Last week Zuora, Inc., a cloud-based subscription management platform, announced that it will acquire Leeyo Software Inc., a financial software and services company. As a result of the deal, Zuora will add Leeyo’s RevPro to its order-to-cash product portfolio. RevPro is a rules-based revenue recognition and forecasting solution that automates revenue processes to produce consistent and accurate revenue data.

The cloud-based RevPro is ASC 606 and IFRS 15 compliant, new revenue reporting standards which go into effect in 2018 for public firms and 2019 for private firms. Under the new rules established by the Federal Accounting Standards Board and the International Accounting Standards Board, companies must recognize revenue when goods and services are transferred to the customer in an amount proportionate to what has been delivered to date. Reporting can be time consuming, labor intensive and risky if the new rules are not adopted accurately or on time.

According to Zuora, compliance with the new standards will be particularly challenging for subscription-based companies because subscriptions change frequently as customers upgrade and downgrade their products and services, and subscriptions can be complex when rolled out over time. The new standards will become a compliance burden that could result in hours of additional labor for complex calculations, costly earnings restatements, and lengthy audits and possible litigation for companies not in compliance.

“We’ve been saying that accounting standards have to change to accommodate the Subscription Economy, and now they have,” said Tien Tzuo, CEO and founder of Zuora. “Every company, regardless of revenue mix, product or service offerings, will be impacted by these new accounting standards. We’ve partnered with Leeyo for over three years, and today we join forces to help our customers alleviate the burden of dealing with these new standards.”

Currently, Leeyo’s RevPro has more than 100 customers running an estimated $266 billion annually through its revenue recognition engine. By joining forces with Zuora, the new company can serve as a “one-stop shop for managing customer records, product catalogues, subscriptions, billing, orders, cash and revenue recognition.”

“At Leeyo, we are tremendously proud of the company and market leading product we’ve built. Being part of Zuora allows us to reach a broader range of companies looking for revenue automation, transparency and consistency in corporate financials,” said Jagan Reddy, CEO of Leeyo, said in the announcement. “RevPro is a natural fit for Zuora’s product portfolio and completes the full order-to-revenue process.”

Both Zuora and Leeyo are privately-held companies. The price and terms of the deal were not disclosed. TechCrunch says this deal could make Zuora more attractive if it considers an IPO. The deal is expected to close this quarter.

Insider Take:

This is big news for the subscription world. Zuora and Leeyo have already been working together, so this acquisition is a natural extension of that relationship. Zuora will benefit by acquiring Leeyo’s customer base and the company’s expertise, particularly as revenue reporting standards are on the cusp of a huge change. Being ASC 606 and IFRS 15 compliant is a huge attraction for subscription companies of all sizes who are in the process of figuring out their internal systems for reporting purposes.