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Revenue Recognition

Recurly Revenue Recognition allows for the easy calculation of revenue schedule reports based on Recurly invoice data.

Introduction

Recurly Revenue Recognition produces a revenue schedule export to expedite the revenue accounting process. This feature is available in the Pro and Enterprise plans of Recurly.

To enable this, you can set revenue recognition rules at the plan, setup fee, add on, charge, credit, and subscriptions level.

When an invoice is created, Recurly calculates the deferred revenue waterfall and creates revenue schedules for each charge or credit and provides a revenue amortization report through an export.

What is Revenue Recognition?

Revenue recognition is an accounting principle under generally accepted accounting principles (GAAP) that determines the specific conditions under which income becomes realized as revenue.

For most digital companies that provide a digital service over a period of time, this is accomplished by calculating the time period over which the service was performed and recognizing a portion of the amount paid for that service each day during the service period.

Every business is different and requires different accounting practices, so Recurly offers several options for how to calculate revenue.

Disclaimer:

  • Please speak with your accountant before using Recurly Revenue Recognition as they can provide you with advice on correct accounting practices.
  • We recommend not changing your revenue recognition type for subscription changes via the API as this can result in invoices being reassigned to a different revenue recognition method.

Revenue Recognition methods

Recurly offers four different ways a merchant's revenue can be recognized.

  1. Evenly
  2. At Invoice Creation Date
  3. At Charge Range Start
  4. At Charge Range End

Evenly Distributed

Revenue for a charge is recognized evenly over the range of time specified. This option is most common for services provided over a period of time (i.e. SaaS, OTT).

A merchant may choose to recognize revenue evenly by day over a set period of time. As an example, let's use Kale Krate Software. Kale Krate Software is a SaaS organization that provides access to a suite of analytics tools. Kale Krate offers many Plans, Add Ons, and Setup Fees to its customers for its SaaS service. Kale Krate Software also charge customers outside the scope of a subscription for non-recurring charges such as professional services.

Example 1: one-month subscription:

On July 26th, Customer A signs up for Kale Krate Software's "Gold Plan", which costs $30 a month, has a Setup Fee of $10, and one Add On for $5. Customer A purchases the recurring "Gold Plan", and the optional Add On. Revenue for the Plan and AddOn will be recognized evenly over the date range of each month's invoice, which is determined by the subscription period. Since this subscription started on July 26, revenue will be recognized over the period billed, in this case July 26 to August 26. A portion of the revenue will be recognized each day, so revenue will appear in the export for both July and August on this charge. Revenue for the Setup Fee is recognized evenly only over the first month's invoice period since it is not recurring.

An image of the plan page to configure revenue recognition is below:

An invoice for this example is below:

Example 2: one-time charge recognized evenly over time:

On July 15th, Kale Krate Software creates a one-time charge with a date range of March 1st - August 1st, selecting the option to recognize revenue evenly. Revenue for this charge will be recognized evenly for each day in the range of March 1st to August 1st.

The revenue schedule export for this charge will appear like this:

Charge
Amount
Revenue per day
March
April
May
June
July

$25 will be recognized daily over the time frame below

$25

$0.165

$4.99

$4.81

$4.99

$4.89

$4.99

At Invoice Creation

Revenue for a charge is recognized at the time the invoice is created. This option is available for one-time charges.

Example 1: creation date and invoice date are different:

On July 15th Kale Krate Software creates a one-time charge for August 10th, selecting the option to recognize revenue at invoice creation time, then generates an invoice. Revenue for this charge will be recognized on July 15th.

Example 2: creation and invoice date are the same:

On July 15th Kale Krate Software creates a one time charge for June 10th, selecting the option to recognize revenue at invoice creation time, then generates an invoice on July 15. Revenue for this charge will be recognized on July 15th.

At Charge Range Start:

Revenue for a charge is recognized at the start of the charge date range.

Example 1: date range in the future:*

On July 15th, Kale Krate Software creates a charge the date range of August 10th - September 10th, selecting the option to recognize revenue at the start of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on August 10th.

Example 2: date range in the past:

On July 15th, Kale Krate Software creates a charge the date range of March 1st - May 1st, selecting the option to recognize revenue at the start of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on March 1st.

At Charge Range End:

Revenue for a charge is recognized at the end of the charge date range.

Example 1: date range in the future:

On July 15th, Kale Krate Software creates a charge the date range of August 10th - September 10th, selecting the option to recognize revenue at the end of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on September 10th.

Example 2: date range in the past:

On July 15th, Kale Krate Software creates a charge the date range of March 1st - May 1st, selecting the option to recognize revenue at the end of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on May 1st.

Export Details

See Exports - Revenue Recognition for information about the .csv generated with revenue schedule data.

Gift Cards

If you use Recurly's Gift Subscriptions feature, there are important considerations to make for revenue recognition. Recurly does not include invoices for gift card purchases in our revenue recognition export. When the gift card is redeemed, the gift card will act as payment for the invoice. The resulting invoice will appear the same as other invoices in our revenue recognition export.

Pricing & More Information

Recurly Revenue Recognition is available in the Pro and Enterprise editions of Recurly. For more information on getting started with this revenue recognition, please contact us.

*Note: This documentation and the export itself are intended to provide best practice guidelines. Recurly is not an accounting firm, and the foregoing should not be construed as accounting advice. You should consult with an accountant before setting up any accounting policies or procedures.