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Revenue Recognition

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Reviewing Results & Closing Accounting Period 

This page helps you understand how to check the processed data, review your revenue results, and manage your revenue subledger in RevRec.

Reviewing Results 

After you configure RevRec for your business and start processing your transactional data, it is time to check the results. You can review RevRec's process results in two steps.

Step 1: Process Validation to ensure the completeness and soundness of the process via:

  • Control Checks
  • Data Process Summary
  • Data Error Reports

Step 2: Revenue Recognition Review to understand the revenue results, do a deep-dive analysis and look at roll forward and journal entry reports.

Control Checks 

Revrec is designed with in-built controls and checks that incorporate the best practices to help you meet your SOX compliance requirements.

Checks

Description

Integration with Source Systems

To ensure that RevRec has captured the data correctly and completely when integrating with third-party systems, such as CRM for contract information, or Xero for invoicing data.

Data Validation

To ensure that the data passes RevRec's quality checks. For example, a multi-currency transaction invoice should include the currency code for the invoiced amount.

Business Logic Check

 

 

 

 

 

 

To ensure all validated invoice and sales order data is processed by RevRec properly. Some additional business logic checks include:

  • proper allocation of transaction price to performance obligations under the contract.

  • the revenue recognized over the contract term should be equal to the allocated transaction price.

  • when both contract and billings/invoices data are provided, the total billings should be equal to the total transaction price/contract value. 

Accounting Journal Entries

To ensure that accounting journal entries are created correctly and capture the recognized revenue. 

RevRec conducts these checks automatically to ensure that any exceptions or issues are promptly identified. It also sends notifications to users when a control issue is identified, and these can be tracked on the Control Checks component of the dashboard.

When you click the Control Checks alert icon, RevRec opens the Control Checks page. The top bar lists the areas that RevRec checks for potential impacts, which includes Bookings, Invoices, Revenue, and Deferred Revenue. In addition, RevRec highlights the specific impacted area of the issue. Following is an example where the issue impacts the Recognized Revenue:

The Control Errors section displays additional information. When you hover your mouse over the information icon, you can see a brief description of the issue and the estimated impact text.

There are additional options to Apply proposed fix, Ignore this error, and Download analysis report. You can first click the download icon to review the detailed analysis along with the proposed data fixes in an Excel file and then decide whether you want to apply the resolution or ignore the issue if the impact is not material. The Excel file comes with multiple tabs that fall into the following three categories:

  • Impact summary: The summary tab provides a high-level description of the issue and the potential impact.
  • Detailed analysis: The analysis tab(s) will include the detailed data and analysis so as to allow you to understand the scope and impact of the issue. Note, that there is no specific format the analysis tab(s) will follow, and each issue can use a bespoken format that best suits the scenario.
  • Proposed data fixes: The proposed resolution tab(s) are the standard RevRec [bulk-upload formatted data][https://help.rev-lock.com/en/article/import-data-in-bulk-1yfhvms/] that lays out the data fixes that can correct the issue when processed. You can also make additional changes to the proposed data fixes.

Below is an example of the impact analysis that shows the population of data impacted by an issue and the estimated accounting impact.

If you choose to apply the fix, RevRec will re-process the data contained in the proposed resolution tab(s) and notify you of the process status. If you choose to ignore it, RevRec will bypass the proposed fix. In either case, the issue will be subsequently removed from the control checks list.

Data Process Summary 

When you use direct integration or do a bulk upload of your data through the template file, RevRec automatically generates sync job status along with a summary view once the process is complete.

To review the Sync Jobs in your RevRec environment, follow these steps:

  1. Click Sync > Sync Jobs.

  2. Click View to see the summary of the data that is processed.

  3. Click the Errors tab to see the data exceptions encountered during the process, along with the reason for the exception and the affected rows.

Data Errors reports 

To view Data Error Reports and access the detailed reports of data exceptions, including Sales Order Errors, Integration Errors, and Sync Errors, follow these steps:

  1. Click Reports > Data Errors.

  2. You can open a report to deep dive and review the data error. For example, on the Sales Order Errors report, you can filter the errors by Severity Level or Error Status.

  3. Additionally, you can handle the data exceptions on the UI directly. You can update the affected data by going to the respective pages and reprocess the update, and click the Resolve icon in the Action column to close the data exception.

  4. If the exception does not cause any revenue recognition impact, you can click the Ignore icon in the Action column. RevRec will refresh the status data exception based on your action.

Revenue Recognition Results 

RevRec provides a standard set of financial and accounting reports related to revenue/commission recognition. These reports are developed on Microstrategy, a well-adopted enterprise reporting platform that gives users the flexibility to drill down or aggregate information to different levels, reformat the report layout, and download or export the detailed data. Additionally, custom reports can be developed in RevRec to suit your unique needs upon request.

Note

Contact your RevRec support team for custom report requirements.

Below is the list of the standard RevRec reports:

Category

Report

Description

Revenue

Unearned Revenue RollForward

Tracks the deferred revenue balance (or unbilled receivable) by accounting period, as well as the activities, including sales, billings, recognized revenue, and foreign currency adjustments that impact the balances.

 

 

Revenue Backlog

Reports the remaining total sales order amount (total contract value) that is yet to be earned by accounting periods.  Not impacted by invoices/billings. 

