You are here:
When to Create Revenue Schedules from Order Products
When deciding whether to recognize revenue from order products, consider key business needs regarding how your company uses revenue information in Salesforce Billing. For example, it’s important to know whether you’ll use Salesforce Billing for revenue forecasting or as the system of record to meet revenue recognition guidelines. (Salesforce Billing Managed Package)
Required Editions
| Available in: All Salesforce Billing Editions |
| Business Need | Should I Recognize Revenue from the Order Product? |
|---|---|
| I need to monitor my revenue cycle to predict future revenue trends and act on them. | Yes |
| The pricing for this product is one-time or subscription based, and I need to see the revenue it generates ahead of time. | Yes |
| The pricing for this product relies on usage, and I need to see the revenue it generates actively, rather than for predictive purposes. | No |
| I need to consolidate revenue for amendments together with revenue from the original deal. | No |
Let’s review some scenarios for recognizing revenue from an order product.
- Full Recognition from Order Products
- To recognize revenue on the order product in full, apply a rule with an order-based, full-recognition revenue distribution method to the Product. Salesforce Billing generates a revenue schedule upon order activation. The revenue schedule contains one revenue transaction for the order product’s full amount. The revenue schedule also sets its Full Recognition Date field based on the revenue distribution method’s settings — either the invoice line start date or end date.
- For example, a company wants to recognize revenue up front for a one-time, $120 hardware
purchase. They could use the following revenue recognition rule configuration, which results
in a revenue schedule with one revenue transaction for the full $120.
- Revenue Recognition Rule
- Create Revenue Schedule?: Yes
- Revenue Recognition Treatment
- Revenue Schedule Creation Action: Order Activation
- Revenue Distribution Method
- Type: Order
- Distribution Method: Full Recognition
- Full Recognition Date: Order Product Start Date or Order Product End Date
- Revenue Transaction Creation Process: Automatic
- Revenue Recognition Rule
- Pro Rata or Ratable Recognition for Order Products
- Forecast revenue pro rata by applying an order-based, ratable revenue recognition rule to the product. Salesforce Billing still creates the revenue schedule upon activation, but it has several revenue transactions instead of one. The number of transactions varies based on the order product’s start and end dates, and the Distribution Method field on the revenue distribution method.
- For example, a company wants to recognize revenue up front for a subscription-based
software service, purchased for a term of 1 year at $10 per month. You could use a
full-recognition rule to create one revenue schedule and a revenue transaction for the full
$120. However, they may also want to report revenue as it becomes recognizable over the course
of the deal, otherwise known as pro rata, or ratable recognition. The following rule results
in a revenue schedule with 12 transactions each for $10. Salesforce Billing creates each
transaction upon order activation.
- Revenue Recognition Rule
- Create Revenue Schedule?: Yes
- Revenue Recognition Treatment
- Revenue Schedule Creation Action: Order Activation
- Revenue Distribution Method
- Type: Order
- Distribution Method: Monthly
- Revenue Schedule Term Start Date: Order Product Start Date
- Revenue Schedule Term End Date: Order Product End Date
- Revenue Transaction Creation Process: Automatic
- Revenue Recognition Rule
- Recognize Revenue from Order Products with Multiple Revenue Obligations
- Sometimes, a product has both flat fee and ratable revenue obligations. You can handle this
by using multiple treatments on your revenue recognition rule. For example, you could make a
rule which recognizes 20% of an order product line ratably and 80% up front.
- Revenue Recognition Rule
- Create Revenue Schedule?: Yes
- Revenue Recognition Treatment
- Type: Percentage
- Percentage: 80
- Revenue Schedule Creation Action: Order Activation
- Revenue Distribution Method
- Type: Order
- Distribution Method: Full Recognition
- Full Recognition Date: Order Product Start Date or Order Product End Date
- Revenue Transaction Creation Process: Automatic
- Revenue Recognition Treatment
- Type: Percentage
- Percentage: 20
- Revenue Schedule Creation Action: Order Activation
- Revenue Distribution Method
- Type: Order
- Distribution Method: Monthly
- Revenue Schedule Term Start Date: Order Product Start Date
- Revenue Schedule Term End Date: Order Product End Date
- Revenue Transaction Creation Process: Automatic
- Revenue Recognition Rule
- Recognize Revenue from Order Products on Amendment
- On amendments, the same revenue recognition rule applies to both the original order product and the amendment order product. Salesforce Billing creates a revenue schedule for the amendment order product based off its effective quantity.
- If the amendment is a reduction or cancellation, the resulting revenue schedule has a negative value to reconcile the revenue difference.
Did this article solve your issue?
Let us know so we can improve!
