accounts, and several days have been shaved off the monthly close.
Revenue recognition is also far simpler. "Intacct's revenue management application makes it easier for us to handle the deferral and future amortization of sales for our virtual goods and related costs," Bourne said in a press release. "It allows us to set up multiple revenue recognition schedules and load in daily bookings detail, and then it automatically schedules items for future recognition."
The general ledger's multi-dimensional capabilities, which allow users to categorize and track data based on specific company or industry needs, received praise from Kajisa. "If you use those intelligently, it saves you a whole bunch of time." At CrowdStar, Intacct's dimensions aid reporting at the level of individual games.
Neither Bourne nor Kajisa could name significant missing functionality in the system,or wish list items. "Other than the revenue recognition, we don't really have complicated needs," Kajisa explained.
And putting the focus squarely on where the company did have nonstandard requirements -- revenue recognition -- was key to successful implementation, Bourne said.
"If you've got one really unusual requirement, make sure that one is met. Really dig into the details and don't allow any hand waving during the sales process," she said. "Pick out things that really matter and don't spend time worrying about the rest of it."
This was first published in July 2013