 

Unearned Revenue WaterFall

Forecasts the future deferred revenue balances based on the current orders and their revenue recognition schedules.

 

Revenue Backlog WaterFall

Forecasts the future remaining unearned total sales order based on the current orders and their revenue recognition schedule.

Sales

Sales Order

Shows the sales order activities (contract value) and SSP allocation by accounting period.

Sales Order Control Report

Shows the sales order activities (contract value) and SSP allocation, up to the current period.

 

Commission

Shows the deferred commission balance by accounting period, and the activities including new commission and commission expense recognized.

 

Commission WaterFall

Forecasts the future deferred commission balance based on the current commission balance and commission recognition schedule.

Commissions Control Report

Shows the deferred commission balance by accounting period, and the activities up to the current period.

Billings

Invoices

Tracks the invoices that RevRec has received input data on, including future dated invoices.

 

Invoice Control Reports

Tracks the invoices that RevRec has received input data on, up to the current period.

 

Billings RollForward

Tracks the billed invoice or unbilled charge balance change for each accounting period by activities.

Data Errors

Sales Order Errors

Tracks the data exceptions identified in the sales order data.

 

Integration Errors

Reports the data exceptions identified during integration with upstream process systems, such as downloads from CRM, Chargebee or Xero.

 

Sync Errors

Reports the data exceptions identified in the bulk upload data file.

Accounting

Journal Entry Report

Reports the accounting journal entries for revenue and commissions based on the account mappings.

Forex

Forex Exchange Rates

Reports the daily close foreign exchange rates used by RevRec for foreign currency transactions.

Service Delivery

Service Delivery

Tracks the quantity of the services delivered by the accounting period.

Service Delivery RollForward

Tracks the quantity of the services delivered by accounting period including the future.

Overage Service Delivery

Tracks the quantity of the overage services delivered by the accounting period.

Service Delivery Control Report

Tracks the quantity of the services delivered by accounting period up to the current period.

Managing Revenue Subledger 

RevRec provides the following features to manage your revenue accounting subledger:

  • Configuring General Ledger(GL) accounts and mapping rules.
  • Managing the journal entries generation and posting.
  • Managing the accounting period including closing an accounting period (or when needed, reopening a closed accounting).

The following diagram depicts a typical accounting period close process:

Setting up GL Accounts and Mappings 

You can configure RevRec to use your specific GL accounts and mapping rules for your revenue recognition. For example, to book deferred revenue to different GL accounts based on product type or location, or to the same GL account but with additional fields for segmentation or reporting purposes.

Read more about setting journal account mapping here.

Managing Journal Entries 

Journal Entry Generation

RevRec automatically generates the revenue journal entries when the transaction data is processed, based on the GL accounts and mappings. Users also have the option to manually generate the journal entries, for added flexibility in creating journal entries. Read more.

Journal Entry Posting

RevRec allows you to directly post journal entries to your accounting system, as discussed below.

You can connect your RevRec environment with accounting systems and post journal entries to them directly. You can also choose to manually post the entries if required.

To configure automated posting of Journal Entries, follow these steps:

  1. Click Accounting and click the Connect icon to integrate with an accounting system for journal entry posting.

  2. Select Journal Posting, and the next pop-up displays all the available systems.

  3. RevRec currently supports journal posting to the following systems.

    • NetSuite
    • Quickbooks
    • Xero
    • Sage Intacct
      Please read here for more detailed information.
  4. Specify your accounting system details/credentials and proceed to connect.

You can also download the journal entries and manually post them.

Managing Account Closing 

After you have reviewed reports and cleared out any control check issues, you are ready to close an accounting period. As a revenue recognition sub-ledger, RevRec provides robust support for closing the books.

RevRec offers you two ways to close an accounting period:

  • Streamlined approach, which is the default method that combines multiple steps together and is more suitable for simple accounting operations,
  • Advanced approach, when you feel comfortable with a more automated close process with more control over each step.

Streamlined Approach

Advanced Approach

Generate JE  vs Close the Period

One-step process

Separate steps

You can read more here about the advanced closing method. Please contact [email protected] if you are interested in using the advanced closing method.

To close an accounting period in your RevRec environment, follow the steps below:

  1. Click Home on the left panel to get to the dashboard.
  2. Click Accounting Period > Close Period.

Re-Opening an Accounting Period 

RevRec lets you reopen a closed accounting period, in case such a requirement arises. A reopened accounting period allows you to process updates to the accounting book for that period.

Note

Please note, reopening a closed accounting period is not a typical process, and you should consult with your accounting operation policy on when reopening an accounting period is warranted.

To re-open a closed accounting period on your RevRec environment, follow these steps:

  1. Click Settings > Configure > Reopen.
  2. Select the year and month and click Set Period.
  3. RevRec will ask you to confirm the operation. Once you confirm, RevRec will reopen the selected accounting period and delete all the journal entries for the period (RevRec will regenerate the journal entries once you have made the data update and are ready to close the period again).

To open a closed accounting period in the past, all periods between the specific period you want to reopen and the current period need to be reopened, and you can reopen one period at a time. For example, the current open period is Sept 2021 and if you want to reopen in March 2021, you need to reopen all periods post-March 2021 (April 2021, May 2021, through Sept 2021).

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