The Vertical Reality
Medical device companies that expand outside their home market typically do so through a mix of direct international entities as well as third-party distributors, each with its own accounting treatment: direct sales by a foreign subsidiary require multi-currency and local statutory reporting support, and distributor relationships require revenue recognition logic that is aligned with the point at which control actually passes under the specific distributor agreement.
In many cases, companies are growing rapidly without the proper financial infrastructure in place and are experiencing currency translation errors, distributor revenue that is being recognized incorrectly, and consolidated reporting that doesn’t tie out cleanly, often around the time an auditor or an investor is looking more closely at international results.
How NetSuite can help
NetSuite provides for direct foreign subsidiary accounting with appropriate currency translation and local statutory reporting via multi-currency and OneWorld capabilities. The revenue recognition engine can be configured to reflect the specifics of each distributor agreement vs a generic sell-in or sell-through assumption applied across all international relationships.
Getting the distributor revenue recognition treatment right is especially important at points of transition, when a company converts a distributor relationship to a direct subsidiary in a given market. This is a common growth pattern and calls for careful handling of revenue recognition during the transition period.
Why Archer Insights?
Archer Insights has experience with the particulars of revenue recognition and multi-entity considerations that come with distributor relationships and foreign subsidiary structures in a regulated device business, and will help configure NetSuite to meet the needs of medical device companies expanding internationally. That experience helps device companies expand globally without international expansion becoming an audit or reporting liability.