Ratable Revenue Recognition
Overview
RevRec automatically generates revenue recognition schedules based on the service start and end dates. 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 defines a range of dates using the Half-Open approach (start ≤ x < end) where the service start date is inclusive and the service end date is exclusive.
You can contact RevRec Support to choose your preferred ratable method from the following:
- 30/360 Ratable Plan
- Modified 30/360 Ratable Plan
- Classic Ratable Plan
- Daily Ratable Plan
- End Month Exclusive
30/360 Ratable Plan
This method assumes:
- A 360-day year
- 12 months of 30 days each
Revenue per day is calculated as:
Revenue per day = Total Revenue / 360
First Period
- Prorated based on remaining days in the first month
- If ≥ 30 days → treated as a full month
Last Period
- Prorated based on remaining days in the last month
- If ≥ 30 days → treated as a full month
Remaining Periods
Remaining Revenue = Total Revenue - (First + Last period revenue)
Monthly Revenue = Remaining Revenue / Remaining months
Example
Contract: $1,200 (03/21/20 → 03/21/21)
| Period | Month | Revenue | Calculation |
|---|---|---|---|
| First Period | March 2020 | $33.33 | First Period % = 10 / 360 = 2.78% |
| Remaining Periods | April 2020 | $100 | Remaining = 1200 - (33.33 + 66.66) = 1100 Duration = 11 months → $100/month |
| May 2020 | $100 | ||
| June 2020 | $100 | ||
| July 2020 | $100 | ||
| August 2020 | $100 | ||
| September 2020 | $100 | ||
| October 2020 | $100 | ||
| November 2020 | $100 | ||
| December 2020 | $100 | ||
| January 2021 | $100 | ||
| February 2021 | $100 | ||
| Last Period | March 2021 | $66.66 | Last Period % = 20 / 360 = 5.56% |
Modified 30/360 Ratable Plan
Aligns revenue with Monthly Recurring Revenue (MRR).
Key Logic
- Each month = 30 days
- Term = Total days / 30
- Revenue evenly distributed across term
First Period
(Per-period revenue / Days in month) × Active days
Last Period
Total Revenue - Recognized Revenue so far
Remaining Periods
Per-period revenue = Total Revenue / Term
Example
Contract: $12,000 (03/15/20 → 03/14/21)
| Period | Month | Revenue | Calculation |
|---|---|---|---|
| First Period | March 2020 | $548.39 | $1000 / 31 × 17 |
| Remaining | April 2020 | $1000 | Term = 360 / 30 = 12 |
| May 2020 | $1000 | ||
| June 2020 | $1000 | ||
| July 2020 | $1000 | ||
| August 2020 | $1000 | ||
| September 2020 | $1000 | ||
| October 2020 | $1000 | ||
| November 2020 | $1000 | ||
| December 2020 | $1000 | ||
| January 2021 | $1000 | ||
| February 2021 | $1000 | ||
| Last Period | March 2021 | $451.61 | 12000 - 11548.39 |
Classic Ratable Plan
This plan uses the actual number of days in the contract (365 or 366).
First & Last Period
- Prorated by days
- ≥ 28 days → treated as full month
Remaining Periods
The remaining periods use the same logic as the 30/360 plan, with the actual number of days.
Daily Ratable Plan
No special handling for first/last periods.
Formula
Revenue per day = Total Revenue / Total contract days
Monthly Revenue = Revenue per day × Active days in month
End Month Exclusive
- First month = full revenue
- Last month = 0 revenue
- Remaining months = equal distribution
Example Logic
Monthly Revenue = Total Revenue / Total months (excluding last month)
Contact RevRec Support to configure your preferred ratable method.