Set up event-based revenue recognition—Order Entry

This topic describes how to set up event-based recognition in Order Entry.

About event-based recognition

Some businesses regularly sell products or services where the revenue cannot begin to be recognized until an event occurs. For example, a software company might receive payment in advance for implementation services, but they do not consider the revenue as earned until the software go-live date.

Sage Intacct lets you automatically prevent revenue schedules from starting for sales transaction line items until you specifically indicate that the recognition event has occurred. This is accomplished via the line item's Delivery status, which defaults from the selected item.

If a line item's Delivery status = "Undelivered," the associated line item's revenue schedule is set to "On hold". When a user executes the Deliver function in the Manage Revenue Schedules page, the line item's Delivery status is set to "Delivered".

  • If the line item's Deferral status = "Defer until item is delivered" and it's not included in an MEA bundle with a line item with Deferral status = "Defer bundle until item is delivered", the Deliver process sets the associated revenue schedule to "Not started" as of the delivery date.
  • If the line item's Deferral status = "Defer bundle until item is delivered", the revenue schedules for all line items in the sales transaction will be placed on hold until this specific line item has Delivery status = Delivered.

The line item's revenue recognition template determines how Intacct adjusts the revenue schedule to account for any skipped revenue periods when the delivery date is later than the revenue template start date. The revenue recognition template's Posting method determines whether the adjustments are posted automatically or require manual posting.

  1. A user creates and posts a sales transaction containing a line item that has a default delivery status of Undelivered and that has a revenue recognition template associated with it.

    Intacct creates a revenue recognition schedule for the item and automatically places the schedule on hold.

  2. When the user receives confirmation that the recognition event has occurred (according to the company's business process), the user opens the Manage Revenue Schedules page, optionally assigns a delivery date to the line item, and sets the line item to Delivered.

    Intacct sets the revenue recognition schedule status to Not started. The revenue recognition schedule is now available for posting.

    Depending on the revenue recognition template System resume option, Intacct may automatically regenerate the revenue recognition schedule from the specified delivery date with new posting dates or it may leave the schedule with the original posting dates.

Set up event-based recognition

Subscription

Standard revenue recognition for Order Entry
Regional availability

  • Australia

  • Canada

  • South Africa

  • United Kingdom

  • United States
User type

Business user with Administrator privileges
Permissions

Administration

  • Application Subscriptions: List, View, Subscribe, Configure

Complete the following steps to set up event-based recognition.

  1. Configure Revenue Management
  2. Define Delivery defaults on items
  3. Define the System resume option on revenue recognition templates

1. Configure Revenue Management

  1. Go to Company > Admin > Subscriptions.
  2. On the Subscriptions page, select Revenue Management, then select Configure.
  3. On the Configure Revenue Management page in the Order Entry section, select the Event-based recognition checkbox.
  4. Select Save.

2. Define Delivery defaults on items

All items are set to Default delivery status = "Delivered" and Default deferral status = "Defer until item is delivered". This status combination has no effect on revenue schedules. You only need to change these fields for the items for which you do not want revenue recognition to start until a particular event occurs.

To define delivery defaults on items:

  1. Go to Order Entry > All > and select Items.
  2. In the Items list, find the desired item and select Edit next to it.
  3. In the Revenue recognition section of the Item Information page, use the Default delivery status dropdown list and select "Undelivered".
  4. If you want to defer the revenue for all transaction line items until this item is delivered, use the Default deferral status dropdown list to select "Defer bundle until item is delivered".
  5. Select Save.
  6. Repeat steps 2 through 5 for each desired item.

3. Define the System resume option on revenue recognition templates

The System resume option on the revenue recognition template tells Intacct how to adjust revenue schedules to account for revenue that was previously scheduled prior to the Delivery date. The System resume options are as follows:

  • Catch up: Intacct will post Open revenue recognition that was scheduled prior to the item's Delivery date to catch up to the period of the resume date. These postings are automatic, regardless of the selected Posting method.
  • Walk forward: Intacct will regenerate the revenue schedule as of the resume date and push the end date out the same number of days as the new start date was pushed forward. This keeps the overall revenue schedule the same length.

Say we had a revenue recognition schedule that was originally set to begin January 1 and end on December 31. However, the item was not delivered until April 8, and the revenue recognition schedule was on hold.

On resume, Intacct would do the following for the different options:

  • Catch up: Jan-Mar will recognize into April. All subsequent months will continue as originally defined.
  • Walk forward: The Delivery date (April 8) will become the new Start Date of the revenue schedule, while the End Date will move ahead by the same number of days.

The posting behavior of any adjustments depends on the associated revenue recognition template's Posting method:

  • Manual: the user must manually post adjustments. Intacct will not automatically post revenue skipped due to delayed delivery, even if the Delivery date has passed.
  • Automatic: For "Catch up", Intacct will automatically post skipped revenue when you execute the Deliver function. For "Walk forward", the system scheduler will post any revenue scheduled in the past the next time it runs.

To define the system resume option on a revenue recognition template:

  1. Go to Order Entry> Setup > Revenue Recognition and select Templates.
  2. Select Edit next to the applicable revenue template.
  3. Select the desired System resume option.
  4. Optionally, edit the template's Description to indicate which System resume option the template uses.
  5. Select Save.
  6. Repeat steps 2 through 5 for each desired revenue recognition template.