If you’re not an accountant, chances are the phrase ‘revenue recognition’ might not mean much to you. But what if we told you that, thanks to our innovative Revenue Recognition reports, Billsby Pro customers can enjoy automatic processing and reporting of ASC 606 and IFRS 15 obligations? Not only that, but our reports are curated with accuracy, down to the day – pretty cool, huh? Read on to find out more.
Revenue Recognition: What You Need to Know
So what is revenue recognition, anyway? Simply put, it’s an accounting principle that relates to revenue which is realised over a period of time – e.g., for subscription services, over the length of the subscription as opposed to when the initial payment is made. For example, if a customer subscribed to a quarterly plan, they might make an up-front payment at the start of the first month; however, even though no additional revenue would be received for months 2 and 3, the service would still be ongoing – as such, in terms of reporting, the revenue should be recognised over the three months for which the service was provided.
In order to gain a more precise understanding of your company finances, it’s strongly advised that you include the revenue recognition methodology within your reporting. That said, accounting practices do vary from organisation to organisation; we can’t pretend that the Billsby revenue recognition report is a ‘one size fits all’ product. However, we’ve worked hard to create a system that will suit most businesses, providing greater insight and accuracy with minimal effort.
How Do Revenue Recognition Reports Work?
To get started, head to Reports > Accounting > Revenue Recognition.
A report, showing the sum total of revenue recognised across al invoices and credit notes by plan and month, will be created. You can select a time period to generate the report, as well as filtering the report by production, plan, subscription, invoice, or credit note. The report will be generated according to the following assumptions/considerations:
Generally, calculations for revenue recognition are made (and updated) when the invoice is marked as paid (or paid offline).
Some revenue must be recognised immediately. All revenue generated from positive one-time charges, plus set-up fees and allowances, will be recognised immediately when the invoices is marked as paid (or paid offline).
Discounts and account credits are recognised by first removing them from the subscription and/or add-on elements. The calculations are then performed using the discounted figures.
Credit notes are recognised if they are issued during the performance period (in which case, the recognised revenue will be adjusted accordingly). Should a credit note be issued at the end of the performance period, the refund will not impact on the recognised revenue figure. Please note that credit notes issued against one-time charges are not recognised.
Frequently Asked Questions
What is a deferred revenue report?
This report calculates the pending revenue to be recognised for the rest of the customer’s subscription period. For example, if a customer paid $90 for a quarterly plan, and made the payment in one go at the start of the quarter. $30 would be recognized when the service starts, with the remaining $60 recognised across the rest of the subscription period. Please note that tax is not taken into account when calculating deferred revenue.
What if a customer cancels a subscription without a refund?
If this occurs, the customer’s remaining deferred revenue is recognised in the month in which they cancel.
Will my past revenue be recognized?
No; past revenue will not be recognized. This is a new feature, meaning that our revenue recognition and deferred revenue reports only accommodate revenue generated from 15th June 2021 onwards.