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Revenue Recognition

Revenue recognition is the process of recognizing "earned" revenue as services or goods are delivered, rather than when cash is actually received.

Overview​

ChargeOver provides several revenue recognition reports to make it easier to identify when revenue is earned and should be recognized for subscription invoices.

Revenue recognition in ChargeOver is based on the payment cycle you choose.

When you create a subscription in ChargeOver, you are prompted to choose how often an invoice is generated for the subscription.

This payment cycle determines the revenue recognition schedule. Some examples include but are not limited to the ones listed below.

  • Monthly - an invoice is created monthly, and recognized and earned that same month
  • Quarterly - an invoice is created quarterly, and will be recognized and earned throughout one-quarter of the year (e.g. 1/3 of the invoice is earned per month)
  • Yearly - an invoice is created yearly, and will be recognized and earned through one year (e.g. 1/12 of the invoice is earned per month)

Yearly, Quarterly, Bi-Annual, Subscriptions​

Any subscription cycle except monthly will be broken out into monthly amounts. For example, in the picture below Jane's Streaming Video has purchased a quarterly subscription for $60 per quarter.

ChargeOver breaks this out to $20 per month - each month you "earn" $20 of the total $60 amount collected. When the next invoice is generated (in April 2020) the next invoice will be broken into it's parts as well, and the report will update with this new data.

Similarly, Jamie's Cat Cafe has purchased a bi-annual (every 6 months) subscription for $60 every six months. ChargeOver breaks this out to $10 per month and reports on this.

At the end of each month, you will recognize the total revenue you've earned in that month. So at the end of January, you will have earned and will recognize $40.

If you're using QuickBooks or Xero, you would recognize this by entering a journal entry to move $40 from your deferred revenue account, to your recognized revenue account.

Monthly Subscriptions​

Monthly subscriptions are recognized immediately, in the month they were created. In the picture below Jacob's Internet Service has subscribed to a monthly plan, and that first invoice will be recognized and earned in the month it was created.

One-Time Invoices​

One-time invoices (e.g. non-recurring) are also recognized immediately, in the month they were created. In the picture below, Jenny's Meal Prep has purchased a one-time service, and that non-recurring invoice will be recognized and earned in the month it was created.