There are different ways in which revenue is allocated and recognized for your products and services. The revenue rules in RevRec help you automate the revenue recognition process for all your products and services in each contract, based on unique business requirements.
You can define revenue rules for product families, product types, or even individual products.
While configuring a revenue rule, each product family, type, or item is mapped with a Standalone Price Policy and a Recognition method based on which the revenue gets allocated and recognized for respective products within a contract.
Following are the different revenue recognition methods that are currently supported by RevRec.
The Ratable method of revenue recognition distributes the revenue equally across the performance period of the product that is sold. The revenue gets distributed equally, even when the invoice amount for the entire contract is received upfront. The Ratable method of revenue recognition is commonly used for SaaS-based product offerings. Another common use case is post-contract customer support, where the contract period is generally a year from the initial contract.
RevRec currently supports the following four Ratable methods of revenue recognition:
Click here to read more about each of these plans.
While using the Point in Time revenue method, the entire invoice amount of the product sold is recognized at the time of delivery or at the end of the contract, based on your configuration. This method is commonly used for product training, hardware, perpetual, and term software licenses.
While using the Proportional Performance method, revenue is recognized for each period based on the number of hours and services that are delivered or the percentage of the work that is completed for the respective period. For example, consider a company selling 1000 hours of professional service engagement to set up a medical laboratory in a hospital. While using the proportional performance method for this service offering, the revenue gets recognized each period based on the number of hours for which the service was provided during the period.
RevRec allows you to define revenue rules for product families, product types, or individual products. Based on how you want to configure the rules, you need to first configure the Accounting Rule Fields by following these steps:
After logging in to your RevRec site, navigate to the right environment.
Click Settings > Configure RevRec.
Navigate to Accounting Rule Fields, click the drop-down and select one or more of the following:
Based on what you select as fields here, you can continue to configure the revenue rules for the respective items as explained in the following sections. There are two ways in which you can configure these revenue rules in RevRec:
To configure a new revenue rule in your RevRec site, follow these steps:
Click Settings > Accounting Rules, click +New Revenue Rule.
On the Create Revenue Rule pop-up, specify the following details:
-Product Details: Based on the Accounting Rules Fields that you've added, select the Product Name, Product Code, Product Family, and Product Type from the respective drop-downs for which you are configuring the revenue rule.
The Revenue Rule is successfully created.
Click here to learn more about the different Standalone Price policies that RevRec currently supports.
You can do a bulk upload of multiple revenue rules for all your products and services in RevRec instead of configuring them individually. To do a bulk upload of your revenue rules, follow these steps:
Click Settings > Accounting Rules.
On the Accounting Rules page, click Download.
An AccountingRules template file is downloaded in a .xlsx format, with all the necessary fields as columns.
If you have already added your product catalog items, you can simply add the other details for each item. Alternatively, you can even add new product catalog line items along with the respective revenue rules-related details. Save the updated file.
Once your file is ready to be uploaded, click Upload on the Accounting Rules page and upload the saved file and click Done.
Revenue rules are successfully added to your RevRec site.
Configuring revenue rules for all your product items in RevRec is critical, and helps in the comprehensive automation of the revenue recognition process for your business.
The Product Catalog items for which accounting rules are not configured can be tracked in the Missing Rules tab. You can configure revenue rules for these items as required.
To edit an existing revenue rule, follow the steps below:
The updated revenue rule gets saved.
When you modify a revenue rule, sales orders of this type will be processed based on the updated rule. Upon modification, you'd also be asked if you want to re-process existing sales orders based on the new rule. Select your preferred option.
Any change that you make to your revenue rules in your RevRec site such as additions, deletions, and other updates are recorded as versions. You can easily view and restore previous versions of these rules as required.
To delete an existing revenue rule, follow the steps below:
The associated SSP rule will be removed and further sales orders of this type will not be processed automatically.