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Building Blocks

Subscription Features

Localization

Invoices

Credits

Billing Features

Taxes

Payment Methods

Direct Debit Payments

Configuring Gateways

Fraud Management

Hosted Pages

Reports and Analytics

Attach Additional Data

Migration

Open Source Resources

Other Features

API Integration

Third Party Integrations

Revenue Recognition 

Introduction 

Revenue recognition is an accounting methodology which helps determining the revenue to be recognized over the period of time the service is consumed.

Most SaaS companies recognize revenue over a period of time when the services are rendered or earned. Though payments are collected upfront to sell subscription plans, the revenue is reflected as recognized only when the service is rendered. Most GAAPs across the globe recommend following this principle for better reporting.

Let's say a customer subscribes to a Monthly plan, on Jan 1, 2017

  • Revenue received is $49
  • Service will be rendered for the month of Jan
  • Renewal in Feb and recurring fee will be paid going forward, every month

On the other hand, when a customer signs up for a Quarterly ($299) plan, Jan 1, 2017

  • Revenue received is $299 in Jan
  • No record of revenue received for the 2nd and 3rd month
  • However, service should be rendered for 2nd and 3rd months

Since there is a liability to serve the customer(s) for the rest of the subscription period, the revenue cannot be entirely recognized in the first month when the payment is received.

Hence, the revenue needs to be recorded as a liability on the balance sheet and should be recognized as the service is delivered over time and recognized as revenue on the income statement.

Caution: Accounting practices vary across different organisations and across different industry verticals. The details are shared as recommendations. Please speak to your accounting advisor before processing your books.

Note
  • Available only in selected plans. To know more, visit Chargebee's Plans and Pricing page.
  • The feature is available on request basis, please contact support@chargebee.com  to get this feature enabled
  • These reports are best suited for SaaS products/services. These reports are not recommended for the physical goods segment.
  • Reports can be generated from Chargebee, however you should manually update the revenue to be recognized in the Accounting system.
  • You should be following Accrual based accounting to use this report
  • The calculation is done on a per day basis (considered till seconds)
  • Month wise recognition is not supported.
  • Consolidated Invoices will not be considered as part of Revenue Recognition reports. Read more about consolidated invoices .
  • Unbilled charges will not be considered for the calculation. Read more about unbilled charges .
  • Rule based revenue recognition at product level is not supported.
  • You cannot override the Recognized Revenue amount displayed in the reports.

Revenue Recognition Report 

The Revenue Recognition Report provides the actual amount to be recognized for each month. This report will also show the projected revenue for the upcoming months.

Let's assume an Annual Subscription is sold for $365 on Jan 1, 2017
An invoice for $365 is created for the period Jan 1, 2017 to Dec 31, 2017

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  • Chargebee will calculate the amount to be recognized for each month
  • The monthly revenue to be recognized is calculated on a PER DAY basis (considered till seconds)
    • So the month of Jan will read - $31.00 to be recognized,
    • Feb - $28.00 and so on..
  • If a subscription is created in the mid of the month, the prorated time period will be calculated for determining the revenue to be recognized
  • If there are cancellations/ refunds/ downgrades/ voided invoices, the amount to be reversed will be calculated and displayed
  • The amount displayed for the upcoming months is a projected figure and can change based on changes to the subscription which may be made later by the customer (upgrade, downgrade etc.)
  • One time charges will be recognized immediately
  • You can select a time period to generate the report
  • You can set additional search filters and retrieve the results (such as Customer Name/ Email or Subscription ID etc.)
  • You can select a Level, namely, Invoice, Subscription, Product or Customer and generate the report
  • You can download the report in the .csv format. The report will contain line-item level details for complete reference.

Deferred Revenue Report 

The Deferred Revenue Report calculates the pending revenue to be recognized for the rest of the subscription period.

Let's assume an Annual Subscription is sold for $365 on Jan 1, 2017.
An invoice for $365 is created for the period Jan 1, 2017 to Dec 31, 2017.

"
  • Chargebee will calculate the balance amount to be recognized for each month
  • The monthly revenue to be recognized is calculated on a PER DAY basis (considered till seconds)
    • Revenue to be recognized for Jan'17 is $31.00, hence pending amount to be recognized in Jan'17 is $334.00
  • The amount displayed for the upcoming months is a projected figure and can change based on changes to the subscription later by the customer (upgrade, downgrade, etc)
  • You can select a time period to generate the report
  • You can set additional search filters and retrieve the results (such as -Customer Name/ EMAIL or Subscription ID etc.)
  • You can select a Level, namely, Invoice, Subscription, Product or Customer and generate the report
  • You can download the report in the .csv format. The report will contain line-item level details for complete reference.

