Revenue recognition is a key part of International Financial Reporting Standards (IFRS) compliant accrual accounting. Rebilly tracks the following types of revenue for revenue recognition:
- Booked revenue: Total amount invoiced and recorded when an invoice is issued.
- Estimated revenue: Expected revenue amount that will be recognized as services are delivered.
- Recognized revenue: Revenue amount distributed over the service period as obligations are met.
Estimated revenue is useful for budgeting, cash flow projections, and interim financial reporting. In the US, businesses with more than $25 million in revenue and publicly traded companies must follow Generally Accepted Accounting Principles (GAAP) and use accrual accounting.
Example: A customer pays $100 upfront for a 12-month subscription service. The booked revenue is $100 when the invoice is issued. The estimated revenue is $8.33 per month when scheduled for recognition. The recognized revenue is $8.33 per month as the service is delivered. If the customer cancels the subscription after 6 months, the recognized revenue is $50.
To create revenue reports, see Revenue waterfall, Revenue journal, and Monthly recurring revenue.
Rebilly supports revenue recognition for two types of order items: one-time sales and subscriptions.
One-time sales are order items that do not have a recurring plan. The issued invoice can contain one-time sales items, taxes, or adjustments. The recognition date is the issue date of the invoice that contains the one-time items.
Example: Jane purchases a product on 2022-11-03. The invoice is issued for the same date, the revenue is recognized in 2022-11.
| Issue date | Estimated revenue | Recognized revenue (2022-11) | Recognized revenue (2022-12) |
|---|---|---|---|
| 2022-11-03 | 20 USD | 20 USD | 0 USD |
Subscriptions are order items that are associated with a recurring plan. The revenue is distributed and recognized over the subscription service period.
- Example 1: John purchases a monthly subscription valued at 20 USD per month. The first invoice covers the period from 2022-04-15 to 2022-05-15, with revenue recognized as 10 USD for 2022-04 and 10 USD for 2022-05. The second invoice covers the period from 2022-05-15 to 2022-06-15, with revenue recognized as 10.32 USD for 2022-05 (16 days over a 31-day period) and 9.68 USD for 2022-06 (the remaining amount).
| Issue date | Estimated revenue | Recognized revenue (2022-05) | Recognized revenue (2022-06) |
|---|---|---|---|
| 2022-05-15 | 20 USD | 10 USD | 10 USD |
| Issue date | Estimated revenue | Recognized revenue (2022-06) | Recognized revenue (2022-07) |
|---|---|---|---|
| 2022-06-15 | 20 USD | 10.32 USD | 9.68 USD |
- Example 2: Bobbie purchases a year-long subscription worth 200 USD on 2022-05-01. The billable period is 2022-05 to 2023-05. The allocated revenue is described in the following table:
| Recognition period | Estimated revenue | Recognized amount |
|---|---|---|
| 2022-05 | 16.67 USD | 16.67 USD |
| 2022-06 | 16.67 USD | 16.67 USD |
| 2022-07 | 16.67 USD | 16.67 USD |
| ... | ... | ... |
| 2023-04 | 16.63 USD | 16.63 USD |
Use revenue reports to manage the revenue status of your company and to understand how your business is evolving. Rebilly financial reporting includes waterfall views and Monthly Recurring Revenue (MRR) reports.
The revenue waterfall report describes revenue that is recognized up to a given month. It contains information on booked revenue, recognized revenue for the months in the issued period, and the remaining revenue up to the selected month. To create revenue reports, see Revenue waterfall.
The revenue journal is a detailed revenue waterfall report that describes revenue recognized in a specific month, aggregated by product ID, product accounting code, or plan ID. It contains information on booked revenue, recognized revenue for each aggregation field in the booked period, and the remaining revenue up to the selected month.
To create journal accounts and set up journal entry in Rebilly, see Set up journals. To view revenue reports, see View revenue journal reports.
The MRR report displays information on the predictable recurring revenue for your business over a period of months. It displays detailed information on the following:
New MRR: Revenue from new customers. This is the revenue from the first recognized invoice. Example: A new customer purchases a year long subscription for 120 USD, with a service period from 2022-05-01 to 2023-04-30. The revenue is classified as new MRR for 2022-05, and MRR for the remainder of the active service period.
Churn MRR: Revenue that is lost due to customer payments going to zero. The customer does not have active subscriptions.
Contraction MRR: Loss of revenue due to a change of plan or downgrade by active customers. Example: A customer changes from a monthly subscription of 10 USD to a year long subscription of 100 USD. The MRR is contracted by 1.67 USD.
Expansion MRR: Increase of revenue due to a change, addition, or upgrade of a subscription by present customers. Example: A customer with a 10 USD per month plan purchases an add-on which is valued at 3 USD per month. The expanded MRR is 3 USD.
Reactivation MRR: Revenue generated in the current month by customers that had active subscriptions in the past.
To create MRR reports, see Monthly recurring revenue.
To download revenue recognition data for further analysis using your own tools, see Data exports.