Revenue Recognition is an accounting term that determines the conditions on when revenue is account for/recognized. Typically, revenue is recognized when specific contractual conditions are met and when the revenue is measurable. However, there are variations on when revenue can be recognized.
BillingPlatform has a built-in revenue recognition feature that allows the billing administrator to define rules on when revenue is recognized whenever measurable amounts are entered into the system.
Types of Recognition Contracts
The platform is able to recognize revenue using the following approaches:
- Point In Time - Revenue is recognized as soon as a charge is generated.
- Obligation Based - Revenue is recognized when certain conditions of various linked entities in the platform are met. Imagine this a revenue being recognized whenever contract conditions are met.
- Time Based - Revenue is recognized during specific time intervals such as monthly, annual, etc. This is particularly useful for cloud subscription use cases where customers pay for an entire year's subscription of a cloud product but revenue is recognized in certain percentages every month (e.g. equal amounts each month for 12 months, etc.).
- Prepaid on Consumption - Revenue is recognized when the product is consumed. This is particularly useful for products that are purchased by customers but are intended to be used later on. Examples are prepaid phone cards, prepaid train cards, or prepaid credit cards.
Viewing Recognized Revenue
Recognized revenue can be viewed in the platform using the standard out of the box contract and reporting functionality. Furthermore, custom reports using the standard platform reporting feature can be used revenue recognition is a standard entity within the platform.
Here is an example of the built-in report for viewing recognized and deferred revenue. For more details, refer to the Tutorials section on how to use the built-in reporting feature.