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

CRAYOLA CRAYONS

ETCH A SKETCH

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

Contingencies Applied

FV Assignment & Allocations

Revenue Automation Engine

Events Delivery Acceptance Cash Receipts Time-bound

Revenue & COGS Waterfall Schedules

Quoting

Booking

Shipping

Billing

Collection

Deferred Revenue & COGS

Quote-to-Cash Process

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

People

Processes

Systems

o Business growth o Path to future upgrades/enhancements

Training
o New tool requires practice o Combined support from IT and revenue recognition experts

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 o o o Changes to chart of accounts (COA) and organizational structure Planned business process re-engineering Large number of RICE components 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 data Collection

Data gets collected to RevPro system Revenue calculations and output Processed data gets archived

RevPro Modules RevPro Archive

Automation Process Flow

FAIR VALUE ANALYSIS FAIR VALUE (Manual Upload)
Create FV Batch FV File UPLOAD Finalize FV batch Collect Historical Data to derive Fair Value Review Fair Value Result Finalized FAIR VALUE For Allocation Fair Value File in .CSV format Finalized Fair Value for Allocation Create FV Batch From FV Template Compliance Check Finalize Fair Value

DATA EXTRACT PROCESS EXTRACT from SOURCE (SO, INV, Serv.Cont)

Custom or External data upload

Create Batch from Arrangement Template 1. 2. 3. 4. Pre-Processor Data Collection Grouping Post Processor
If FV Eligible for Transaction Line

COLLECTION PROCESS
Assign FV for Eligible Transaction Line

REVPRO STAGING TABLE

Apply Contingency Based on rules On INV Lines

If FV Assign Error

Yes

Review and Fix the Error

REVENUE ALLOCATION PROCESS

Allocation Begins

Checks if all lines in the Arrangement is Within range

Perform Relative Allocation

Release Contingency (AUTO Release / Manual )

Checks for 97-2 lines in Arrangement

Yes

Residual Allocation

TRANSFER ACCOUNTING PROCESS

Build Accounting Schedules Exclude Arrangements in Hold Accounting Create Transfer Accounting Batch Transfer Accounting Entries

END

Download Accounting Summary & Transaction Details

Transferred to Source System GL / AR

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