Chargebee's Orders feature automates the process of creating schedules and capturing the shipments for physical goods in a subscription. RevRec provides the support to create sales contracts for such subscriptions with orders and recognize revenue based on shipments.
Shipment entities refer to the number of shipments fulfilled for a sales order. Shipment entities are created when an invoice is generated in Chargebee. The number of shipment entities to be created is determined by the shipping frequency of the plan. Invoices with unbilled charges or marked as future do not generate shipment entities.
For example, if an invoice for an annual plan is created with a monthly shipping frequency, then 12 shipment entities will be created. Alternatively, if the same plan has an annual shipping frequency, then only one shipment entity would be created.
Chargebee's shipment status indicates the stage of an order's shipment process. RevRec currently only supports the 'Shipped' status. It's important to note that each entity can have its own status. The following statuses are currently not tracked by RevRec and may be included in the future releases:
| Order status | Description |
|---|---|
| Queued | This is the initial status of orders waiting to be processed. This is typically their state before they have been moved to an integration platform/external fulfillment system. |
| Awaiting shipment | Used to indicate that the orders have been moved to the integration platform/external fulfillment system. |
| On-hold | Indicates that the order processing has been put on hold. |
| Partially delivered | The order is only partially delivered. |
| Delivered | The order has been delivered. |
| Canceled | Indicates that the order has been canceled. |
RevRec recognizes revenue as long as the shipment entity's status is marked as "Shipped," regardless of whether or not the associated invoice has been paid.
Follow these steps to leverage this feature in your RevRec site:
A new advanced configuration, "consume_order_stream", has been added to RevRec-Chargebee Integration and should be set to True to enable this feature.
Set Revenue recognition method for products with orders as Proportional Performance inside RevRec.
Learn more about revenue recognition methods here.
RevRec creates a sales order from a single invoice which is associated with multiple shipment entities and sets up a deferred revenue balance with the same amount.
A sales order is created for the full term of the subscription, which is the product of the type of billing cycle (e.g. monthly, quarterly, or annually) and the number of billing cycles. Each billing cycle within the subscription is represented as a separate line item in the sales order, with corresponding start and end dates. Shipment entities are created only for the first billing cycle during subscription creation in Chargebee as only the first invoices are generated. The shipment entities for subsequent invoices are generated when relevant invoices are created.
For example, a subscription with an annual plan having two annual billing cycles and a monthly shipping frequency would result in a sales order with two separate line items, with the first invoice creating twelve shipment entities. After the first year, a second invoice will be generated, creating twelve new shipment entities.
Revenue is not recognized until the status of each shipment entity is updated to "Shipped". When this occurs, RevRec records the following details in the "Professional Service Delivery" input mapping:
The Service Delivery logs in RevRec integration will be updated to reflect the number of expedited shipped units. RevRec then recognizes the additional revenue associated with the expedited shipment.
A subscription is created in Chargebee and an invoice is generated on Day 1. The plan billing frequency is annual, and the monthly price per unit is $100. The shipping frequency is set as monthly, and 24 units are sold, with a total contract value of $2,400 per year.
Chargebee will generate 12 shipment entities, with 2 units for each shipment entity.
| Shipment Entity | Status | Amount |
|---|---|---|
| Order 1 | Queued | $200 |
| Order 2 | Queued | $200 |
| Order 3 | Queued | $200 |
| Order 4 | Queued | $200 |
| Order 5 | Queued | $200 |
| Order 6 | Queued | $200 |
| Order 7 | Queued | $200 |
| Order 8 | Queued | $200 |
| Order 9 | Queued | $200 |
| Order 10 | Queued | $200 |
| Order 11 | Queued | $200 |
| Order 12 | Queued | $200 |
| Order Number | Invoice Number | Product Code | Contract Date | Service Start Date | Service End Date | Quantity | Sales Price | Extended Sales Price |
|---|---|---|---|---|---|---|---|---|
| 111 | 1 | SaaS-Annual | 1/1/2022 | 1/1/2022 | 12/31/2023 | 24 | $100 | $2,400 |
| Order Number | Contract Date | Product Code | Customer ID | Billing Date | Invoice Number | Amount |
|---|---|---|---|---|---|---|
| 111 | 1/1/2022 | SaaS-Annual | ACME | 1/1/2022 | 1 | $2,400 |
No revenue will be recognized at this point. After 15 Days Shipment Entity Order 1 is marked as Shipped.
| Order Number | Units Delivered | Product Code | Log Date |
|---|---|---|---|
| 111 | 2 | SaaS-Annual | 15/1/2022 |
RevRec will recognize the revenue of $200 ($100 x 2) at the end of January since the unit delivered for the shipment entity is 2. Similarly, for other shipment entities, as soon as their shipment status is marked as "Shipped," RevRec will add the delivery log to the professional service delivery and recognize the revenue accordingly.