Account Summary Report 

The Account Summary Report is a monthly report of your sales, discounts, bad debts, and reversals, that can be used for accounting purposes.

Note
  • The Revenue and Revenue Reversals columns will be updated every 24 hours. The other values are always up-to-date.
  • Account Summary Report is available on all Plans, ‘Revenue Recognized' and ‘Revenue Reversal' columns in the Report will be available if you are on the ENTERPRISE Plan ($599/mo onwards) only.

If you are processing large number of invoices and do not want to sync each and every invoice to accounting systems (or via Xero  or QuickBooks Online  integration), you can refer the Account Summary Report and update the summarized amounts manually.

Report Details Description
Sales & Sales Reversals Sale amount from all invoices and credit notes
Discounts & Discount Reversals Discounts provided on purchases & Discounts reversed due to cancellations/refunds/voids etc
Taxes & Tax Reversals Taxes collected on subscription & Taxes reversed due to cancellations/refunds/voids etc
Bad Debt & Bad Debt Reversals Payment due invoices written off and bad debts incurred & Bad debt reversals
Payments & Refunds Payments received & Payments refunded
Revenue Recognized and Revenue Reversal Revenue recognized & Recognised revenue to be reversed due to cancellations/refunds/voids
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Multi-Currency Support 

If you are operating in multiple currencies, then Chargebee will display the details in the base currency and the currency in which the invoice was processed.

Assume, you are operating in USD, EUR, SGD, base currency set in your Chargebee site is EUR, and you have processed invoices in all the currencies:

Customer 1 makes a purchase Invoice 001 raised in USD
Customer 2 makes a purchase Invoice 002 raised in EUR
Customer 3 makes a purchase Invoice 003 raised in SGD Invoice 004 raised in SGD
  • When the reports are loaded, the amount will be calculated and displayed in base currency by default, (in this case, EUR). Read more about how exchange rate conversion   works in Chargebee.

  • You can choose a different currency to view details of invoices raised in additional currencies

    • If you choose USD, then Invoice #1 related data will be displayed in USD in the report
    • If you choose SGD, then Invoice #3 and Invoice #4 related data will be displayed in SGD in the report

FAQ 

I've already recognized revenue for a particular period manually, how can I move to the recognition process in Chargebee going forward?

You can provide data about the revenue you have recognized already and we will assist with migrating the data into Chargebee.
Chargebee will consider the data uploaded and calculate the amount to be recognized for the upcoming months.
If there is a change in the amount to be recognized, the difference (+/-) will be balanced in the current month for which revenue should be recognised. Contact support@chargebee.com  if you want to upload amounts which are already recognized.

How should I use the Revenue Recognition report to update the books?

You may have setup Revenue and Liability accounts based on products/plans or a single account for tracking all the revenue.

In case you have setup GL Accounts per product, then you may setup Liability and Revenue Accounts and recognize revenue on a monthly basis

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Refer the Revenue Recognition Report > ‘Revenue Recognized' data for the amount to be transferred from Liability account to Revenue account.

If you are operating with different Revenue/Liability Accounts for tracking Annual, Quarterly, Monthly Plan sales, you can refer the Revenue Recognition Report (search by product or invoice) and refer the amount to be recognized on a monthly basis.

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I'm already using Chargebee's Xero/ QuickBooks Online integration feature. How should I utilise this report?

If you are using Chargebee's integration with Xero or QuickBooks Online, here are the recommended steps to manage deferred revenue in your accounting system.

Scenario 1:

If you have provided different Chart of Accounts for each product:

  • You can refer the Revenue Recognition / Deferred Revenue Report for the amount to be transferred per product
  • Transfer the amount from Liability to Revenue accounts based on the account setup, here's a sample:
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Scenario 2:

If you have provided the same Sales Account for all products, in this case,

  • You can create different Sales Accounts for each product in the Accounting system

  • You should then provide the Accounting code of the Liability account for plans whose billing frequency is greater than a month, read about how to update the Accounting name or code per product/plan 

  • If you have integrated your Chargebee account with Xero/ QuickBooks Online, Chargebee will sync the data to the respective accounts, based on the GL Account provided in the product setup

    "
  • Next, refer the Revenue Recognition / Deferred Revenue Report and transfer the amount from Liability to the respective Revenue accounts

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