%20(2).svg)
.svg){kind=icon}
.svg)
.svg)
Revenue recognition errors don’t usually start during the reporting period in your accounting software. They start at the contract negotiation phase—in unclear order forms, unusual pricing structures, or clauses no one flagged in time.
And when the close week hits, it’s a scramble. Finance is left tracking information, unscrambling the context to finalize the numbers on time.
Having served as Sr. Controller at Ramp and Director of Accounting at Circle, Edwine Alphonse shared the simple, repeatable steps that can pull Finance into the deal cycle early—without blocking sales.
The goal is to spot risks, create easy checkpoints, and document key terms the moment they’re agreed on. The result: audit-ready rev rec logic, less rework, and a stronger partnership with Sales.
Read on to explore her approach.
Deal Structure Pitfalls
If you’ve ever had to rebuild a revenue schedule mid-close, you know the pain starts long before journal entries.
The following contract features can cause rev rec confusion, no matter your company’s stage:
Complex Custom Pricing
From multi-year prepayments with a “free” period, to rebates tied to usage thresholds, or bundles that combine software, services, and implementation—each scenario demands precise allocation and start/stop logic to keep ARR schedules accurate.
Volume-Based Incentives
“Process 100,000 API calls and get 25% off” seems straightforward until Finance has to ask for usage data from Engineering before recognizing revenue.
Customer Acceptance Clauses
If revenue hinges on customer acceptance, make sure there’s a clear process to document the acceptance. Ideally, the rep can confirm it. Otherwise, you risk delayed billing, missed recognition, or chasing documentation after the fact.
Contract Modifications
Mid-term cancellations, partial refunds, retroactive discounts, and backdated expansions all alter the revenue waterfall. If these scenarios are allowed under the contract, Finance needs clear rev rec logic for how to handle them. That includes defining how to reallocate performance obligations, adjust timing, and track modifications across reporting periods.
Each of these risks is manageable—but managing them well depends on timing. Edwine’s preference is proactive communication (whenever possible), so rev rec risks are easier to spot, surface, and solve.
Embedding Finance Into the Sales Cycle
Managing risk starts with visibility, and visibility starts with better collaboration. Here’s how Edwine suggests to build that process:
1. Standardize Your Contracts
The less variation in your “default” contract structure, the easier it is to spot exceptions that need extra attention. Here are a few ways to get aligned:
- Collaborate with Sales and Legal to design order form and MSA templates, so everyone works from the same baseline.
- Agree on clear guidelines for pricing, discounts, and payment terms—so exceptions are more obvious.
- Store version-controlled templates in one place. No email scavenger hunts.
- Maintain a short rev rec policy by deal type. It doesn’t have to be fancy, just clear.
- Sync regularly with Sales to address any bottlenecks and keep everything up-to-date.
2. Celebrate and Inquire
When a deal is verbally agreed upon, start with recognition. Congratulate Sales on the win, then ask one focused question: “Anything unusual in this contract I should know about?”
- Keep the conversation collaborative. Reps are far more likely to mention important details like variable start dates or promised freebies, if they feel the question is part of a shared win, not a compliance mission. The more overzealous the rep is, the more you should expect unusual terms and the more you should reach out.
- Ask clarifying questions about anything that sounds vague or unconventional. Individual reps may assume a term is standard when it’s not. Better to confirm now than deal with misinterpretation later.
- Capture the rev rec logic for exceptions while they’re still fresh. The goal is to avoid relying on memory during close.
3. Pre-Signature Review
You don’t need to review every contract up front. But for complex scenarios, early visibility helps avoid future cleanup.
- Set objective triggers so Sales knows when to pull you in—contracts above a certain bookings threshold, custom billing structures, or heavy bundling of software and services. Fast responses build trust—and make it more likely Sales will loop you in again.
- In your review, scan for terms that affect rev rec timing: payment milestones, acceptance clauses, usage thresholds, and any implied performance obligations.
- If your rev rec tool can read contracts automatically, great—let it handle the baseline agreements. But for edge cases, a quick CRM note goes a long way in keeping everyone aligned on your revenue allocation logic.
Staying close to upcoming deals leads to faster closes and fewer surprises—and it shows your cross-functional partners just how much upstream decisions affect finance and compliance.
“Listen to Sales calls. Review the agreements. Review the pricing template. Review the information entered into the CRM. Make sure you understand how the sales process works—because if you don’t, you aren’t going to understand the products being sold, you won’t be able to explain it to auditors, and you won’t be able to do good revenue recognition either.”
- Edwine Alphonse
A System that Scales
When your checkpoints are supported by a system that connects to your CRM, the process becomes faster, cleaner, and easier to sustain. Contract terms flow into Finance automatically. Your bread-and-butter deals generate revenue schedules with minimal touch. And the edge cases—the ones that actually need review—are surfaced early, when there’s still time to handle them right.
When the system works, Sales can move fast—and Finance can close with confidence.
Thank you to Edwine for sharing her perspective and experience with us on how to manage revenue recognition risks at the contract stage. The repeatable checkpoints she described are a reminder that even small changes in process can prevent major headaches during close.
