From Materiality to Risk-Based Review

Intercom’s revenue accounting team leveraged Klarity to change its approach from a materiality-based to a risk-based review.

“We completely updated our scoping process. We no longer need a materiality threshold for contract review, we can simply rely on Klarity to identify the areas of risk,” said Nikolay Trenin, Revenue Controller at Intercom. “With Klarity, there are larger deals that we no longer have to review manually. Conversely, there are contracts with non-standard clauses that would previously have been below our materiality threshold that we are now able to identify. Klarity gives us significantly greater and more accurate coverage over our customer contracts.”

Klarity’s automated approach allows Intercom’s team to gain insight into its entire contract population in less time than it used to take to review just a portion.

“It’s incredibly valuable to have a tool that directs my team’s focus to specific areas of identified risk,” said Trenin. “Prior to Klarity, my team spent significant time reviewing contracts based on a dollar value threshold. Now, instead of trying to review a representative population of everything, we are able to hone in on areas that we know need our attention. Bringing Klarity into our tech stack allowed our team to remain a team of two rather than adding headcount.”

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Creating a SOX Environment

Klarity created a standardized customer contract review process by allowing Intercom’s team to focus on terms identified by the system as having potential revenue impact. Klarity’s audit trail and review sign-off features allow Intercom to demonstrate a strong environment for SOX compliance.

“Klarity’s functionality for comments and reviews is one of the system’s most valuable features,” said Trenin. “This has been a notoriously difficult area to create a standardized process for. With Klarity, the preparer can quickly log into the platform, notate any accounting impact, and include detailed comments on their rationale for reaching that conclusion. This allows me to then review the preparer’s work quickly and make additional comments back for any areas that still need to be addressed. The whole review process is tracked, and lives within Klarity, making it easy to share with auditors.”

Klarity also allows Intercom to run a completeness check against its CRM. “For SOX, we now have a central location where all of our Revenue Controls live,” Trenin said.

Increased Audit Efficiency

With Klarity, Intercom’s revenue accounting team can now give auditors direct access to the system, eliminating the manual process of pulling documents from Salesforce. This provides the Intercom team with significant value in audit time savings, a process that was previously a full time job for its senior accountant three months out of each year.

“We average 300 revenue samples per audit,” said Trenin. “It took a tremendous amount of time to review, download and tie contracts to invoices, let alone organizing all of the samples. During the process, we’d sometimes find contracts missing. Now, with a simple click, we can provide auditors with the samples and required documentation, making their jobs easier and significantly improving my team’s quality of life at audit time.”