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Understanding the Revenue Recognition Process
Salesforce Billing uses several objects to manage the revenue recognition system. Once you define these objects and their relationships, you can automate most of the revenue recognition process. (Salesforce Billing Managed Package)
Required Editions
| Available in: All Salesforce Billing Editions |
The revenue transaction record stores information about transactions that a customer performed on one of your order products and how much revenue those transactions created. The revenue schedule defines the period for which Salesforce Billing makes revenue transaction records for an order product. Your goal is to set up Salesforce Billing’s revenue recognition objects so that your org creates revenue transactions for your desired time periods. You also define the actions that prompt Salesforce Billing to create those transactions in the first place.
Revenue recognition rules are the first object in this process. Your rule’s Create Revenue Schedule? Field defines whether Salesforce Billing makes a revenue schedule for an order product. Set this field to Yes and assign your rule to any products that should have revenue transaction records once you invoice them or order. When you order those products, their order product records inherit the lookup to the revenue recognition rule.
Your revenue recognition rule has a related list for revenue recognition treatments. A treatment answers the following questions to tell Salesforce Billing how and where to recognize the product’s revenue.
- Which GL rule makes a record of the revenue transaction?
- How much of a transaction’s amount should be assigned to a GL rule?
- How much revenue from a transaction is assigned to a revenue schedule?
- What action causes Salesforce Billing to create a revenue schedule?
A revenue recognition rule can have several treatments. When you invoice an order, Salesforce Billing groups for evaluation order products that have the same revenue recognition rule. It then applies revenue recognition treatments based on matching legal entities between the order product and one of the rule’s treatments. This process lets you apply different treatments to order products that a single rule is evaluating. It also helps you organize your rules based on the types of treatments they apply. For example, you could have one rule that makes revenue transaction records for all one-time products you sell. You could then have another rule that makes revenue transaction records for each subscription product you sell.
The revenue treatment object contains a lookup to a revenue distribution method. A revenue distribution method controls how Salesforce Billing spreads revenue over a set time period. Salesforce Billing spreads revenue into revenue transactions, grouped within a revenue schedule. Your method answers the following questions.
- When does the revenue schedule start and end?
- Should Salesforce Billing make revenue transactions automatically, or should it make only the revenue schedule and let users create transaction records manually?
- What action causes Salesforce to create a revenue transaction?
- What types of time periods should each of the schedule’s transactions cover? For example, a transaction record could cover the revenue from all transactions against an object during one month. Then if your schedule lasts for five months, it contains five revenue transaction records.
The revenue transaction serves as the endpoint of your revenue recognition process. This record stores the following data.
- How much revenue you have previously recognized for this transaction
- How much revenue you have recognized on this record
- How much deferred revenue you have yet to recognize
- The Revenue Waterfall
The revenue waterfall is the distribution of revenue across one or more periods. This process represents revenue recognition as goods or services are delivered to your customers. It’s a key component of revenue reporting and forecasting. (Salesforce Billing Managed Package) - Revenue Distribution Methods
Your revenue distribution method controls how Salesforce Billing spreads revenue over a set time period. You can set up revenue to distribute over time or at a single point in time. (Salesforce Billing Managed Package) - Organizing Your Revenue Transactions in a Revenue Schedule
A revenue schedule stores records of revenue transactions you’ve made against an order product. Use this object to track the total amount of revenue you’ve recognized within the timeframe set by your revenue recognition rule. You can also split revenue from one order product into multiple revenue schedules based on your recordkeeping needs. (Salesforce Billing Managed Package) - Revenue Recognition Policies
Revenue recognition is an accounting principle used to determine when and how revenue is recognized or accounted for. Your business can apply different methods and policies when deciding how to recognize revenue. The type of business determines which policy to apply. (Salesforce Billing Managed Package) - Revenue Agreements
Revenue agreements are objects with a Revenue Schedule related list. They’re useful for grouping revenue schedules related to the same transaction, so that you can quickly evaluate revenue amounts for that transaction. You can use default or custom functionality to assign revenue schedules to a revenue agreement. Each revenue agreement contains several revenue amount fields that you can customize to report on revenue from the related revenue schedules based on your organization’s revenue reporting standards. (Salesforce Billing Managed Package) - Revenue Adjustments
When your actual revenue differs from your initial revenue schedule, you may need to increase or decrease your revenue schedule's available balance, or transfer it to the available balance on a different schedule. You can use revenue adjustments to change your revenue schedule's available balance. (Salesforce Billing Managed Package)
