Revenue Recognition Reporting

Revenue recognition reporting is the process of accounting for revenue for a product you provide to a customer. For example, when a customer pays for and receives a shirt in a clothing store, the store owner makes a record of the revenue received. How and when the store owner recognizes the revenue depends on many factors.

Let’s look at a few common ways of reporting revenue.

Service delivered over time

Sometimes you want to spread revenue over a set period. For example, on an annual order you might recognize revenue during each of 12 months even though you invoice it all at once.

Bundled products and services

Bundles include components that you deliver all at once or over time. For example, an IT infrastructure bundle could contain a component for a server cooling system and a server repair service agreement. Since the cooling system is a physical product, you provide its value when your customer receives it. However, the repair service has a variable amount of value based on how many times the customer needs repairs during a billing cycle.

Discounts and credits

You can apply discounts and credits even after you’ve begun recognizing revenue for a product by aligning your existing revenue schedules to reflect the difference.

Add-on orders

Add-ons follow the contract terms of the original quote or order and their revenue recognized accordingly.

Contract amendments

When you change a contract, such as upgrading or downgrading a service, you also have to adjust the revenue associated to these changes over time.

Customer acceptance and service deliverables

Products and services can be delivered and used while also having delayed acceptance rights that impact when you can recognize revenue.

Customers that stop paying invoices

Revenue is recognized based on when the customer pays and not upon delivery of the product or service. This process is useful if there’s a significant risk of the customer defaulting.

Selling a product to a new region or customer base

When you sell a product or service to a new customer segment, you may require different revenue recognition methods for the new customers.

Revenue recognition requires organizations to track what their customers have purchased, company obligations, and how they deliver their services. Salesforce Billing helps users understand types of revenue recognition reporting, configuration, pricing, and payment obligations, creating a straightforward revenue calculation process.