How to Leverage Your Upgrade to R12.1

with

Robust Revenue Recognition Automation

Presented by Patrick Glenn and Crystal Lieu, Leeyo Software

Agenda

Revenue recognition overview

Why automation makes sense

Opportunities with R12.1

Profile of a project

Q&A

Revenue Recognition

What It Is: Principle of accrual accounting that determines the period in which revenue is recognized

Revenue recognition is an earning process

There are rules and regulations on how and when you can recognize revenue

Under GAAP, there are four basic criteria:

o Evidence of an arrangement exists (governing contract & PO)

o Delivery has occurred (transfer title and risk of loss)

o Fee is fixed or determinable (normal payment terms)

o Collection is probable (customer has ability to pay)

Revenue Recognition

Continuing revenue projects

o Modifying Multiple Element Arrangements (to include Best Estimate Selling Price) & Exclusion of Tangible Products from Software revenue Recognition Guidance Effective 2009

o FASB/IASB Joint Projects Draft format, expect to be finalized end of this year or beginning of next year

Accounting terminology you may hear FASB and IFRS guidelines, evidence of an arrangement, delivery, fixed fees, collection, software and non-software rules, multiple element arrangements, fair value (VSOE, BESP, TPE), relative selling price, revenue allocation, linked arrangements, acceptance, release events, contingencies, future upgrades, significant discounts, extended terms, software is essential to functionality, deferred revenue release, and so on.

In other words its HIGHLY TECHNICAL

Why It Is Important

Most critical financial statement account

Most complex financial statement account

# 1 reason for public company restatements

# 1 account that is closed manually (i.e. not in ERP)

Its a key component of their SOX certification:

What Options Exist

ETCH A SKETCH CRAYOLA CRAYONS

APPLE ENHANCED IIE MICROSOFT EXCEL

The Next Generation Tool

The Next Generation Tool

Heres What It Looks Like

User-defined Revenue

Contingencies

Fair Value Analysis

Auto-accounting Rules

Amortization Methods

Revenue Automation

Engine

Contingencies Applied

FV Assignment & Allocations

Delivery Acceptance Cash Receipts Time-bound

Deferred Revenue &

COGS

Revenue & COGS Waterfall Schedules

Quote-to-Cash Process

Events

Quoting Booking Shipping Billing Collection

Project Planning Is Critical

Alignment with business requirements

o Articulate unique requirements clearly avoid one size fits all

o Set clear expectations and coordinate closely

IT and business planning with all stakeholders

o Revenue-speak is different than IT-speak need a revenue champion

o 100% automation is not reality on day 1

o Internal project teams and management ensures success

Project Planning Is Critical

Data integrity and flow

o Migrating from manual systems can be challenging

o Historical data may not be clean

Business process re-engineering

Scalability

o Business growth

o Path to future upgrades/enhancements

Training

o New tool requires practice

o Combined support from IT and revenue recognition experts

Systems Processes People

Opportunity R12 Upgrade Technical stack software upgrade

o No changes to chart of accounts (COA) or organizational structure

o Limited configuration changes

o Minimal RICE components

Revenue automation will be driven by business user

Opportunity R12 Upgrade

Re-Implementation

o Changes to chart of accounts (COA) and organizational structure

o Planned business process re-engineering

o Large number of RICE components

o Introducing new modules

Revenue automation is usually easy to justify

Dollars may be available due to larger overall project

Process improvements lessen automation customization

People and project resources are available and focused

New R12 module features can be leveraged

Typical Implementation

Proof of concept (optional)

Business requirements document (BRD)

Design and configuration

Training and conference room pilot (CRP)

User acceptance testing (UAT)

GoLive

Post GoLive support, e.g. quarter-end close

Stabilization and enhancements

Enhancing R12 with RevPro

Leeyos RevPro is a complete suite of software that automates and manages every process in the revenue cycle seamlessly integrating with the quote-to-cash processes of any ERP system.

Features:

Upload fair values (VSOE, TPE, ESP)

Identify arrangements and link transactions

Allocate revenue and post carve-outs to A/R or G/L Features:

Define release events to auto-release revenue from deferred

Manage contingencies

Revenue waterfall with real-time forecast

Features:

Real-time revenue analytics with drill-down capabilities

Pre-built adapters for OBIEE, SAP BW, BOBJ, Cognos

Oracle R12 Integration

Oracle ERP Inbound sources

Standard Adapters

Sales orders, service contracts, invoices, credit memos, RMA orders, master data (item, customer)

RevPro Staging

Area

Adapter extracts data to RevPro staging per defined schedule

RevPro Modules

Revenue calculations and output

RevPro data Collection

Data gets collected to RevPro system

RevPro Archive

Processed data gets archived

Automation Process Flow

COLLECTION PROCESS

If FVAssign Error

1. Pre-Processor 2. Data Collection 3. Grouping 4. Post Processor

Review and Fix the Error

Yes

REVENUE ALLOCATION PROCESS

Checks if all lines in the Arrangement is

Within range

Perform Relative

Allocation

Checks for 97-2 lines in

Arrangement

YesResidual

AllocationRelease Contingency

(AUTO Release/ Manual )

TRANSFER ACCOUNTING PROCESS

ExcludeArrangements in Hold Accounting

Create TransferAccounting Batch

TransferAccounting Entries

Download Accounting Summary& Transaction Details

END

FAIR VALUE ANALYSIS

Create FV BatchFrom FV Template

Collect Historical Data to derive

Fair Value

Transferred to Source System

GL / AR

Compliance Check

Review Fair Value Result

Finalize Fair Value

FinalizedFAIR VALUE

For Allocation

FAIR VALUE (Manual Upload)

Create FV Batch

Fair Value File in .CSV format

FV File UPLOAD

Finalize FV batch

Finalized Fair Value for Allocation

Apply ContingencyBased on rulesOn INV Lines

BuildAccountingSchedules

Allocation Begins

If FV Eligible for Transaction

Line

Assign FV for Eligible

Transaction Line

DATA EXTRACT PROCESS

EXTRACT from SOURCE(SO, INV,

Serv.Cont)

REVPRO STAGING TABLE

Customor

External data

upload

Create Batch from Arrangement

Template

Where We Find Success

Customer profiles

Public or pre-IPO company $50M to +$20B revenue

Existing manual processes or custom solutions for revenue calculation

U.S. GAAP reporting required or planned

Concerned about upcoming changes (e.g. IFRS exposure draft)

Desire to improve controls on revenue

Market high technology and expanding

Software

Networking equipment

Consumer equipment

SaaS

Wrap-up

Q&A

Contacts

o Crystal Lieu Director of Customer Service

Crystal.Lieu@Leeyo.com

(408) 988-5800 x143

o Patrick Glenn Vice President, Business Development

Patrick.Glenn@Leeyo.com

(408) 515-8959