Revenue Assurance is becoming a favorite subject of all Internal Audit Professionals.
Revenue Assurance is made popular by telecommunication industry due to ever-increasing plans offered to consumers. Revenue Assurance, is being practiced in a different forms by companies for a long time:
- Lost Sales analysis
- Opportunity lost
- Delay in project execution
- Shipments without order
- Provision of service without order
- Three way comparison of contract rates, invoice rates & purchase order rates.
- Input / output analysis and so on
In case of software companies, the basic raw material is employees and Intellectual property.
Following check should be performed to make sure that revenue is being booked correctly.
A. Employees:
- Time Booked by employee vis-a-vis revenue: No Human is superman, hence they cannot work 16 hours a day on a single project or eight hours each on two projects.
- Revenue need to be booked on the proper purchase order of customer. Even a customer accepted order where invoices are being delayed or collections is delayed will be something which auditors need to look closely. Companies get carried away based on customer verbal promises and performed services/ sell goods and then they need to later write them off.
- Is any employee is working on two projects at the same time? software projects are complex projects. A person cannot work on two projects at the same time for an extended period. (unless person being a project manager).
B: Intellectual Property:
- is the intellectual property, whose license is being sold, is owned by company?
- In case of yes, is the license is really owned by the company with filings with patent/ copyright registrars?
- In case of No, whether any licensing deal has been entered by the company with IP owner and contract has been adhered to.
C: Projects:
- Is the entire contract is properly reflected in project or contract has broken into several projects? There has to be a rationale for breaking the project which need to be consistently followed across projects.
- Is a project has been broken into two or more projects during the execution? There can be a case of early recognition of revenue or postponing of revenue.
These checks are in addition to normal checks which an Internal Audit Professional will carry on in normal situation.
