Jan 16, 2024

Driving growth and strategy: The importance of revenue recognition in media

Credera Team

Credera Team

Driving growth and strategy: The importance of revenue recognition in media

In today’s media industry, accurately tracking every pound is more important than ever. As technology constantly changes the rules of the game, companies now juggle more diverse revenue streams than before. From advertising and subscriptions to content licensing deals, the mix is ever-changing, and each revenue source presents its own unique challenges.

To stay competitive and compliant, media businesses need tools that simplify an otherwise complicated process. Traditional methods for recognising revenue can lag behind evolving business models; they often introduce delays, errors and lack the flexibility modern companies demand

With so many moving parts, media organisations require sophisticated yet easy-to-use solutions. Cutting-edge revenue recognition platforms are key to both compliance and uncovering strategic insights. Only with the right software can businesses maintain control as the market undergoes its biggest transformation yet.

Informed decision-making

Real-time revenue recognition is essential for making informed decisions within a business. Relying on values calculated last week in Excel sheets is neither accurate nor up to date. It’s a costly effort that lacks the necessary precision for today’s fast-paced business environment.

Effective revenue recognition provides businesses with the timely insights they need for financial planning, budgeting, and evaluating investment opportunities. Having a deep understanding of the revenue stream is absolutely vital. When revenue is accurately recognised, businesses can respond proactively with targeted sales and marketing strategies. By having a clear view of their financial landscape, companies can make smart decisions that drive growth and maximise profitability.

Stakeholder confidence

Ensuring the confidence of senior management in the ‘truth’ of financial figures is crucial for making sound decisions and effective planning. This confidence is critical across all areas of the business. The ad sales team needs to know if they are on track to meet their targets in a timely manner, so they can make necessary adjustments to hit their targets. The finance department must understand how revenue recognition impacts billing processes, while senior management requires early visibility into up-to-date, trusted, and accurate figures.

Solving this issue

Despite being a critical aspect of business health, it is surprising that many companies still struggle with effective revenue recognition. While some may manage to navigate through manual processes and Excel reports, with lots of jumps and hoops, this approach is time-consuming, expensive, and lacks any sort of business agility. From what we see, the landscape has significantly changed over the past five years. Previously, management reporting relied on the end results of the Ad Sales business, such as sales orders. But the current trend is shifting towards placing revenue recognition at the forefront of how companies want and need to operate and calculate revenue. 

Today, revenue recognition has become a central focus in any Request for Proposal (RFP) for media projects. The way revenue is calculated and presented to the business is now at the very heart of the RFP. The solution must demonstrate the ability to show the pipeline against committed (booked) revenue, based on when it appears. And then, it should offer the flexibility to slice and dice this data by title, business area, or salesperson, and present it in predefined reports and dashboards. It is revenue recognition that is shaping the design of Order Management Systems (OMS), marking a significant turnaround from the past! 

Intelligent and automated revenue recognition is the need of the hour. It should be capable of calculating revenue for any given financial period. Particularly in the realm of digital advertising, it should not only account for contracted values but also track delivered actuals. For financial planning purposes, it is essential to compare expected revenue (X) in a specific month with the actual delivered revenue (Y) and analyse any discrepancies. 

The rules governing revenue recognition can be highly complex. That’s why it is important for the Order Management System (OMS) to be highly configurable to cater for this. For example, it should provide options for allocating production charges and determining what should be omitted from revenue calculations. 

Competitive advantage 

In the highly competitive landscape of the media industry, business success hinges on staying ahead of the competition. Effective revenue recognition provides businesses with valuable and timely insights into customer preferences, sales trends, and market dynamics. Armed with this information, companies can make informed decisions that give them a competitive edge. They can use these insights to develop innovative products, devise pricing strategies, and implement effective customer engagement programs.

With a wealth of experience and knowledge in effective revenue recognition, having assisted some of the UK’s leading media companies, we understand the complexities involved and can help aid your business planning. To learn more about how we can help you gain a competitive advantage in the dynamic media industry, please reach out to us.

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